Yahoo! Appoints Click Quality Czar

I’ve always believed that click fraud was a bigger PR problem than actual problem for the search engines. Of course there have been raging debates about the percentage of “invalid clicks” that advertisers were receiving and what the click fraud numbers actually are. But the engines historically took the “black box” position that they were dealing with the problem and working diligently to address it. But they also tended to address it reactively via litigation rather than getting out “in front” of the issue – at least in public.

Last August, the IAB and search engines came together to jointly form a group to create click quality standards and address the issue of click fraud as an industry. And now Yahoo has smartly appointed Reggie Davis as “Vice President of Marketplace Quality.”

The rest of this post is at SEL.

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Related: Terry Semel raises expectations of Panama for Q1. Previously, the Wall-Street expectations managing had been: no results until at least Q2 (earnings call transcript). But things appear to be going extremely well, prompting Semel’s remarks.

Previously I was informally told by one Yahoo! search marketing exec. that the Panama geotargeting feature (the first thing you have to specify in setting up a campaign) was proving extremely popular.

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Ingenio’s Marc Barach on PPCall

iMedia features an article on PPCall by Ingenio CMO Marc Barach with some case-study information. For those already familiar with PPCall, there are no revelations. It’s basically an overview with some interesting detail.

BusinessWeek on Click Fraud

Danny Sullivan at SEW points to a Steve Rubel post re a Biz Week cover story on click fraud. The furor and frenzy over click fraud had seemingly died down. This may reignite it.

And now a piece in the NY Times (reg. req’d) over the weekend about it. What will prevent click fraud from killing (or substantially damaging) paid search is the central role that search plays in the consumer purchase process.

ComScore: Yahoo! Gains Search Share

It will need to be verified by at least one of the other traffic trackers, but comScore said that Yahoo!’s search share showed a modest, fractional gain for the second month in a row (but down vs. a year ago). Google, by comparison, showed a single point decline.

Any positive indication on the search front for Yahoo! is reason to celebrate these days. We’ll see if it’s a trend. Here’s more from their release:

• Americans conducted 6.3 billion searches online in July, down 2 percent versus last month, reflecting seasonal declines typically seen in July. Growth in search query volume on an annual basis remains strong, rising 30 percent since July 2005.
• Google Sites led the pack with 2.7 billion search queries performed, followed by Yahoo Sites (1.8 billion), MSN-Microsoft (802 million), Time-Warner Network (366 million), and Ask Jeeves/Ask Network (338 million).
• Google and Yahoo! continued their dominance in toolbar searches, combining for more than 95 percent of the market share in July. Google grabbed 50.3 percent of toolbar searches, while Yahoo! captured 46.2 percent.

Here’s data from a William Blair advertiser survey (via iMedia) that show how much is at stake in the battle for search market share:

William Blair equity research analyst Troy Mastin, who provides coverage on 20 marketing, advertising, and media companies, wrote in the survey, “All respondents indicated that they expect online marketing budgets to increase in 2006, with average expected growth of close to 20% (up from 19%). On average, responses indicated that prices increased by about 8.4% (up from 7.3%) during the first half of 2006.”

He also noted that consistent with last survey, brand advertising spending appears to be shifting out of traditional media and onto the Internet. Rich media and “other” forms of online advertising were selected by 45% of respondents as the fastest growing, up from 43% last survey, while search declined from 38% to 34%. Also, 51% of respondents indicated that traditional advertisers would be most responsible for growth, well ahead of the second choice of emerging advertisers at 24%.

The survey also showed a mixed outlook for Yahoo, Google’s continued dominance, and MSN slipping. “Despite aggressive investment by competition, Google continues to gain market and mind share, as 69% of respondents (up from 53%) characterized Google as the best-positioned major player,” Mastin added. “While our open-ended questions revealed optimism regarding Yahoo’s search platform enhancement initiative (Project Panama) and a community that seems to be rooting for the company, only 22% characterized Yahoo as best positioned, down from 30% last survey. The overwhelming view of MSN was either negative or that of indifference, which is surprising given the recent launch of adCenter.”

Even though search declined as an online ad vehicle it’s still the dominant category. Online display advertising growth (incl. video) is anticipated to be the beneficiary of online branding and traditional media dollars moving onto the Internet, which is also good news for Yahoo! Rich media/display was cited as the fastest growing format.

