More than you’d think.

As reported in the WSJ,  Microsoft recently “filed a lawsuit against three people that it alleges committed a form of “click fraud” (…)  in which automated computer scripts or large groups of people click on (pay-per-click) online advertisements without having any interest in the services or product being advertised. The company alleges that the defendants engaged in “competitor click fraud,” one form of the ruse in which a perpetrator seeks to exhaust a competitor’s (pay per click) advertising budget while boosting the prospects of their own advertisements.”

The defendants in this case are Eric Lam, his brother Gordon Lam and their mother Melanie Suen, who ran up prices for ads for auto insurance and World of Warcraft Gold.  World of Warcraft (aka WoW) Gold is a virtual currency, that you’ll need if you want to upgrade your Orc’s wimpy little “this-is-your-dad’s-Oldsmobile” battleaxe to a blinged-out Fel Edged Battleaxe.  See, the Lams owned a site called WoWMine.com, and some of their competitors included such notables as wowgold-sale.com, wow-cheapwowgold.com,  wowpowerwow.com and innumerable others. The Lams needed to get a Fel’s edge on the competition, and (allegedly) used click-fraud to peddle more of their virtual metal.  

Woo-hoo Microsoft… making the world safe again, right?

Well, the way I see it, this isn’t just a case of  “Too-Little-But-Not-Too-Late”  in the online scourge that is click fraud.  This is another way that Microsoft tries to establish itself as the “good guys” of online search who “clean things up.”

Click fraud is old news, which makes its continuance all the more appalling.As a former owner of a consumer-facing online retail store, I’ve had more than my share of terse conversations with advertising representatives at Yahoo and Google who were complicit with the abuse of their system by their “publisher” networks and “unique” users. My peers who owned online businesses were all complaining too, but what real short or medium term incentive did those search engine salespeople have to look into an advertiser’s complaint of click fraud? They had an ever-increasing number of people using their services and had quarterly sales targets (and pay bonuses) directly linked to the volume of clicks on their advertiser accounts, so why bother look into a purported scam that is difficult (but not impossible) to track?    The long term incentive (customer trust, service and brand integrity) wasn’t enough to spur action.

Eventually, we negotiated some simple estimated ”store credits” based on unusual click traffic.  This saved Google and Yahoo the hassle of having to investigate the integrity of their networks and gave us a bit of a break, but unfortunately that workaround only dealt with sudden bursts of click fraud.  For ongoing click fraud, particularly from sleazy competitors, it did nothing. In the past few years, I know of at least two lawsuits — against IAC and Google — launched by advertisers who allege that those search engines have not being doing enough to deliver what they promise to their customers — clicks from actual live prospective customers.  Google settled their case for $90 million. I also know of one case where Google went after a click fraudster, but only after he tried to extort them for $100k.  Aside from that, I don’t know of any cases where Google pursued legal action against people simply because they tried to make themselves (and Google) extra money by having advertisements clicked a few (hundred thousand) extra times.

Enter Microsoft and Bing.  Bing is all about making a whole bunch of nit-picky improvements to the search experience, to make it more usable and practical.  Whether or not Microsoft succeeds in getting a serious piece of Google’s pie, they will definitely raise the game in terms of search relevance and user experience. ..and “users” include advertisers, who pay for the experience.This is especially true in the beginning stages of Bing’s existence, where Microsoft has to prove the value of its audience to prospective advertisers.  So, in the spirit of “the best defense is a good offense,”  rather than wait for advertisers to complain that Bing’s system is being gamed, Microsoft has sued some poor enterprising Vancouverites with (allegedly) poor business ethics, who just wanted to make a mint selling some WoW bullion.   

So, this lawsuit is just a little bit of PR/street-cred for Microsoft.   What about Google?  Will it go beyond its passive “we’ll tweak our click-filtering algorithm” approach, and go after the people involved?

Google has something that Microsoft doesn’t: Dominance in online search. With its massive datastores, computational power, ubiquitous toolbars, regional hubs and whatnot, Google is actually in a position to put a serious dent in click fraud, by exposing the sources of it.  In fact, all Google would have to do is publicly post the stuff that its ‘click-filters’ are capturing. If everyone could see where the clicks were coming from, which ads those clicks were attacking — and even which competitor ads were NOT being attacked — there are enough people with an interest to appropriately monitor, analyze and act on this information. The people running the click fraud scams would see it too, but they can see it anyway, by opening their own Adsense accounts, so this would not give them an additional edge in the technological arm’s race. Google could maintain its ostensible image of being a neutral provider of just-the-facts, free the information for the masses, yada yada.  

How about it, Google? As Spidey’s dad famously said, with great power comes great responsibility. We don’t buy the passive, non-adversarial act. “Don’t be evil” is not a moral vision… it’s more like something an unscrupulous Swiss banker would say, trading in all kinds of anonymous gangster gold.

Looks like we have the making of theme here. 

Two ads, two days in a row, both of which position a seemingly “non-essential” product against the recession, using the linkage of health (see, How to Market Premium Beverages in a Recession ).

