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Click Fraud And Google's Context

A click-fraud activist believes that recent comments by Google CEO Eric Schmidt about solving click fraud by ignoring it, though apparently taken out of context, still belie an intrinsic problem.

The alleged misunderstanding began in March when Schmidt answered a question after his remarks at the SIEPR conference at Stanford University.

"Let's imagine for purposes of argument," Schmidt began, "that click fraud were not policed by Google and it were 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."

In an attempt to calm a turbulent blogosphere, which ran with Schmidt's comments, Google posted on its blog that Schmidt's comments were written out of context.

In the post, Google said that Schmidt was answering a hypothetical question with a hypothetical answer, adding that Schmidt was not describing Google's approach to the click fraud problem, only answering economics question at an economics conference.

But at least one click fraud activist, who is currently involved in litigation against Yahoo and Google and thus spoke only under the condition of anonymity, says that Schmidt's answer and the thinking behind it were flawed -- hypothetical or not.

The click fraud activist told internetnews.com that Schmidt's hypothesis presupposed that advertisers can tell the difference between good clicks and fraudulent ones.

That's not always true, the activist argued, suggesting that advertisers' sales are hard to correlate with online activity.

Take a car dealership, the activist said. Potential buyers might click on a sponsored link, look at a car and be very interested, but then not perform any transaction to signal the click was not fraudulent, thus making fraudulent clicks more difficult to detect.

Schmidt's theory presupposes that advertisers can always tell how many clicks are worth paying for, the activist said.

The activist also noted that advertisers who are already paying the minimum bid would have a hard time adjusting lower to compensate for click fraud.

The activist argued that Schmidt's comments belie Google's internal thinking that it doesn't need to worry too much about click fraud, that they do not have to go back to the drawing board.

But Google said in its post that it "strives to detect every invalid click that passes through its system, and to prevent those clicks from ever reaching an advertiser's account."

The company also said that "Anyone who has followed Google knows" they have "devoted significant resources to manage" click fraud.