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Flat Fee Advertising All That’s Left?

If you go by the story from SEOMoz, there’s too much fraud in the advertising arena and the only format that makes sense for advertisers is flat-rate models such as Text Link Ads (aff).

The post writer, Michael Martinez, cites a staggering fact that 14% of clicks in the click-through variety of advertising is fraudulent. I don’t know where he got his numbers, but I have no reason to doubt that they are accurate.

I’ve thought for some time that contextual advertising is dead, and I see the argument about impression based advertising. But could his prediction be true? I sure hope not.

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Comments

  1. jhay says:

    Yes, I sure hope this prediction is not true. Most small time bloggers rely solely on pay-per-click ads as they find it difficult to secure advertisers via the models similar to TLA and AdBrite.

    Google and Yahoo just have to do more on fighting fruadalent clicks.

  2. I’ve heard the 14% figure before, and maybe that’s true in certain segments. It doesn’t seem to be so in mine. Then again, I am pretty proactive at putting suspicious AdWords advertisers in my competitive ad filter.

  3. Jon says:

    14% is probably accurate…but not the end of the world or the PPC model. It just means that advertisers are having a theft fee that they need to absorb into the cost of doing business, much as retailers have a shoplifting/security fees. PPC would not have lasted and continued to grow as long as it has if there wasn’t a very good return on the cost of those clicks.

    Flat fee advertising is highly limited because it is usually not context targetted. How many real “ready to buy” clicks to you think this site is send to the “Nomi Juice” advertiser on the left of this page. Flat fee is for link love not targetted buyers. No end in PPC model that I can see, even if fraud went as high as 25%….there’s a lot of margin left.

  4. Paul says:

    I think advertisers will just start to accept click-fraud as a cost of doing business. Google etc will do their best to reduce it, but it will never completely go away like spam.

    Click fraud is a bummer, but I think those who rail against it have to realise that all advertising contains an element of waste. What % of viewers for a car TV ad is actually interested in buying a new car, for example. Definitely a minority. So the majority of the viewers the advertiser is paying for is waste. Just as click-fraud is waste.

    The old advertising saying says “Half my advertising cost is wasted. If only someone could tell me which half.”

    I think why they’re so upset at the moment, is they saw an opportunity to reduce waste to nil with PPC. Only those who were interested would click, so you’d only be paying for real customers. Click-fraud has ended that happy illusion.

    In the end, advertisers will measure their PPC campaigns the way they always have cost vs benefit. If I can spend $10,000 on PPC and generate $12,000 in profit from the resulting sales, I’ve just made myself a juicy 20% return. Sure it would be great if I could cut out the $2,000 or whatever of my $10,000 that’s click-fraud and increase my return. But even if that’s impossible (which looks likely), I’m still getting a good return.

    Anyway, that’s my 2c worth.

  5. A.B. Dada says:

    The original poster has no idea what he’s talking about. I’ve been in and out of the advertising business at both ends for over a decade, and I guarantee that contextual advertising is the best place to be — as long as the advertising marketers (ie, Google, Yahoo, etc) keep working on battling false clicks and keep working on making better contextual campaigning systems.

    For me, contextual advertising through AdWords is my key business for the websites that I sell actual items through. I’m not talking about MfA websites but websites with actual items to sell — AdWords accounts for nearly 60% of my most profitable sales. Direct marketing is only 5% and return business accounts for the rest.

    If you don’t understand the intricacies of contextual advertising, you’ll loose out. Marketing to your end buyers is one of the most complicated systems known — you have to know what you’re selling (not your product, but your performance and your ROI for your customer) and you have to be able to predict what it takes to acquire customers. The biggest AdWords advertisers know that there is a huge future in both the blogosphere as well as the “competitive gain” business — companies willing to run AdSense because the know their service will work better with competitors ads running on their sites.

    That isn’t to say that 14% isn’t accurate. He is correct there. In the years I ran cable, satellite, radio and newsprint ads, about 92% of our ads were ignores. 92%! But the 8% that hit was incredibly profitable.

    The key to winning in ANY marketing campaign, including contextual advertising, is to track every single ad click. Known what they clicked, know why they clicked, know what they want even if they don’t buy, and work to convert those who walked away. Contextual advertising will destroy TV, radio, newspapers and direct maketing as we know it. It will change advertising more than you’ve ever realized it, and anyone who thinks it is a failure (like SEOMoz) is clueless to the reality of the advertising, marketing and business world that has not yet grown past infancy.

    The final word here? This is not a news story, this is just a link to a company or guy who has no idea what is ahead for contextual advertising. It will only get _better_ for those willing to stake their claim, work hard — really hard — and reap the results.

  6. stuart says:

    14% fraudulent or 86% valid — is that glass half full or empty?

    worth mentioning that the story is based around rumours among publishers that their earnings were down — big deal — earnings are fluctuating all the time and for every moaner there’s another raving about their best day ever…

  7. Of course, from my perspective, I’m simply asking a question. I’m glad there are readers like you AB that know the other side of the coin. Until tonight when I bought 6 Text Link Ads, I had no experience on the Advertiser side of the coin. No Adwords campaigns. No sponsored links. Only publisher experience.

    And as in the entry I linked to on my own site, my revenues are way down. I can only guess what’s going on but if there is a perception of high click fraud, it is easy for people to say that Google and Yahoo have to tighten their ship, but those people usually don’t have money tied up. I’d presume those who have money tied up might hang out for a bit and then begin to bail on those programs.