This photo, taken yesterday in front of the Equinox health club near Grand Central Terminal, NYC, shows a sign which reads,

IN TODAY’S TIMES
FITNESS IS NOT
A LUXURY
IT’S A NECESSITY

It’s hard to disagree with this sentiment. It’s one thing to be “lean,” cutting out unnecessary activities and costs in these leaner times.  It’s another thing to cut out the activities that create your health in the first place.

A client — one of the world’s leading financial institutions coming out of the current mess – put it very nicely today, saying, “In this current … trough of misery … we are the sharks, they are the whales.”   His firm is aggressively snapping up the best talent on the market and investing in their workforce capabilities (education/training), in order to more easily take away market share from competitors that are just too freaked out to make any moves.  Their approach is working, as they redefine their own landscape and become stronger than ever.

Other examples I see working right now are the firms that are investing in and accelerating their research and development efforts, turning out better offerings to their clients. It’s all about evolving your capabilities in a rapidly changing environment.

In today’s times, fitness is not just a necessity, it’s a major opportunity.

“Risk your health in this economy?  NEVER!” 

Risk your feeling of consumer entitlement in our current recession/buyer’s market?  NEVER!  Risk your friends and co-workers seeing you drink a less-than premium beverage, because you’ve got to save money for your handbag habit?  NEVER!  Question whether a diet rich in antioxidants will truly cleanse your body, not to mention your guilt-ridden soul, of the excesses of your decadent lifestyle?  NEVER!!!

Well, don’t blink, cause Google’s hitting back today, with a strange,vaporware-esque leak to the WSJ about doing some kind of deal with Salesforce. This deal/alliance is sketchy on the details and seems like a case of PR one-upmanship, a kind of quick counterpunch designed to make me say, “Yeah, Redmond’s a cash-fillled heavyweight who’s fighting strong,  but those Google guys are dancing circles around ‘em in the ring, three steps ahead.“  Ok, they made me say it. 

The thing is, I need more than just a whiff of Google “working together” with Salesforce.  All I’m being told is that there might be some kind of

“…web-based offering that integrates some of Google’s online services such as email and instant-messaging with those of Salesforce.com…”

Well, YEAH.  Salesforce integrates with EVERYTHING… that’s the idea.  It integrates with Lotus, and it integrates with Microsoft Outlook.  And it should integrate with Gmail. Or Gtalk.  There’s no revolution there. 

Anyway, this boxing match is fun to watch and all, but how much new & real customer/product value is being created out of all this expended energy and activity?  I’m still waiting for that.

 -<>-

 [Postscript, a few hours later:  Hmmm, Google CRM?  Ok, maybe… but that’s more like a SMB (small/medium business) play for Salesforce… it would be more of an anti-ACT!/Goldmine move, rather than an anti-Outlook/MicrosoftCRM move.  Also, unlike how Google Analytics dovetails with Adwords, I don’t see where “GCRM” would mesh with the rest of Google’s offerings.  On the other hand, Salesforce+Intuit, or better yet,  Google + Intuit,  now that would be something. 

1)  “The Travails of Tracking Web Traffic” by Catherine Holahan (BusinessWeek, April 30, 2007)

2) “IAB Call for Audits: Transparency or Conspiracy?” by Kate Kaye (ClickZ News, April 20, 2007)

Both articles mention one of the more nimble competitors in this space: the up-and-coming  Compete.  Another company mentioned is Quantcast.  Hopefully these smaller firms will have the opportunity to innovate while the whole cycle of disbelief-scrutiny-pressure-and-recalcitrance plays out between Nielsen/comScore and the IAB’s publisher constituents .

What follows in the next two sections of this post is a bit of a dissection of the above two articles.  Click below to read more, if you’re into web analytics (or if you work for one of the Big Four auditors)…

1)  “The Travails of Tracking Web Traffic” by Catherine Holahan (BusinessWeek, April 30, 2007)

This piece covers the issue nicely and is well organized, like many of BusinessWeek’s articles. It works well whether you are new to the subject or are just looking for an update and more complete perspective. However, it did fall into a couple of spin-doctor traps:

a) The article explains why user panels fail, sometimes by orders of magnitude, in predicting the total traffic to a given website. However, right after doing that the article proceeds to mention that panels have certain advantage over server logs in that, “Unlike server logs … panels can tell companies more about the audience’s demographic composition. This is possible as panel members share such information as age, gender, and income level.”   Yes, that’s what part of the whole panel pitch.  But no, it’s not true.

See, by extrapolating their user panel results, these analytics firms have failed to guess even the order of magnitude of a given website’s traffic.  The composition of that panel and the erroneous total derived from it, in terms of user demographics, is part of the problem math.  Therefore, the demographic profiles they report are just as likely to be grossly incorrect. There is no reason to trust those demographics if you can’t trust those totals… because the two measurements (quantity and quality) are tied together in the methodology itself.  They can’t say, “well, we might be wrong on the scale of this, but qualitatively we’re still correct in the audience makeup.”