Still smart marketers know they have to blend online branding/rich media with search. You can’t really have branding without search.

The William Blair survey also indicated that marketers were concerned but not overly so with click fraud.

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Related: Here’s a long piece from Danny Sullivan on evaluating traffic and search share data.

Finally: Joint Anti-Click Fraud Initiative

Only about a year and a half too late . . . finally search engines are getting together to do some PR and fight click fraud. According to AP/BostonHerald.com:

The initiative, to be announced Wednesday morning by the Interactive Advertising Bureau, will draw upon the expertise of Google Inc., Yahoo Inc. and Microsoft Corp. – the owners of the top online search engines – to attack a problem threatening to erode their profits. Combined, the three companies control 86 percent of the lucrative U.S. search engine market, according to comScore Media Metrix.

Two smaller search engines, InterActiveCorp.’s Ask.com and LookSmart Ltd., also have joined the alliance along with the Media Rating Council, a nonprofit group formed 42 years ago at the urging of Congress to help track and validate the sizes of advertising audiences.

Finally!

Here’s more from Elinor Mills at CNET.

Panel: Don’t Give Up on Print

I just got through moderating this session at Real Estate Connect. (I actually have to finish my deck for another session at 11. But I’m a compulsive blogger, what can I say.)

8:30 a.m. to 9:45 a.m.
Top of the Funnel: Search Engine and Portal Marketing
The consumer mortgage shopping experience starts here. What do consumers want? How can lenders differentiate themselves? What are current price trends for advertising?

Dean DeBiase, Chairman & CEO, Fathom Online
Jamie Glenn, VP, Product Management, Trulia
Steve Horowitz, SVP, Product & Business Development, Bankrate.com
Sam Sebastian, Director, Classifieds & Local, Google

The session was very tactical: where to put your spend, should you bid on the head or the tail, verticals vs. search, how to calculate overall cost per lead, etc. But one of the things that was almost unanimous was the panel’s belief that marketers should not abandon print media entirely for online.

I led off with the question, “Should marketers abandon traditional media for online and search?” They all emphasized the importance of and complementary nature of both. And Sam Sebastian (of Google) made the point, which I’ve discussed in the past, about search also being a way to track the success of offline media as well as a way to do “A/B testing” before campaigns are rolled out more broadly.

Also interesting was a lender in the audience who made the statement that he’s experienced “lead fraud,” (not click fraud). He said that 25% of the email based leads he’s received (at up to $70 per lead) have been bad over the course of the last year. This is somewhat counterintuitive because I would have thought that “leads” (CPA) would be an antidote to bad clicks. But not so according to his experience.

I wonder how widespread it is.

NYU Prof: Google’s Click Fraud Efforts ‘Reasonable’

Barry Schwartz at the SEW blog posted yesterday about a new click-fraud report, prepared by an independent, court-appointed expert in the context of the Lane’s Gifts class action litigation. The expert is Alexander Tuzhilin, a professor of information systems at New York University. Here’s a copy of the report itself.

From the “conclusion” section:

Google has built the following four “lines of defense” against invalid clicks: pre-filtering, online filtering, automated offline detection and manual offline detection, in that order. Google deploys different detection methods in each of these stages: the rule-based and anomaly-based approaches in the pre-filtering and the filtering stages, the combination of all the three approaches in the automated offline detection stage, and the anomaly-based approach in the offline manual inspection stage. This deployment of different methods in different stages gives Google an opportunity to detect invalid clicks using alternative techniques and thus increases their chances of detecting more invalid clicks in one of these stages, preferably proactively in the early stages.

Since its establishment in the Spring and Summer of 2003 the Click Quality team has been developing an infrastructure for detecting and removing invalid clicks and implementing various methods in the four detection stages described above. Currently, they reached a consolidation phase in their efforts, when their methods work reasonably well, the invalid click detection problem is “under control,” and the Click Quality team is fine-tuning these methods. There is no hard data that can actually prove this statement. However, indirect evidence provided in this report supports this conclusion with a moderate degree of certainty. The Click Quality team also realizes that battling click fraud is an arms race, and it wants to stay “ahead of the curve” and get ready for more advanced forms of click fraud by developing the next generation of online filters.

