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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.