PPC Growth = Click Fraud
As any industry grows into its own, it obviously becomes more competitive. At first, things are uncertain, and few are willing to commit their resources to competing. But as things shape up, and it become clear what works and doesn't work (not to mention that the industry as a whole does), the invisible hand starts pulling more an more resources into that market.
Well, this has definitely happened with PPC advertising. It's scarcely older than the internet itself, so it is no surprise that the last few years have been, for the most part, pioneering years. Even if the frontier isn't completely landscaped, it's definitely settled, and the PPC industry is getting considerably more competitive. Gordon Choi, moreover, has identified 5 of the main factors behind growing competition in the PPC market. They are all the result of a maturing marketplace, but while one in particular is a sign of growing efficiencies, another represents a malicious inefficiency. Summarized, they are as follows:
Reason #1: People tend to move towards where the money is
Reason #2: Bid management systems are getting smarter
Reason #3: Your competitors have gained experience
Reason #4: Keyword click price inflation is to continue
Reason #5: Click fraud
On the efficient end of the spectrum, we have #4: click price inflation. Basically, webmasters and marketers alike are beginning to get a sense of what traffic is worth, and that's effecting the click prices of both stand alone keywords, as well as how much a keyword generated ad on any given site is worth. Indeed, and the cost of traffic might only keep climbing.
On the inefficient end of the spectrum, the nefarious #5, click-fraud, threatens to devalue the market as whole. In general, there are two kinds of click-fraud: that generated by affiliates who are seeking to inflate their revenues, and that represented by malicious competition. While cheating webmasters represent a conflict of interest for advertisers, they scarcely threaten the industry as a whole. The risks associated with being tend restrict this kind of behaviour to smaller-end portals.
Conversely, the click-fraud that results from malicious competition poses a serious threat the industry. This form of click-fraud is characterized by companies trying to exhaust the advertising budgets of their competitors by unleashing click-bots on their PPC ads. This kind of click-fraud is especially salient for keywords that cost upwords of $10 per click. Although these kinds of keywords are not the most prevalent, they are valuable to advertisers and, consequently, do represent a valuable market to adservers.
Granted, adservers are developing technologies to counter such malicious competition, but having to keep those methods relatively secret is preventing any significant or definitive solution being developed quickly. As Gordon Choi explains:
Major search engines do have their own ways to prevent and detect click fraud. However, they will not disclose these methodologies to prevent the real click fraudsters from easily finding ways around it.
Consequently, to be certain that their dollars are not being squandered, advertisers have to police their own click-throug-rates, and this is impossible at worst and inefficient at best. Whether or not any preventative measures against click-fraud can be developed soon, then, is uncertain. Advertisers are left to wonder whether adservers are (1) detecting most of the click-fraud, and (2) accurately reporting it. If no fool-proof click-fraud methods are developed in due time, however, it seems that advertisers will have to bear the brunt of this inefficiency, and that is not a promising prospect for a maturing marketplace.
