Vinny Lingham's Blog

I’m not going to rehash my previous post on this topic (still highly applicable – I highly recommend reading it before continuing with this post), but Google has finally launched Pay Per Action across their Adwords Network for US advertisers onto Adsense (not Search Network yet). I still believe that there are severe problems with the model, and Google will discover that it is not sustainable.

Search Engine Watch believes that Commission Junction’s days are numbered – I don’t think so! Andy Beal also has a similar view. We’ve been running CPA campaigns through Google for nearly 4 years now, and I think Google vastly under-estimates the risks and relationships at play with CPA marketing. The biggest concern though, is that Google’s internal arbitrage of CPC to CPA (which is what they’re doing, effectively), pushes prices CPC prices up in the short term, while they make mistakes that we’ve forgotten how to make, in our Clicks2Customers business.

Also, from the Inside Adwords blog, it’s not clear how they will deal with chargebacks – I’m guessing that the merchants have to factor this in? Can you imagine what’s next? Click-Order-Return (COR) fraud (i.e. Website owner clicks a merchant, places an order – merchant pays Google, Website owner returns goods – Google doesn’t refund merchant and Google pays Adsense site share of CPA). What if I’m a Google stockholder and I make a $1m purchase in order to boost the earnings, and then return or cancel the order – in theory, Google still gets paid and their stock goes up, but the merchant is out of business – just summising here, but I still don’t think CPA is viable for Google.

As I said in my previous post on this topic – Google has a smart bunch of guys, and I’m sure they will figure it out!

Ahh, fantastic news – now everyone can just shut up and get on with things. Google just announced that they will now provide advertisers with data about how many clicks are credited back. In our experience, we see about 5%-10% invalid clicks across all our campaigns from Google – it’s very low, and we factor it into our ROI calcs – and in most cases, this range is possibly server errors, not relating to Google. I honestly believe that people make too much of a fuss about it.

The other thing about this reporting is that is doesn’t do an impact calculation on the higher CTR’s on the ad, and how much discount the merchant received on good clicks. Confused? Here is a scenario:

You get 100 “good clicks” on 1000 impressions – 10% CTR – at $1 CPC the bill is $100.
Click “Fraud” occurs and you get another 50 clicks within the next 1000 impressions – (100+50=150=15% CTR).

Higher CTR=Lower CPC = 75c (example) = $112.50 = Net cost impact of $12.50.

So in the scenario above, Google’s CTR discounter allows you to only pay $12.50 – so a 50% increase in clicks from “fraud” would only lead to a 12.5% increase in costs which is negligible, given the ratios.

For this reason, I’m not convinced that Advertisers are out of pocket as much as they claim. Any other views?

Although these are sample numbers – we have similar data to back it up.

Google has finally spoken out about Click Fraud, after their $90m settlement today. From the analysis, it seems that Google estimated their click fraud to be no more than 1% of their total revenues – in my experience, that’s a very conservative estimate.