Google Click Fraud – Understand the Formula

Google click fraud has gone mainstream lately with articles in Businessweek to the Washington Post. What is funny is that this issue has been an albatross around Google’s neck for years – check out this CNN Money article from December 2004.  What I do not see is a lot of rational discussion about what this really means, just a lot of emotional knee-jerking.  Let’s take the emotion out of it for a second and look at what happens given the current framework set forth by Google in their AdWords product.

Most folks worth their salt in the online marketing space, especially paid search, know the following equation better than E=MC2.

Rank = Max Bid * Quality Score

The accepted premise here is that the higher up in the Paid rankings you are the better your result. That is debatable, but assuming it is true – take a look at the dynamics of the two variables Max Bid and Quality Score. Max Bid is straight forward and fully in control by the advertiser, purely the Max CPC (Cost Per Click) one is willing to pay for a given keyword. Emphasis on Max, it is not actual. Now Quality Score is more subjective and is where Google allows some of their mystique to enter the occasion. Google defines Quality Score as:

“Quality Score is determined by your keyword’s clickthrough rate (CTR)
on Google, relevance of your ad text, historical keyword performance on
Google, the quality of your ad’s landing page, and other relevancy

You can see for yourself here. What those “other relevancy factors” are is open for discussion. I have heard it could be your campaign architecture (Campaigns and AdGroups) among other things.

What is important to note is that the higher your Quality Score, the lower the Max Bid in order to achieve the same Rank. Conversely, the higher the Max bid, the lower the Quality Score in order to achieve the same rank. A key factor of Quality Score is CTR – Google being a relevancy engine, I am making a leap of faith assuming that because it is the first variable listed in Google’s definition that it is the most important. I have had Google folks confirm verbally that this is indeed the case – CTR is the weighted majority of Quality Score.

So, back to Click Fraud, if one is receiving clicks (fraudulent or not) on an ad this will by definition up your click through rate thus lowering your overall Max Bid. My point is that Google has some of the fraud risk built into the Rank equation. In a perverted way, click fraud does have a benefit by increasing CTR thus Quality Score, thus reducing Max Bid and the same or better rank is now cheaper thus potentially (depending on the competitive dynamics of the word) lowering the overall amount paid to gain non click fraud traffic. By all accounts, even the high estimations pegging click fraud at 35%, you would still be ranking higher and potentially paying less for 65% of the legitimate traffic.

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This post was written by DEP Ecommerce Consultants