Thursday, July 13, 2006

Schneier on Click Fraud & Cost Per Action

Bruce Schneier's got an interesting post today about beating click fraud by tying fees to a different metric:

Click fraud has become a classic security arms race. Google improves its fraud-detection tools, so the fraudsters get increasingly clever ... and the cycle continues. Meanwhile, Google is facing multiple lawsuits from those who claim the company isn't doing enough.

[...] Google is testing a new advertising model to deal with click fraud: cost-per-action ads. Advertisers don't pay unless the customer performs a certain action: buys a product, fills out a survey, whatever. It's a hard model to make work -- Google would become more of a partner in the final sale instead of an indifferent displayer of advertising -- but it's the right security response to click fraud: Change the rules of the game so that click fraud doesn't matter.

The BetaNews article and the 1 or 2 commenters to it who aren't just patting themselves on the back for using AdBlocker bring up valid points: The pay per action model is a greater boon for advertisers than for Google on a day-to-day level, but it stands to help Google in the hopefully-not-daily cases where they're getting sued for negligence in fighting click fraud. Though the price range for cost per action would likely be higher than CPC due to the huge disparity between click volume and conversion volume, yet that price increase might not make up for the lost revenue from PPC. So Google stands to lose money if they switch over to a PPA model. That they're offering it alongside PPC as an option, instead of totally replacing the one with the other, is playing it safe: they get to test out the PPA model; many advertisers will likely stick to PPC out of inertia if nothing else, at least initially, so there won't be much revenue loss; and, once the PPA system has been fully rolled out, it's a good CYA measure in court. If some advertiser sues them for click fraud negligence, Google can shrug and say "You could've switched to PPA, but you didn't. Caveat emptor."

And hey, Google Checkout's just come out, too. Fancy that.