Google CEO Eric Schmidt Speaks Out on Click Fraud

Google CEO Eric Schmidt believes there is a “perfect economic solution” to click fraud: “let it happen.”

PPC Advertisers reeling from bogus clicks in their Google AdWords Pay Per Click accounts are finding little comfort from Google's top brass. Google's stance on Click Fraud remains unchanged for more than (4) years -- "Don't Ask Don't Tell" the work continues on finding a solution.

Google's admission of click fraud and their CEO's stunning admission that nothing will be done to curb click fraud is amazing. It appears that Google's refusal to address click fraud in the AdWords system is rooted in real world economics.

Some Industry sources suggest that Google may not motivated to stem click fraud.

All of this recent press concerning click fraud onlys heightens the importance of organic search engine optimization. Clicks garnered from organic/natural search results are free and serve as an endorsement of a websites content.

To read the full article on Eric Schmidt's AdWords Clcik Fraud Comments from ZDNET visit: http://blogs.zdnet.com/micro-markets/?p=219

In the article, Google CEO Eric Schmidt discussed how the AdWords pay-per-click advertising model is inherently “self-correcting” in regards to click fraud during a Stanford University event last March. Schmidt extolled the enhanced trackability of the online pay per click advertising model versus pay per impression models, while acknowledging “smart but evil” people try to “go around the system.”

According to Schmidt, Google’s auction-based pay-per-click advertising model is inherently self-correcting: " Eventually, the price that the advertiser is willing to pay for the conversion will decline, because the advertiser will realize that these are bad clicks, in other words, the value of the ad declines, so over some amount of time, the system is in-fact, self-correcting. In fact, there is a perfect economic solution to click fraud which is to let it happen".

Schmidt’s “perfect economic solution” analysis for click fraud suggests that any Google charges to advertisers for fraudulent clicks would naturally be viewed by Google advertisers as a “cost of doing business” with Google, to be factored into advertiser ROI calculations.

I discuss such an advertiser acceptance of click fraud based charges as a cost of doing business, rather than as a potentially deceptive business practice, in “Click Fraud: deceptive business practice, or cost of doing business.”

Schmidt indicates, however, that Google engineers think it is “great fun” to try and get ahead of click fraud:

GREAT FUN?

FUN AT WHOSE EXPENSE?

But because it is a bad thing, because we don’t like it, because it does, at least for the short-term, create some problems before the advertiser sees it, we go ahead and try to detect it and eliminate it.

Part of what we do is we try to decrease the time, and increase the rate, at which the auction automatically detects that this is a bad click, naturally.

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Is Google asking AdWords advertisers to accept "Click Fraud" and factor it into their advertising budgets ?

What long term winning strategy is this?

Is this the best solution that Google, the world's 10th largest and fastest growing company can provide?

Budget for Fraud ?

Eric Schmidt must have been joking or taken completely out of context. Hopefully active Google advertisers share in this humor. Google officical post on Click Fraud and their clarification on CEO Eric Schmidt's (company clarifications of executive statements are never a good sign) can be found here:

(or full link: http://www.googleblog.blogspot.com/2006/07/let-click-fraud-happen-uh-no.htm)

In summary it appears that Eric Schmidt CEO of Google made these statements:

1) Click Fraud in Google AdWords continues.

2) the value in advertising with Google declines over time.

Google Opens New AdWords Center in Ann Arbor, Michigan

New Google office center to bring 1,000 badly needed high-tech jobs to the state of Michigan.

Google Co-Founder Larry Page a Michigan Native plays key role in selecting Ann Arbor vs. Boston.

Michigan's sputtering economy gets a big boost today when Google Inc., the high-flying Internet search engine giant, announces plans to hire up to 1,000 workers over the next five years for a new Ann Arbor AdWords facility.

California-based Google's decision to expand in Michigan, a state marred by the downturn in the automotive industry and hurt badly by the steady exodus of its best college graduates to more prosperous regions is excited about this timely technology win.

Google plans to create a headquarters facility for its Google AdWords unit. AdWords offers "pay-per-click" ads that are triggered when Google users search using keywords. AdWords is Google's core advertising product and is the primary source of revenue.

Google officials said they will start posting new Michigan SEO job openings for employment positions at the new Ann Arbor facility at: www.google.com/jobs.

The jobs will vary in skill demands and pay. The average salary for new hires is expected to be $47,000 a year.

Michigan Governor Jennifer Granholm called the new Google Ann Arbor AdWords facility "a tremendous statement about Michigan having a cutting-edge workforce."

We have some of the leading search engine optimization firms in America right here in our before this morning's news conference, the Michigan Economic Growth Authority is expected to approve $38 million in Single Business Tax credits over 20 years for Google, whose development is expected to generate $165 million in tax revenue over that time.

As Google evaluates specific sites, it will work with local communities on other possible incentives to complement the MEGA tax credits.

"I don't know if there's a cooler company in America than Google," said James Epolito, chief executive officer of the Michigan Economic Development Corp. "They're looking for very skilled people at a time when we're trying to keep our kids in the state of Michigan."

The MEDC has been wooing Google ardently for about a year, ever since reports surfaced that the company was looking at Ann Arbor, Boston, Boulder, Colo., and the Phoenix area as possible sites for expansion.

David Fischer, Google's director of online sales and operations, said Monday that the company's focus is on hiring bright, motivated people.

"We worry less about experience than raw talent. We've had tremendous success hiring people straight out of universities, with majors from engineering to art history."

Google cofounder Larry Page, an East Lansing native and 1995 engineering graduate from the University of Michigan, was a major supporter of the decision to locate in Ann Arbor, Granholm said.

Google already has a small AdWords sales office in Southfield. No decision has been made yet on whether Google will build or lease space in Washtenaw County.

