Sign up to myFT Daily Digest to be the first to know about New York University news.
The approach to search engine advertising that has turned Google into the world’s most successful internet company is “inherently vulnerable” to fraud, according to a report from a court-appointed expert.
While also concluding that Google’s attempts to crack down on illegal behaviour have been “reasonable”, the findings of the report will add to the controversy surrounding “click fraud”– the generation of spurious clicks on online advertisements.
Under the “pay-per-click” model used by Google and other search engines, advertisers are charged for each click, although, according to one recent report, fraudulent clicks account for as much as 14 per cent of all advertising activity on search engines.
The warnings about the weaknesses of the search engine advertising system were issued by Alexander Tuzhilin, a professor of information systems at New York University. He was appointed to study the effectiveness of Google’s anti-fraud activities as part of a recent court settlement between the search engine company and one of its advertisers.
The very nature of “clicks” on the internet makes it impossible to tell whether they were made with an intent to defraud, according to Mr Tuzhilin. Also, some common clicking habits that are not meant to deceive can also lead to over-charging of advertisers, since internet users may click on an ad multiple times for different reasons, he added.
For instance, some internet users automatically click twice on internet adverts, a habit developed from opening applications on their PCs, and until last March Google counted each of these clicks as a separate action and billed advertisers according, according to Mr Tuzhilin.
Assurance from Google and others have failed to stem the growing concern from advertisers about the validity of the clicks for which they are asked to pay, and the court report pointed to an explosion in advertiser queries about potential fraud in recent months.
“It is a cost of doing business, we will never get it to zero, we can reduce it and we refund when we discover it,” Eric Schmidt, chief executive of Google, said this week. “Frankly, it’s under control. It’s not material, it’s not got any worse.”
However, Mr Tuzhilin questioned what he called the “Trust Us” approach of the search engines, due to the “inherent conflict of interest between the two parties: the money from invalid clicks directly contribute [sic] to the bottom line of the search engines.”
The “fundamental problem” of pay-per-click advertising, based on the impossibility to assess the validity of every single click, is compounded by Google’s inability to explain in detail why it had charged advertisers for some clicks and not others, since to do so would open it to massive fraud, he added.
Get alerts on New York University when a new story is published