AdMoolah News and Views

As reported by ZDNet, Google’s CEO Eric Schmidt had this to day about the click fraud problem:

According to Schmidt, Google’s auction-based pay-per-click advertising model is inherently self-correcting. Schmidt’s scenario for what would happen if Google did not police click fraud and it was “rampant”:

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 which is to let it happen.

This type of attitude is bad news for publishers. If this were too happen the advertisers wouldn’t mind because they are paying less per click for fewer real clicks, so their ROI stays the same. Google wouldn’t mind because they are still getting paid for every click whether fraudulent or not. The click fraudsters would love it because they would be making lots of easy money. The only losers ion the equation would be the legitimate publishers. They would be earning less per click.

Note that this was a “what if” scenario, not something that Schmidt acknowledged was going to actually happen. It’s still scary that he thinks this is a “perfect economic solution” when the fraudsters are getting rich and the real publishers are losing out. Doesn’t sound perfect to me!