Click Fraud isn`t Going Away - Some Really Ugly Percentages
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The most shocking figure of the report, at least for me, was the percentage of respondents who believed they’d been victims of click fraud at least once. The number was 75 percent. That’s right; three out of every four online advertisers who responded to the survey believed they’d been defrauded. How often have they been defrauded? According to Outsell, advertisers believe a whopping 14.6 percent of all clicks are fraudulent.
As you might expect, these advertisers acted on that belief by cutting back their spending. More than a quarter of the respondents had cut back their keyword purchases; of that group, more than half had cut their spending by at least 20 percent. Here’s another surprising number: 16 percent of respondents have become so fed up with paid search advertising that they have completely stopped doing it. And the news for search engines gets worse; another 10 percent of advertisers said they plan to reduce their paid search spending in the future.
So where does the $1.3 billion figure quoted in the previous section come from? Well, $800 million comes from the amount of money the respondents estimate they lost on phony clicks. Outsell just expanded the numbers to incorporate the entire field. This works if you figure that the respondents accounted for more than 18 percent of the total money spent on pay-per-click advertising, and that the 14.6 percent figure for the number of fraudulent clicks is consistent throughout the field. (I could very well be wrong here; math is not my strong suit, but I checked my figures twice). You also have to figure that the respondents spent most of their online advertising budget on pay-per-click, which may or may not be reasonable (but there are probably other ways to make the figures work.
And where does the remaining $500 million come from? Again, that’s just a matter of the percentages. According to Chuck Richard, vice president and lead analyst for Outsell, “If we take the 37 percent of advertisers who have reduced or intend to reduce their PPC and apply the average 33 percent reduction rate, we see a 12 percent hit to total PPC ad spending.”
Could advertisers really have lost about $800 million from phony clicks? What about refunds? You would figure, with 75 percent of survey respondents believing that they had been defrauded, a lot of them would ask for refunds. Nothing could be further from the truth. Only 5.4 percent sought refunds from Google, 2.9 percent from Yahoo, and a tiny 1.5 percent of respondents sought refunds from MSN. Many of them did fairly well, though; the average refund came to $9,507.
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