In summary, I have been asked to evaluate Google’s invalid click detection efforts and to conclude whether these efforts are reasonable or not. Based on my evaluation, I conclude that Google’s efforts to combat click fraud are reasonable.

(My emphasis.)

The report takes a swipe at some of the other reports in the marketplace on Click Fraud (presumably the much-covered Outsell report of several weeks ago):

As a scientist, I am accustomed to seeing more direct, objective and conclusive evidence that certain methods and approaches “work.” Having said this, I fully understand the difficulties of obtaining such measures for invalid clicks by Google, as previously discussed in this report. Moreover, one can challenge most of the reports pertaining to invalid clicking rates published in the business press by questioning their methodologies and assumptions used for calculating these rates. Most of these reports would not stand hard scientific scrutiny.

(My emphasis.)

For more detail, read Danny Sullivan’s very extensive analysis of the report.

Another Click Fraud Release

Not to be outdone by research firm Outsell, which grabbed tons of coverage with its recent click fraud report, Click Forensics (creators of the Click Fraud Index) released its own numbers, indicating click fraud growth from 13.7% on average three months ago to 14.1% today. The Outsell report cited an average of 14.6% clicks that were bogus.

As click fraud grabs more headlines the question is, will this growing perception and concern over click fraud “kill the golden goose?” No. But it may prompt some advertisers to try lead generation, PPCall and CPA models in addition to paid search (if they aren’t already). It may also prompt some advertisers to back away from contextual networks and stick to paid-search, where click fraud may be somewhat less. It may also hurt second and third tier paid-search networks where click fraud is perceived to be much worse than on Google and Yahoo!.

Here’s more from AP:

Google and Yahoo are better at weeding out click fraud than smaller Web sites, but Click Forensics still concluded both companies are being hard hit. About 12.8 percent of the clicks on ads served up by Google and Yahoo are deceptive, up from 12.1 percent three months ago.

The central reason that advertisers can’t afford to abandon paid-search is that consumer usage of search is just too compelling for them to back away now. Indeed the old Pacific Bell yellow pages marketing slogan “If it’s not in the book maybe it doesn’t exist” applies to Google. In fact, that’s what Kinderstart alleged in its bid to have Google branded a monopoly in its now failed antitrust lawsuit against the company.

Here are my posts over the past few months on click fraud (those that I remembered to tag).
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Here’s Google’s official response to Donna Bogatin’s original post quoting Eric Schmidt re his seemingly lax attitude toward click fraud.

Google Checkout, Click Fraud and PR

This is a precarious time for Google. Sure, it seems to be opening up an even bigger lead in search. But it has also started to suffer something of a backlash among “insiders.” The public is largely unaware of all the drama: “Google is too powerful,” “Google is the Microsoft of the Internet,” “Run for your lives!”

Putting aside the competitive animus of certain rivals and would-be rivals, the concerns about Google surround questions of privacy, security and general consumer trust.

When company representatives say things like they won’t use consumer data collected from products like Google Checkout to affect search results or sponsored results — or otherwise use it mproperly — the question is: Do consumers (we) believe them?

This has reared its head recently with Google’s joint WiFi initiative with Earthlink. Google was asked to respond to privacy concerns raised by EPIC, EFF and the ACLU. While these organizations might have generically raised privacy if some other vendor was working on the project, the fact that one of the partners is Google raises a higher level of concern among some people.

I typically encounter skepticism bordering on outright sarcasm from Internet “insiders” when I report what Google has told me on this or that occasion during a briefing regarding their safeguarding of consumer privacy. There’s a danger that over time these skeptical attitudes will seep out into the popular mind and come back to “bite Google on the ass” (as some would say).

Microsoft’s former “e-wallet” initiative, similar to Google Checkout, under the aegis of Passport, was doomed by privacy and security fears. (Passport is now one of the sources of demographic information for adCenter.)

When I talk to Google media relations folks I often say, “You’re aware of the concern about privacy and some of the skepticism because of Google’s market position . . .?” The answer, to the extent we go down this path is “yes.” But I’m not sure there’s a complete understanding of the implications.