    Again, just a guess from an otherwise inexperienced advertiser.

  8. Don says:

    I’m confused. you say you’ve thought for a while tht contextual advertizing is dead. Yet you are still using it and recommending it.

    Please expound.

    Thanks!

  9. I still use it on some sites. I’ve eliminated it on others. And I’ve thought for some time that if it isn’t dead, it’s dying quickly. And I also make the idsclaimer that I am no expert.

    Clear as mud? :)

  10. Tore O. says:

    If I remember right, fraudulent clicks were the main reason porn and gambling sites shut down their click through programs and went on to only do percentage of sale or pay per sale in the beginning of the 00s. We may see the same thing happening for the contextual ads.

  11. George says:

    In some ways contextual advertising is just starting. MSN and Yahoo are getting into the game, for them it’s just starting.

    Yes, they need to fix click fraud, but with so many people getting into the contextual advertising game, I would be surprised if it died anytime soon. It may not be the best way to make money on the net, but it can provide a nice income.

  12. Mike says:

    I think the poster should discuss more in his post rather than make nonsense posts and link back to his site…

  13. Andy Merrett says:

    My revenue is down a little but I generally put that down to summer, nothing else. Fraud is a problem but I don’t think it’s insurmountable.

  14. bernard says:

    june for me was a brilliant month, lots of ‘sales’ via adsense, July is less, but also less visitors due to the summer and less competive ads I guess… nothing to worry about.

  15. Tim says:

    Click fraud is even a big blog thing in Germany at this time.

  16. pcunix says:

    First, I agree that fraud is just part of doing business. I’m an Adsense publisher but I’m also an Adwords advertiser; fraud is just something you have to expect.

    However: Google et al. can and will work to reduce it and to provide other ways not so affected by fraud. Their CPA test may be one way. I suggested something similar at my http://aplawrence.com/Web/click_fraud_cure.html that could be used even for advertising that wouldn’t quite fit the CPA model, and I bet the bright folks at Google are thinking about all sorts of other things.

    My ad revenue is down about 15%, but it’s very hard to tell if that’s lower bids (quite possible with all the economic problems right now) or is from other factors. I don’t fret about it – just keep on trucking.

  17. Sebastian says:

    the only way to solve this problem is to shop online, yes you heard me, shop online. For example, When Darren Rowse wants an ipod of phone or pay his bills or something, do it online. PPC will survive when there is business, stop buying things offline.

    support online business, when they thrive, so do bloggers.

  18. Jim Kukral says:

    It’s not going away just yet. Supplement it though, who knows, someday maybe your 2nd option becomes your first? Very possible if done right.

  19. A.B. Dada says:

    For some advertisers (such as myself), click fraud is almost ZERO concern. I’ve even e-mail Google about it — I wish they had an item called “Pay for every click” under AdWords. Why don’t I mind click fraud? Brand recognition.

    If you are a huge advertiser (think Honda or McDonalds or Sears), anyone seeing your ad and your brand name is a net gain — even if they’re just seeing it to click their own ads. While I think for the smaller advertisers it MIGHT be considered a loss, for the big ones it is a huge gain. Getting your name read is huge for brand recognition over a period of a few years.

    I think the biggest complainers about click fraud are the Made for Adsense advertisers/publishers. I’m a small advertiser and I have absolutely zero concern for click fraud — and all of my customers who I help market also don’t care about click fraud. How many TV commercials get watched but ignored every day? How many magazine ads get read and ignored? Click fraud is no big deal, and people need to let Google do their job in battling it, but also realize that product/brand recognition is still gained even during a fraudulent click.

  20. Paul Drago says:

    Where that figure comes from:

    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/07/05/BUGL6JOQPA1.DTL

    I am only posting the link because I am sure you have rel=no follow

  21. Leon says:

    I feel its more than 14%. A lot of blogs are out there for the sole puropse of tricking contexual advertising. We’ve all seen those mesotheilioma blogs.

  22. No way are contextual ads dead. They may have been “slapped around a bit” based on stories like this one, but the people who are converting customers will continue to pay.

    Is the “easy money” in contextual ads gone? Probably so. So what? That means more money for the pros.

  23. Harry says:

    14.6% is close to what you get according this article by BW:

    http://www.nytimes.com/2006/07/09/washington/09russia.html?ex=1310097600&en=f35bb44903cc3e14&ei=5088&partner=rssnyt&emc=rss

    About $800 million’s worth was lost last year.

  24. Ace says:

    You’re a cow.

  25. babsbitchin says:

    If you find out if this is true, please let us know. Quite frankly, I don’t know alot about it but am researching it all now. Somehow, I keep coming back to your blog, it is quite resourseful. I would, somehow, like projection of my one blog, Ask Aunt B, http://askauntb.blogspot.com/ and would love to pitch it in conjunction with adverts. I’ll be back, as I am able, for the most part to understand how you present things. I mean you’re technical but you present well. Make sense? Thanks!

  26. greg abel says:

    OK…Here’s what got my interest: “14% of clicks in the click-through variety of advertising is fraudulent.” I wouldn’t be surprised if it was even higher (I’m a real conspirator theorist at heart). I figure if there is a way to make extra money, somebody will do it. I can even invision staffs of hundreds of folks in India, or somewhere else, being paid to sit there and click-through on these sites that are paying for advertizement on a per click basis. Don’t know about “14%” but I’m sure it is probably happening to some extent!

    Greg
    http://www.DiCaprioBengals.com

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