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| UPDATED: 2006-07-10 |
 Google Ads Run The Show 
By: David Utter 2006-07-10 The dominant search advertising company can help a business to profitability, but its take on click fraud has been dismaying to some.  In the retail world, items that get broken or stolen tend to be covered by insurance. The term "shrinkage" applies to such involuntary reductions of inventory, and they are treated as a cost of doing business.
With Google (GOOG), click fraud is being treated as its shrinkage. Click fraud does take place in the search advertising industry, with one study claiming advertisers lost $800 million to click fraud. Google has policies in place that allow advertisers to request refunds for fraudulent clicks, as does its nearest search ad competitor, Yahoo. Is the concept of click fraud as shrinkage one that dismisses the problem too readily? Donna Bogatin posted at ZDNet some comments made by Google CEO Eric Schmidt on click fraud. He described the issue of click-fraud as "self-correcting," which would take place if Google did not filter out those phantom clicks. That would pass the burden of click fraud along to advertisers, and as they do with shrinkage would have to account for it along with other expenses. Schmidt theorized that the cost per click price would decrease with the presence of "rampant" click fraud, so the "perfect economic solution...is to let it happen." There is a silver lining to the cloud over online advertising, and that would be the success stories resulting for businesses using it and making a profit. The Wall Street Journal illustrated how sites both big and small have done well with their paid search efforts. A site specializing in higher-end shaving products, ShavingCream.com, has used ads with Google and Yahoo to build a niche business into a forecasted $200,000 in revenue enterprise for 2006. Owner Mark Williams said in the report that managing their search ads takes up about 30 hours per month of his staff's time, though. Plus, competitors have entered the niche and begun driving up certain keyword prices. The Wyndham hotel chain has done well with its search advertising, noted in the article as having increased by 500 percent since 2001. Wyndham's owner Cendant (CD) estimated it makes $14 in revenue for every dollar it spends on search ads. That's a nice return on investment. Like ShavingCream.com, Cendant actively manages its search advertising. Their success reinforces the wisdom that search advertising isn't a "fire and forget" solution. The presence of click fraud and the need to be aware of its possible impact should be enough to keep advertisers involved continuously with their campaigns, too. --- Tags: Google, Cendant Add to  Del.icio.us |  Digg |  Yahoo! My Web |  Furl
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View All Articles by David Utter About the Author: David Utter is a staff writer for InternetFinancialNews and WebProNews covering technology and business. |
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