Google has been lax (so has Yahoo!) in communicating about click fraud and has gotten sued and criticized by advertisers and the press about not being “transparent” about its efforts to combat the problem and specifics related to its click fraud enforcement or refund policies. I have argued for a very long time (or what feels that way now) that Google, Yahoo!, MSN, et al needed to get out in front of the question of click fraud, be very open and mount a PR campaign that reassures advertisers.

Now comes a widely covered Outsell report that says: 1) it’s a huge ($800 mm) problem, 2) it’s widespread and 3) advertisers are reducing their paid search spending. Even more striking, 75% of advertisers said they were victims of click fraud.

Perception is reality in this case.

There are potential reasons to doubt some of the findings and conclusions of the report, or at the very least to scrutinize its methodology. To the extent Outsell was asking marketers largely about their perceptions and intentions (which it appears from the coverage they were) the reported findings could be very different from the underlying reality. However, the Outsell report does indicate an average click fraud rate of 14.6%, which seems to be higher but generally consistent with Click Forensics’ Click Fraud Index (13.7% on average).

I don’t believe the reality of click fraud is as stark as some of the findings of the Outsell document or some of the recent inflammatory coverage on the issue. My point is that there’s a perception problem now that might not have existed if Google, Yahoo! and others had been more proactive on the PR front. There’s now a sense among some people that these companies may be hiding something.

Back to Google Checkout.

My belief is that Google must assure the public that using Checkout is completely secure and that any information will not be exploited by the company. This could and should be part of a marketing effort to promote the product. However, if Google takes its usual “if the spaghetti sticks” approach (survival of the fittest products) Checkout may not get the reception it needs – and bad PR or inflated privacy concerns that take hold in consumers minds and could potentially fatally impact the product.

I’m not trying to be alarmist, I’m just pointing out that one must have a clear perception of the way the world sees you and respond or react accordingly. Google must be mindful of the wariness and growing concern surrounding its increasing dominance of search and not take its partners’ or users’ good will for granted.

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Related: Google’s CEO’s apparent attitude toward click fraud as a self-correcting problem. That may be a sophisticated economics theory way to regard the problem, but advertisers don’t share that same “sophistication.”

Google Checkout (Late Posting)

I was on a short two-day vacation (more on that later) when Google Checkout was released last week. Lots has already been written and said and much remains to be seen. But I believe, like most Google initiatives these days, it’s not about any single objective — Google is always trying to kill more than one bird.

So what is Google Checkout ultimately about? It’s about rewarding current AdWords advertisers and attracting new ones. It’s about building stronger and deeper relationships with merchants and, especially, consumers. It’s also potentially about new revenues (we’ll see). And, assuming Google is to be believed, it’s NOT about using consumer purchase data to tailor search results or to market to consumers in other ways. It’s also apparently not tied into Google Analytics.

As Om Malik points out, it may be also about anticipated future migration to a CPA model. (I think CPA is on the menu as an intended “advertising” option, but not thought of as a PPC replacement at Google). Early last year I asked whether click fraud would accelerate the further development and mainstreaming of alternatives to PPC (they’ve always existed of course). Now we are seeing several developments that suggest that some of these other models will gain popularity and take hold.

My comment to many of the reporters with whom I spoke last week was that the key for Google is to establish trust and build consumer acceptance and adoption right out of the gate. I think the entire system hinges directly on this. And part of that will be marketing and promotion of the system — something that Google has been loathe to do with any sustained focus for any of its recently introduced products.

This Business Week article is highly critical of Google’s non-search initiatives and uses Hitwise data to argue that they’re mostly flops. Here’s an interesting statement from the article attributed to Marissa Mayer of Google:

[U]p to 60% to 80% of Google’s products may eventually crash and burn. But the idea, she says, is to encourage risk-taking and let surviving products truly thrive. “We anticipate that we’re going to throw out a lot of products,” says Mayer. “But [people] will remember the ones that really matter and the ones that have a lot of user potential.”

From what little I know of the company’s culture, this statement reflects a quasi-Darwinian ethos prevalent at Google. I’m using informed speculation when I say that behind their non-promotion of products is something like a “survival of the fittest” notion. The products that are good will find their audience and survive (or stick on the refrigerator), while others (60% to 80% according to Google’s Mayer) will fail (or fall to the floor).

