The search giant has always offered its many services for nothing, but the threat of click fraud may change the way it does business

Charles Miller
Thursday January 19, 2006
The Guardian

John Carreras was once a contented Google advertiser. He used text adverts that appeared alongside searches to bring people to his trade exhibition website. He happily paid Google a few cents for every referral, believing that anyone who clicked through to his site from Google was a likely customer. But then he attended a conference in Las Vegas, and he noticed something strange: the number of Google referrals he was getting dropped dramatically, only to rise again once the conference was over.

Carreras became convinced the “missing clicks” weren’t from customers, but from his competitors, who had all been in Vegas along with him. He believed his unscrupulous rivals whiled away their office hours clicking on his Google ads, knowing that every tap cost him money.

If you add in a second kind of scam, where people earn themselves a little money from Google by clicking on ads they’re hosting on their own sites, you can see the potential for malice. Click fraud, as it’s called, is acknowledged by Google as a problem: last year, Google chief financial officer George Reyes described it as “the biggest threat to the internet economy”.

While Google Labs, as the company calls its development division, turns out new products at a cracking pace, Google remains largely dependent on just one source of income: advertising. Google would never admit to being uneasy about that reliance. Why should it? Advertising is doubling the company’s revenue every year, and is expected to generate almost $10bn this year. But for all the undoubted strengths of its pay-per-click system, some worrying vulnerabilities have emerged.

Clicking off

At the same time as it tries to combat click fraud, Google is preparing to add a second string to its money-making bow, by charging users for video downloads. It may not sound earth-shattering, but if it works, it could represent the start of chapter two in the Google story.

The problem of click fraud remains – although today Marissa Mayer, the company’s vice-president of search products, is more reassuring. She calls it “a serious problem for us, but also a very solvable problem”. In principle, the company will not charge its advertisers for clicks that aren’t from genuine potential customers. Typically, Google is hoping to use technology to detect suspicious click patterns.

Which brings us back to John Carreras. As a result of his experience, he got out of the trade exhibition business, believing that click-fraud detection would be a more lucrative field. He now sells software under the name Who’s Clicking Who? which promises to solve click fraud for Google advertisers, firstly by sending “we know who you are” messages back to fraudulent clickers, and then by compiling click dossiers to help fraud victims reclaim their money from Google.

For the Mountain View company, click fraud has the potential to become the kind of technological arms race that has been a drag on Microsoft in its battle against ever-changing security threats. Nobody knows the exact extent of it. But, says Google-watcher John Battelle, “right now, advertisers are getting such a good return on their investment that it doesn’t matter to them whether [click fraud] is 5% or 30%”. But he believes that as Google advertising becomes more competitive and the level of fraud grows, “eventually the rubber will meet the road and we’ll see how much fraud there is in the system”.

New streams

There’s no question that Google’s ad system is still a runaway success, but with click fraud on the radar, it’s a good time to be exploring new revenue streams. Previously, Google Video (video.google.com), unveiled in January last year, only offered a chance to upload and view uncopyrighted videos free – creating a jungle of thousands of weird, searchable amateur videos (try “party”, “family” or “vacation” to get the flavour).

But Google is now signing up professional broadcasters, and soon users will be asked to pay for downloads. But how will users take to paying a company that has so far offered them so much for nothing? “It will be a new experience for them,” admits Jennifer Feikin, director of Google Video. “If you look at our product today, we refer people off to somewhere where they purchase things; this is something brand new, where it will be happening on Google.”

Google’s new interest in selling is a worrying trend for the likes of Amazon, but Battelle believes online retail is only the start of Google’s commercial ambitions: “They are changing the economic presumptions of a number of industries. You can start to tick the boxes of all the information-driven, intellectual property-driven businesses in the world. And it’s a very, very big bundle of businesses – the biggest bundle one can imagine.”

So far, Google has remained tight-lipped about whether its video payment system will be the basis for other services. When I suggested to Feikin that it would allow the company to sell almost anything to its customers, she hesitated for a moment, then replied with cheerful mock-surprise, “that’s a good idea!”

· Charles Miller is producer of The World According to Google, the first in a new Money Programme series, beginning tomorrow night on BBC2 at 7pm.

FEELING depressed because you missed out on Google’s stock bonanza? Not to worry. Just get on the company’s shadow payroll.

New York Times technology reviewer David Pogue was at the 2006 Consumer Electronics Show, posting blog entries and daily video updates. Hundreds of thousands of people have essentially done just that by starting blogs, forums or other informational sites and getting paid for posting ads on Google’s behalf. And while the money they earn might not be enough for them to buy, say, a share of Google’s stock, such revenues are growing.

The trickle-down effect from Google does not stop at fledgling entrepreneurs. A growing number of rank-and-file contributors to Web sites are also profiting. Consider Digital Point Solutions, a software company in San Diego, which publishes an online forum (http://forums.digitalpoint.com) frequented by about 15,000 users. Any one of them who starts a new forum discussion topic receives half of the advertising revenue paid to the site by Google for ads on the front page of that topic section. (The discussion’s creator then splits his share with others who post messages.)

Google does not actually advertise on the Digital Point site. Rather, through Google’s AdSense program, it places ads on the forum, similar to the ads that appear next to search results on Google.com. Google scans the information on the forum’s pages, then posts related ads. If the discussion is about computer hardware, for instance, ads for DVD drives might appear.

