Spam and other illnesses

Many experts believe spam poses the biggest threat to businesses that have an online presence. According to Brightmail Inc., a major vendor of anti-spam software, roughly 40% of all e-mail traffic in the United States is spam, up from 8% in late 2001 and nearly doubling in the past 6 months. By the end of this year, industry experts predict, fully half of all e-mail will be unsolicited. The armies representing the Internet's good guys may never be able to defeat the spammers.

Spam's opportunity costs collectively represent the greatest cost to employers using the Internet as a business tool today. The band width (Internet load) that spam occupies—along with the equipment, software, and manpower to handle it—represents the second biggest cost. According to Einstein Medical's internal calculations, this accounts for about 11% of the total money allocated by companies to provide e-mail services to their employees.

As costly as spam is, a new breed of crooks that may be even more dangerous than the spammers has been growing steadily over the past 5 years. Click fraud is the game and pay-for-click advertising is their ballcourt. The players could be your competitors. To understand the what, how, and why of click fraud, we need to revisit the story of the Internet itself.

Internet advertising

Internet advertising has undergone some dramatic changes since the launch of the first major search engine, Yahoo! in 1995. The first form of online advertising, known as "general run advertising," came about in the mid-1990s. This early stage of Internet marketing was not very targeted; in fact, the banner ads that appeared at the top of search engine results pages had no correlation to the search terms that produced the results.

For example, if a person searched for "LASIK," a Visa ad might come up on the results page. Conversely, searching for "Visa" could just as easily produce a LASIK banner ad. These advertisements were sold on a cost-per-one-thousand impressions, which is very similar to how TV advertising is sold.

The next wave of Internet advertising began in the mid- to late-1990s and centered on "key word search," a method that proved much more effective for advertisers and consumers alike. Key word search made it possible for potential patients to find advertisements pertaining to the searches they were conducting. When consumers searched using the term "LASIK," an advertisement that dealt specifically with LASIK would appear. Key word search provided a greater return on investment for advertisers and a greater search engine user experience for consumers.

The main problem key word advertising posed for search engines was cost. Many factors, including the number of small advertisers wanting to buy key words, the complex artwork required to design key word advertising, and the management associated with these factors, made key word advertising a very labor-intensive approach.

A successful overture

In 1999, Overture came into the market with what seemed like the answer to the administrative headaches of key word advertising. Overture's auction-based, pay-per-click (PPC) advertising eliminated the ingredient causing most of the pain—human beings—and replaced it with automated software.

Along with the two other major strategies used to achieve visibility on the search engines (Internet directories and search engine optimization), pay-per-click advertising's software-driven bidding process has enabled advertisers to get more visibility on the search engines. Potential advertisers simply navigate to the advertiser section of the search engines to start the bidding process. The highest bidder gets a link at the top of the search results page. Advertisers with lower bids appear further down in the results (the lower the bid, the further down).

This bidding process is similar to traditional auctions in some ways and dissimilar in others. Like traditional auctions, of course, the bidding for pay-per-click auctions goes higher for more valuable items. For example, on Overture the winning bids for the search term "laser vision correction" are much higher than for "hand surgery." But unlike traditional auctions, the winning bidder in pay-per-click auctions doesn't get to keep the spoils forever. In fact, the bidding for pay-per click auctions is perpetual, meaning you are only as good as your last bid! The bidding keeps going, with no permanent winner.

Pay-per-click leads to fraud

The advent of Overture's pay-per-click model had a colossal effect on the search engine world. Seeing the success Overture was having, in August 2003, search giant Google scrapped its old key word advertising strategy and created the pay-per-click-driven Google AdWords. Today, MSN is the only major search engine that does not have its own proprietary pay-per-click bid model strategy (although Overture advertising does exist on the MSN search results).

The effect of this Internet revolution on advertisers has been a mixed bag. While Internet visibility can now be achieved with the click of a button (more like the swipe of a credit card), advertisers are also much more likely to become victims of fraud. People with few scruples can click on their competitors' pay-per-click ads every time they see them on the search engines. If your latest bid is $5 per click, and a dishonest competitor clicks on the pay-per-click advertising 10 times, your bill suddenly becomes $50. If someone clicks on the advertising 50 times, it would be $250.

This is click fraud, and it's the reason pay-per-click advertising is a realm you may want to avoid. Disturbingly, our contacts in the field of Internet advertising estimate that 30% of pay-per-clicks are fraudulent. (Incidentally, that's one-third more money in the pockets of the search engines, which are loathe to crack down on the perpetrators of click fraud.) This statistic is particularly sobering when you consider that pay-per-click advertising has only existed for 5 years. Spam e-mail, currently the industry's biggest aggravation, makes up 40% of all e-mails—but it's been around for 10 years. At this rate, pay-per-click fraud will undoubtedly surpass spam as the number-one problem of Internet advertisers. And this calls into question whether pay-per-click advertising itself is worth investing in.

With less problematic, more effective Internet strategies like directories and search engine optimization available, why bother?

Aug 15, 2005
Ophthalmology Times

http://www.ophthalmologytimes.com/ophthalmologytimes/article/articleDetail.jsp?id=175972&pageID=1