If I’m right about that assumption regarding the “Darwinian” philosophy – remember the template is Google search, which grew and thrived without any marketing — it’s an element of the culture that may need to change.

If Google really wants consumers and merchants to use Checkout, it probably will have to do some good old fashioned marketing or at least consistent promotion on Google.com. Without that, Checkout may not get the notice and potential adoption it otherwise would — and could wind up falling into that 60% to 80% abyss.

But I think there’s too much at stake here to throw the baby into the pool and see if it can swim on its own.

‘Pay-per-Percentage’ and Other Non-PPC Models

Bill Slawski at the Search Engine Watch blog (via Shimon Sandler) points to a Microsoft paper about a newly proposed performance-based ad model “per-per-percentage” (PPP) — the latest in a series to take on “click fraud.” It’s an interesting model whose reason-for-being is to minimize or eliminate click and impression fraud. Slawski explains and quotes from the MSFT paper on how it would potentially work:

What does pay-per-impressions mean? Simply, someone can can for a percentage of all impressions for certain keywords or keyword phrases over a period of time.

In this system, an advertiser picks a keyword, e.g. “cameras” and purchases, perhaps through bidding, a certain percentage of all impressions for that keyword. For instance, an advertiser might pay $1.00 to MSN Search. In return, the advertiser might receive 10% of all impressions for “camera” for 1 week. What does this mean? It means that for 1 week, one out of ten times that someone searches for the word “camera”, they will see the ad.

The number of real impressions that an advertiser receives would not be affected by the number of fake impressions. The paper describes how this mechanism would need to work to avoid impression fraud, and how a broad match-type of system could function under a pay-per-percentage type system.

It’s important to note that the advertiser isn’t charged on the basis of clicks and that’s the primary way the system resists “click fraud.”

There’s now some momentum gathering around the concept of performance-based online ad models that are more fraud resistant. There are several recent high-profile CPA introductions (e.g., Snap, Jellyfish, and Google’s own CPA test). But effective CPA has been around for a long time and so has pay-per-lead. And PPCall is something of a CPA/pay-per-lead model.

Will any of these displace PPC? Over time possibly, but not in the near term. Generally it will depend on how bad a problem click fraud is perceived to be and the anti-click-fraud measures taken by Google, Yahoo! and Microsoft. More likely, if PPP is introduced by Microsoft it will simply be another way for some marketers to buy online ad inventory.

Effectively PPP is a yield management system based on a certain advertiser spend. Although the model as proposed is auction based, it’s not too far removed from managing a yield to an advertiser budget: something that Citysearch has done for a long time with SMEs, something that LocalLaunch is doing now with its publisher-partners and a feature of the new Panama platform at Yahoo! (However, these systems are sill click based.)

Click fraud is gaining greater “visibility” as SEMPO and other organizations try to get an empirical handle on what the real numbers are. (However the more coverage there is in the press the more the problem is perceived to be real.)

Click fraud is not a threat to online advertising, as suggested in the Microsoft paper. It may well turn out to be a threat to the PPC model. But online advertising is here to stay.

Click Fraud Vindication — Sort Of

CNET reporter Elinor Mills posts about a new Click Fraud Index, which reflects relatively low rates of CF on the major engines ("Tier 2" is a different matter):

The Click Fraud Index shows that the overall, industry-wide average click fraud rate is 13.7 percent. The click fraud rate at top-tier search engines such as Google and Yahoo is even less, at 12.1 percent, the data show. The rate rises to 21.3 percent at so-called Tier 2 search providers and 29.8 percent at Tier 3 search companies, according to the Index.

On one level this is a smart marketing strategy by CF detection firm Click Forensics for its own products. But the establishment of such a third-party index is a good thing for the industry because it will make the CF issue more "transparent" and should instill greater confidence in search-engine marketing overall.

However, the exposure of this data and the contrast between so-called Tier 1 and Tier 2/3 will have an uncertain impact on marketers. Logic might suggest an exodus from Tier 2/3. But while Tier 1 delivers more quality and less CF it costs more too.

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Related: A San Jose Mercury News piece about click-fraud: it seems to be unaware of the index and has a more dire tone.