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AdWords vs. AdSense Click Fraud -- Why Do So Few Get It?

Everyone's talking about clickfraud recently. John Battelle. Robert Cringley. Andrew Goodman. Heck, even Mark Cuban.

But not enough folks emphasize the key distinction: search click fraud vs. content click fraud. Follow the money. Content click fraud is the key issue.

Though not limited to Google, consider AdWords and AdSense. With 43% share, Google's a reasonable proxy for the industry.

 AdWords FraudAdSense Fraud
Advertiser's competition (a bit)
* * AdSense publisher * *
Advertiser's competiton (a bit)
Scaleable InventoryNoYes
Scaleable FraudNoYes
"Death By 1000 cuts"

Consider AdWords fraud, where a person or robot clicks on a search result ad on Google or a syndication partner for the sole purpose of incurring the click charge.

Clearly, the advertiser is harmed. Who benefits? Well, Google makes a few cents. And the advertiser's competitors gain slight benefit from the advertiser's loss of a bit of their marketing budget. But both Google and any competitor of size have too much to lose and too little to gain by such mischief. There's too much risk to build a clickbot or hire a firm to click fraudulently. Besides, I believe that Google and major retailers act ethically.

Detecting bogus AdWords clicks is hard but possible, and I think Google does a good job detecting and purging them. And the AdWords click universe scales (relatively) slowly, driven by Google seizing market share, the increasing availability of broadband, and the growing adoption of search. The growth is limited to real people clicking on real search results. Clicks aren't generated out of thin air. As a result, AdWords fraud scales slowly, both in relative and absolute terms.

In contrast, consider AdSense fraud, where a person or robot clicks on a context ad on an AdSense publisher site for the sole purpose of incurring the click charge.

As before, the advertiser is harmed. But who benefits? Again, Google makes a few cents. But more importantly, the publisher makes a few cents. And unlike AdWords fraud, AdSense fraud scales extremely well -- the publisher can use scripts to create numerous sites easily (even more so now with the AdSense API). Across many many sites, a few cents here and there can add up to meaningful easy money. As the fraud can be spread across many AdSense accounts, it is much harder to detect, even with legions of PhDs. The AdSense click universe can grow quickly, driven by manufactured clicks on fake sites.

In general, I believe AdWords fraud rates are in the low single digits, and AdSense fraud reaches as high as thirty percent.

From the retailer perspective, if the ads drive enough sales to meet target ROI, then the retailer should run those ads, search and/or content. The click fraud loss is just a cost of doing business. (Of course, an advertiser would be crazy to run search and content without distinguishing tracking.)

But one thing is sure: when analyzing click fraud, the search vs. content distinction is crucial.

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