Google, based in Mountain View, Calif., began in 1996 as a research project for Larry Page and Sergey Brin when they were PhD students at Stanford University.

Today Google has 6,800 workers and is the world's largest Internet search company.
As of July 2007 Google shares are about $127 billion. That's nearly $50 billion more than the combined value of General Motors Corp., Ford Motor Co. and DaimlerChrysler AG. Toyota Motor Corp.'s value is $171 billion.

It's hard to overstate the importance for Michigan of landing a major expansion of a company with the cutting edge cachet of Google. The declining fortunes of GM and Ford, along with the related bankruptcy filings of major automotive suppliers Delphi Corp., Collins & Aikman and Tower Automotive and more have hammered Michigan's economy.

Swedish-owned refrigerator manufacturer Electrolux closed its Greenville, Michigan plant and moved 3,000 jobs to Mexico this year. And along with neighboring Indiana and Ohio, Michigan is among the states with the greatest net loss of its college graduates to other states.

Although Michigan has had some successes during Granholm's first term -- new research operations promised by Toyota and Hyundai, plus the move of auto parts maker Borg-Warner's headquarters to Auburn Hills -- they've been obscured by the bad news.

If Michigan is to shed its Rust Belt image and avoid becoming an industrial backwater in the new global economy, it's clear that the state must diversify and emphasize the strength of its research universities in producing scientists and engineers.

Granholm has pushed those buttons hard in creating a $2-billion 21st Century Jobs Fund, aimed at creating and attracting growth of companies in life sciences, alternative energy and other high-technology fields.

"We see Michigan as an ideal location to recruit the best and brightest workers," said Fischer of Google.

If Google's experience in Michigan meets its expectations, the state couldn't ask for a better testimonial.

Some details above include snippets of a Free Press article in July 2006.

How Google AdWords works
• AdWords began in 2000. It is Google's flagship advertising product and its main source of revenue.

• AdWords offers pay-per-click advertising, where businesses specify the exact keywords that trigger their ads and name the maximum amount they are willing to pay per click.

• Competitors include Yahoo Search Marketing and Microsoft adCenter.

Google at a glance
Headquarters: Mountain View, Calif.
Employees: 6,800

Founding: Stanford graduate students Larry Page and Sergey Brin met in 1995 and worked on a search engine that became Google in 1998. Google went public in 2004.

Mission: Google said its mission is to organize information and make it universally accessible and useful.

Name: Google is a play on googol, which is the number 1 followed by 100 zeros.

A look at the men who started Google
Larry Page
Age: 33
Education: Bachelor's degree in engineering, University of Michigan; master's degree in computer science, Stanford University. Graduated high school from Interlochen Academy (www.interlochen.org).

Family: Page is the son of former Michigan State University computer science professor Carl Victor Page, Google's Web site says.

Trivia: While in Ann Arbor, Page built a printer out of Lego bricks.

Sergey Brin
Age: 32 Education: Bachelor's degree in mathematics and engineering, University of Maryland; master's degree in computer science, Stanford University

Family: He immigrated with his family to Maryland from Russia at the age of 6.

Trivia: Brin and Page are converting a used Boeing 767 jet for personal travel, one of the largest corporate jets in the world.

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Advertising Age Blames Search Engines For PPC Click Fraud

Industry trade magazine says click fraud has major advertisers running scared of search advertising and seeking organic seo services.


Click Fraud Cost Advertisers $800 Million Last Year

Study Blames Search Engines for Lack of Vigilance

Original Article By Gavin O'Malley

Published By Advertising Age: July 05, 2006


NEW YORK (AdAge.com) -- Advertisers wasted $800 million on fraudulent clicks last year, according to market researcher Outsell, which conducted a study of 407 advertisers responsible for roughly $1 billion in ad spending. The study found that decreasing confidence in pay-per-click advertising is causing the industry to lose an estimated $500 million in potential pay-per-click spending.


The study was critical of search engines for failing to address click fraud, but Yahoo, MSN and Google insist they have been aggressive in their stance against it.


Slowed and stopped advertising

The study was critical of search engines for not being vigilant enough in stopping click fraud. Outsell found that 27% of advertisers have slowed or stopped their pay-per-click advertising because of suspected click fraud, including 16% who have stopped spending altogether. The average spending reduction is 33% of total pay-per-click spending. These advertisers estimate that 14.6% of the clicks they're billed for are fraudulent, Outsell reports, representing about $800 million in wasted spending in 2005.


Another 10% of advertisers have plans to cut their pay-per-click spending budgets and focus resources on organic search engine optimization, according to Outsell's findings.


Chuck Richard, Outsell VP and lead analyst, was particularly critical of the major search engines for what he sees as their failure to address the problem. "Google, Yahoo and MSN are stonewalling on click fraud, to their own and others' detriment," Mr. Richard stated in the report.


Representatives for Yahoo, Google, and MSN deny such accusations, insisting they have been aggressive in their stance against click fraud.


Google's alternative

Last month, Google began testing a cost-per-click ad alternative that only charges advertisers after their ads generate sales or qualified sales leads. Among other benefits, the new model will likely reduce cases of click fraud, which occur when ads are clicked on repeatedly to paint a false picture of their value. It's no small matter: Google paid $90 million in ad credits earlier this year to settle one click-fraud suit.


Just last week, a federal judge gave preliminary approval to a settlement in a lawsuit that accused Yahoo of not properly safeguarding advertisers from click fraud. U.S. District Court Judge Christina Snyder in Los Angeles approved the settlement whereby Yahoo would pay $5 million in legal fees and offer credit or cash refunds to advertisers shown to be victims of click fraud since 2004.