Last week a panel presentation was held at Stanford Law School on the topic of click fraud. Presenting on it were Eric Goldman, law professor at Santa Clara University, Shuman Ghosmajumder, a non-lawyer representative from Google, Daralyn Durie, a lawyer for Keker & Van Nest who is counsel for Google in click-fraud class actions, and Laura Sullivan of the FTC.
Although the panel was originally billed as a panel on the legal issues inherent to click fraud, there seemed to be a consensus that click fraud is really a business issue, assuming that it is any issue at all. The point was raised that certain interests, such as plaintiff's lawyers or advertisers' associations, have an incentive in making click fraud look like a serious problem caused by inherently adversarial interests: advertisers, and the search engines that profit from their ads. In reality, the panel suggested, the problem is a) much smaller than many might claim (several people took issue with the metrics used to formulate the conclusions that click fraud was such a massive problem in the first place), and b) one where there is greatest profit potential for either party when the profit potential for both is best preserved. Arguably this kind of win-win is best brought about through effective pricing models and technical solutions designed to weed out the "click fraud," or the kinds of clicks that would never, ever lead to revenue for the advertiser.
Of course, for any of these tactics to be successful there needs to be some sort of definition for what "click fraud" is. Professor Goldman cited Wikipedia for a definition as a place to begin:
Click fraud occurs in pay per click online advertising when a person, automated script, or computer program imitates a legitimate user of a web browser clicking on an ad, for the purpose of generating an improper charge per click.
This definition is still quite vague, so he followed it up with some potential scenarios:
- Competitor click fraud, where a party causes an ad to be clicked simply to burn through their competitor's pay-per-click ad budget without there being a commensurate return on the investment.
- Publisher click fraud, which occurs when the people who display ads provided by search engines (e.g., a blogger running AdSense ads) click on the ads that appear on their own sites in order to earn more money from the search engine (since normally they get paid based on the number of clicks their pages brought to the ad).
- Vandalism/pranks, like where a nefarious party tries to get someone blacklisted for making it seem like they have committed click fraud.
Relatedly, Goldman raised other tangential problems associated with Internet advertising, including "impression fraud," where someone causes an ad to look like it's not generating revenue and thus gets kicked out of the service, and "syndication fraud," where ads appear on low-quality sites (such as when a domain name is parked and simply aggregates other content published around the Internet, along with search engine-provided ads). And then there is the general gaming that can happen where parties try to raise or lower the profile of ads within a service.
No one in attendance doubted that these scenarios were problems on some scale. But there was skepticism that the search engine's profit motive was such that they would be inclined to tolerate it simply because the extra clicks would turn into extra revenue for them. Indeed, Goldman speculated that if advertisers had to continually pay for inflated click counts, they would simply put pressure on the search engines to pay less per click.
(A complicating factor, however, is that advertisers ultimately care more about return on investment than the specific cost of the ad. The problem with diluting click counts with un-valuable ("fraudulent") clicks is that it becomes harder for the advertisers to track the return on each investment and assess its true effectiveness.)
The representative from Google also asserted that it was in Google's interests to keep advertisers happy, and outlined a 5-stage model the company used to weed out the un-valuable clicks so that advertisers ultimately would not have to pay for them.
Still, concern was raised (particularly by some people in the audience) that while there might not be an obvious legal wrong with the current behavior of the search engines, there was a lack of transparency that made it very easy for advertisers to naturally distrust the search engines. Not only might they question their bills, but they also might question how the ads were ranked and displayed. There also was the concern that any party that might be banned by Google for suspicion of wrongful behavior might not have any redress. The term "black box" was raised along these lines, with the concern that even as a company like Google promises to "not be evil," by allowing Google to be the sole arbitrator of these kinds of disputes where it is also an interested party inherently engenders distrust and causes the more vulnerable parties to look for legal solutions beyond the search engine's direct control. Whether or not such solutions are available, however, is subject to some debate. Ms. Durie, for instance, a defense counsel for Google, posited that few were available, outlining how breach of contract causes of action or class action claims for fraud in the inducement could not stand. There is the possibility that the FTC could play a role, since it "has broad authority to ensure practices are fair and not deceptive" and not injurious to the consumer. However it is not clear under what statutory authority it could actually prosecute, and thus far the FTC's prosecutions in the Internet advertising space have mostly resulted in settlements (not full adjudications) involving spyware and spam.