Google pays Digital Point about $10,000 a month, depending on how many people view or click on those ads, said Shawn D. Hogan, the owner and chief technology officer of Digital Point.

Mr. Hogan said he started the revenue-sharing approach in 2004 “as kind of a marketing gimmick.”

“But everyone seemed to think it was a cool idea,” he said. “I saw a lot of other sites doing the same thing maybe six months later.”

Mr. Hogan said it was difficult to say whether the financial incentives had made the forum’s participants more active, because its growth rate was about the same before and after it started paying users. Either way, the payoff is meager. “In the best-case scenario, someone might make $50 a month, so they’re definitely not quitting their jobs to do this,” he said. “But it might be enough to buy a nice dinner.”

One area of concern, Mr. Hogan said, was whether the forum’s participants would skew their postings to earn more money. For instance, since advertisers in certain categories, like sexual-performance drugs, pay much more to place their ads on Google and its affiliated sites, you might expect technology discussions to randomly veer in that direction.

“But that hasn’t happened, thankfully,” Mr. Hogan said. “Probably because there isn’t that much revenue in it for them.”

That could change, as more marketers adopt this approach, which Yahoo also offers. Google’s advertising network sales, which come largely from its AdSense advertisers, reached $675 million in the third quarter of 2005, the last period for which Google reported results. That figure was up 76 percent from a year earlier. AdSense generates slightly less revenue than Google’s primary revenue engine, its search Web sites, which sold about $885 million worth of ads in the third quarter of 2005, a 115 percent jump from the previous year.

Google.com and the company’s foreign search sites contribute more to Google’s bottom line than AdSense, because for every dollar the company brings in through AdSense and other places that distribute its ads, it pays roughly 78.5 cents back to sites like Digital Point that display the ads.

But in some ways, search advertising has a more limited horizon, since the number of advertisements a company can display is limited by the number of searches its users conduct. Internet users continue to increase their reliance on search sites, and Google in particular, but the rate of growth is in the single digits.

By contrast, millions of small sites have not yet signed up for Google’s AdSense program, which was introduced in 2002. AdSense quickly gained a following among bigger companies with an online presence, like the Weather Channel, as a way to supplement their advertising deals and populate more obscure pages with paid ads. But as more small sites use the Internet to post photos, journals and other material, the number of pages that can carry new Google ads is growing quickly.

That’s what makes AdSense one of Google’s most compelling long-term bets, said Charlene Li, an online media analyst with Forrester Research. “I’ve called Google the one-trick pony for a long time, and for the most part they still are,” Ms. Li said. “But they really see AdSense as the next frontier.”

To that end, the company has refined the program significantly, with various features intended to attract more advertisers and publishers. For instance, as of late last year anyone who created a blog with Google’s Blogger service was automatically enrolled in the AdSense program.

“Before that, it was quite painful to figure out,” said Gokul Rajaram, the business product manager for AdSense, “so over the last few months we’ve seen a sharp uptick in bloggers using AdSense.”

For AdSense advertisers, some of the more significant improvements began last June, when Google started allowing marketers to select vast groups of sites on which to advertise, as Paramount Pictures did last year when it chose 100 small sites with hip-hop-oriented content to promote its movie “Hustle & Flow.”

Late last year, Google also gave advertisers the ability to display graphical ads on sites within the AdSense network of publishers, as well as the ability to pay different (typically lower) prices for AdSense ads than those available on Google.com. The company will not disclose how many advertisers have joined the program – “thousands” is all it says – but analysts said marketers were quickly warming to it, thanks in part to the recent upgrades.

More advertisers, of course, mean more money for publishers, many of whom would simply not publish if it were not for AdSense, Ms. Li of Forrester said. “Before, if I wanted to put advertising on my site, I’d have to hire ad salespeople, process orders – there’s no way,” she said. “This has taken away a huge barrier in publishing and made it viable for people to make a couple dollars, or thousands of dollars.”

Click on the adsense logo on the lefthand menu of this site to start making money from your website….

nytimes.com

Internet users make up their minds about the quality of a website in the blink of an eye, a study shows.

Researchers found that the brain makes decisions in just a twentieth of a second of viewing a webpage.

They were surprised as they believed it would take at least 10 times longer to form an opinion.

The study, published in the journal Behaviour and Information Technology, also suggests that first impressions have a lasting impact.

Speedy conclusions

The Canadian team showed volunteers glimpses of websites, lasting for only 50 milliseconds.

The volunteers then had to rate the websites in terms of their aesthetic appeal.

The researchers found that the speedily formed conclusions closely tallied with opinions of the websites that had been made after much longer periods of examination.

Gitte Lindgaard of Carleton University in Ottawa, Canada, and lead researcher of the paper expressed her surprise at the results.

“My colleagues believed it would be impossible to really see anything in less than 500 milliseconds,” she told the website of the Nature journal, which reported the research.

The judgements were being formed almost as quickly as the eye can take in information.

Lasting impressions

The researchers also believe that these quickly-formed first impressions last because of what is known to psychologists as the “halo effect”.

If people believe a website looks good, then this positive quality will spread to other areas, such as the website’s content.

Since people like to be right, they will continue to use the website that made a good first impression, as this will further confirm that their initial decision was a good one.

As websites increasingly jostle for business, Dr Lindgaard added that companies should take note.

“Unless the first impression is favourable, visitors will be out of your site before they even know that you might be offering more than your competitors,” she warned.

BBC Website