Court expert on CPC model: 'inherently vulnerable to click fraud'

“Although currently popular, the CPC/PPC model has two fundamental problems."

In conjunction with announcing its court filing of a “omnibus response to objections” involving its settlement in the Lane’s Gifts v. Google click fraud case, Google has posted a link to a 47-page independent expert’s report, also a court filing.

The document, “Lane’s Gifts v. Google Report”, was written by Dr. Alexander Tuzhilin, Professor of Information Systems at NYU.

Google says, “The bottom-line conclusion of the report is that Google’s efforts against click fraud are in fact reasonable.”

Google’s “bottom-line conclusion,” however, may not be the bottom-line conclusion advertisers reach.

The report provides undoubtedly the first public, unbiased analysis of the mechanisms of the Pay Per Click (PPC) - Cost Per Click (CPC) advertising model.

Among the reports' findings, "the main problem of the CPC model: it is inherently vulnerable to click fraud."

Following are excerpts of the report:

Although currently popular, the CPC/PPC model has two fundamental problems:

  • Although correlated, good click-through rates (CTRs) are still not indicative of good conversion rates, since it is still not clear if a visitor would buy an advertised product once he or she clicked on the ad…
  • It does not offer any “built-in” fundamental protection mechanisms against the click fraud since it is very hard to specify which clicks are valid vs. invalid in general…

The Advertisers’ Dilemma or What Knowledge Google Shares with Advertisers about Clicks

When advertisers are billed by Google, they receive reports describing the clicking and billing activities…One problem with these reports, however, is that these statistics are aggregated by Google over some time period…In other words, advertisers cannot know if a particular click on a particular ad was marked as valid or invalid by Google, and Google refuses to provide this information to advertisers. This is a source of contention and dispute between Google and the advertisers…

Conceptual Definitions of Invalid Clicks

There are numerous definitions of fraudulent and invalid clicks…it is hard or even impossible to determine the true intent of a click using any technological means…given a particular click in a log file, it is impossible to say with certainty if this click is valid or not in all the cases. This means that it is impossible to measure the true rates of invalid clicking activities, and all the reports published in the business press are only guesstimates at best…

The invalid clicks can come from the following sources:

  • individuals deploying automated clicking programs or software applications (called bots) specifically designed to click on ads
  • an individual employing low-cost workers or incentivizing others to click on the advertising links
  • publishers manually clicking on the ads on their pages
  • publishers manipulating Web pages in such a way that user interactions with the Web site result in inadvertent clicks
  • publishers subscribing to paid traffic Websites that artificially bring extra traffic to the site, including extra clicking on the ads
  • advertisers manually clicking on the ads of their competitors
  • publishers being sabotaged by their competitors or other ill-wishers
  • various types of unintentional clicks, such as doubleclicks or customers getting confused and unintentionally clicking on the ad without a malicious intent
  • technical problems, system implementation errors and coordination activities between and its affiliates resulting in double-counting errors
  • multiple accounts of AdSense publishers: some AdSense publishers illegally open “new” accounts under different names and using false identities; all the clicks originated from theses illegal accounts are considered invalid.

Conclusions about Definitions of Invalid Clicks

there is a fundamental problem associated with the definition of invalid clicks for the Pay Per Click model… 

There is no conceptual definition of invalid clicks that can be operationalized in the sense defined above.

An operational definition cannot be fully disclosed to the general public because of the concerns that unethical users will take advantage of it, which may lead to a massive click fraud. However, if it is not disclosed, advertisers cannot verify or even dispute why they have been charged for certain clicks.

This problem lies at the heart of the click fraud debate and constitutes the main problem of the CPC model: it is inherently vulnerable to click fraud.

For this reason, we will refer to it as the Fundamental Problem of invalid (fraudulent) clicks. Two possible solutions to this Fundamental Problem are:

The “trust us” approach of the search engines. The search engines can assure advertisers that they are doing everything possible to protect them against the click fraud. This is not easy because of the inherent conflict of interest between the two parties: the money from invalid clicks directly contribute to the bottom lines of the search engines…

Third-party auditors. Independent third-party vendors, who have no financial conflicts of interest, can work with advertisers and audit their clickstream files to detect invalid clicks.

These two approaches would still constitute only a partial solution to the Fundamental Problem because there is no conceptual definition of invalid clicks that can be operationalized.


UPDATE SEE: Click fraud: are advertisers sufficiently protected?