Google's $90 Million Click Fraud Lawsuit

Perry Marshall newsletter (Google and Google Adwords expert)

How big of a deal is click fraud? A lot of people
ask me about this.

Last week Google agreed to settle a class action
lawsuit for $90 million for click fraud. They're going to
give advertisers a credit for future clicks, based on
improper charges going back to 2002.

Ninety million bucks sounds like a lot of money,
but compared to well over ten billion dollars of
clicks they've sold since AdWords started, this
is spare change. It's less than 1%.

A lot of people are paranoid about click fraud.
I haven't talked about it a great deal, so let's talk
about this right now.

How are click prices determined in the first place?
By advertisers' bids. And how are bids determined?

Well obviously a lot of people determine their bid
prices by guessing a number and then bidding. But
the *right* way to determine your bids is to figure
out how much a click is worth in the first place, by
tracking conversion of sales or sales leads. Then
pay accordingly.

Are you doing that?

If you're not, you're losing WAY more money than
click fraud would ever cost you. A few months
ago I read an article in the Wall Street Journal
about click fraud. They were interviewing this guy
who sold private airplanes, and he was complaining
that he didn't know what he was getting for his
Google AdWords investment, he'd seen signs of
click fraud and his faith in the whole system was
being shaken.

It seemed pretty clear that this guy had no idea
what his cost per lead and his sales conversion
was. So he was throwing darts in a blizzard. Sort
of like a store owner who never takes inventory,
complaining about shoplifting.

Let me repeat: If you're not tracking conversion
of clicks to sales leads or sales, it's costing you
WAY more money than click fraud.

Last year I had what amounted to a click fraud
problem on one certain keyword. For about 3-4
days I had 3X the normal amount of traffic. But
you know what happened?

My Click Thru Rate went up, my ad moved from
the #3 position to the #1 position and once it was
in #1, Google started charging me less for clicks
because of the high CTR. I got 4X the traffic but
it only cost twice as much. The cost per click
went from 19 cents to 7 cents.

Again, for those few days I was spending twice
the money as before. But not 4X. Google's CTR
formula inherently gives you discounts for click
fraud. Not a total solution, but it does help.

If you've paid much attention to this you see that
Google doesn't say very much about it. Why?
Because they just can't. If they told everyone
what techniques they use to detect it, people
who do click fraud would find more ways to
get around it.

What I can tell you is that if someone clicks
on your ad twice or more in 30 days, you
only get charged one time. The most obvious
kinds of click fraud, like your competitor repeatedly
clicking on your ad, are easily detected and you
don't get charged. Furthermore, AdSense advertisers
who get caught for click fraud get clicked out.

You know what's way worse than click fraud
though?

Trashy "AdSense sites."

If you syndicate your ads on AdSense, these
sites cost you WAY more in terms of crappy,
costly traffic than click fraud ever does.

We've all seen them - sites full of junky, nonsense
text and non-content, whose only purpose is to
get people to click on AdSense ads.

You don't want your ads on those sites. Not
only do they do a disservice to Internet users
in general, they bring you only the lowest quality
visitors.

I'm not against AdSense sites - the late Ken Giddens
had hundreds of quality examples in his portfolio,
with real articles and real content. What I am
against is filling web pages with garbage that looks
like content to a search engine but not to a real
person. And there are undoubtedly dozens or maybe
hundreds of gurus teaching people how to do that.
This is worse than click fraud.

How do you protect yourself against that? You
HAVE to bid separate prices for your AdSense
traffic, and you have to track its conversion rates
separately. And you may want to deliberately
exclude certain sites from showing your ads.

THIS is the #1 biggest place where Google
advertisers lose money. They make money
on Google traffic and give it all back on AdSense.

Buyer beware!

At my Chicago seminar not only are we going to
arm you with more knowledge about this, we're going
to Give Away Apple's beautiful new MacBook Pro to
everyone who registers for my special offer. BUT -
you have to reigster by March 17, Saint Patrick's Day,
to get it.

See you in Chicago,
Perry Marshall

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