(The article later mentions the “niche demographic” aspect of online (non-mass) media, which is related, but it’s not exactly the same issue. ) 

b)  The article correctly points out that traditional server logs have the weakness of not accounting for web surfers who switch computers (though I wonder if those panels are any different in this respect?  Does your Nielsen NetRatings tracker follow you from home to your work computer?  I don’t think so. ) and that although the server log and cookie-based tracking systems can give a more precise count of visits to a Web page from unique IP addresses, “... it can also be thrown off by users who periodically delete the bits of tracking code from their computers.”  Absolutely true.

I would have been cool with that, and I would have been happy if the article then quoted a reliable authority on the percentage of users who periodically delete their cookies. They did this, except… the “authority” in this case was comScore! Jeez, come on.  comScore pegs the number of users who periodically delete their cookies at 30%.  Ok, just because it’s from comScore, I’m gonna discount estimate that by half… no, by a quarter, and call it 7.5%   comScore’s CEO said, “These serial resetters have the potential to wildly inflate a site’s internal unique visitor tally, because just one set of eyeballs at the site may be counted as 10 more unique visitors over the course of a month.”   These serial resetters?  It sounds scary. 

In any case, there is probably a range of percentages, based on how ”tech savvy” a given user group is, on this cookie-resetting factor. Whatever that percentage is, it would be an okay discount to apply to a given server log totals, and in terms of statistical deviation it would not be orders of magnitude off reality.

2) “IAB Call for Audits: Transparency or Conspiracy?” by Kate Kaye (ClickZ News, April 30, 2007)

Unlike the BusinessWeek piece, this is the insider’s article on the issue.  You want to hear what people are saying on the sidelines?  It’s all there.  

I think all this scrutiny and debunking of comScore and Nielsen will accelerate the trend of more and more advertisers asking publishers for third-party audited numbers on their traffic… and for publishers to have those audited numbers ready for their advertisers.  I disagree with the fear mentioned by an anonymous media agency insider, who ”thinks exposure of the NetRatings or ComScore innards may backfire. If advertiser trust in these large two measurement firms erodes as a result of audits, their trust in online advertising could weaken, dampening enthusiasm towards Internet spending. “   In the short term, some of the agency’s large CPG (consumer packaged goods) clients may cite the article they saw about this issue in the Wall Street Journal and threaten to reduce their online ad spend budget… but in the end, they’ll keep buying more, because those online ads bring measurable results (in terms of clicks, and where applicable, online revenues), and those measurable results usually outperform whatever they’re getting from the glossy magazine ads and T.V. spots that they’re still buying. 

CONCLUSION:  Clearly, the big winners who will come out of this will be the “Big Four” accounting firms.  The owners of major content websites have already started shelling out big bucks to get a “Big-Four-certified” audit of what is really a fairly straight forward (and largely automated) data analysis.  This is a consulting/accounting services firm’s dream:  An easily scaled, commodity-type service that can be sold at a premium. 

At the end of the article, Stephen DiMarco of Compete is quoted, “Is this going to have the impact of a [Sarbanes-Oxley]? That sounds like a stretch.“    He’s right from the point of view of the auditors, but maybe not entirely from the point of view of major publishers.  The outcome of the debunking of panel-based traffic estimates will add to the cost of doing business for major publishers, just as Sarbox has added over $2 billion in accounting costs to public companies.  [ Mind you, how much can Deloitte, Ernst & Young, KPMG and PwC charge for server log audits?  It couldn't be that much... could it? :-P  ]   For auditors, however, this will finally be a case where the added billable work will not create a tremendous CPA labor crunch, the way all the FASB/SEC-related legislation did. 

The Interactive Advertising Bureau asked the two major Web-traffic-measurement companies, comScore Inc. and Nielsen//NetRatings, to submit to an outside audit to find out why the two companies report different audience sizes for the same Web sites.

Ok, it’s 2007. The Internet has existed for over a decade. During that time, we’ve all watched comScore/MediaMetrix, Nielsen and other would-be measurement/ratings gangster firms pulling numbers out of their…. analytic data models, presumably making tons of money from the BDC’s who pay them for their statistical brilliance.  Finally the IAB has stepped up to the plate and managed to ask the emperor for some threads.   The WSJ notes,

Reston, Va.-based comScore has agreed. New York-based Nielsen//NetRatings was to respond today. Disparities between these companies’ numbers and Web sites’ internal server logs are no secret. For instance, unique U.S. visitors to NBC Universal’s online women’s network, iVillage, reached 15.5 million in March, according to comScore. Nielsen//NetRatings measured the audience at 12 million. IVillage says it had 26.5 million unique visitors in March. ComScore and Nielsen//NetRatings rely on audience panels, which the IAB calls archaic.

(gleeful emphasis mine)

At least Alexa was smart enough to duck for cover when it changed its model to a measurement of relative share of traffic.  This is useful if you’re interested in (a) comparing similar sites which are (b) likely to be frequented by a typical Alexa toolbar user, and (c-z) among other caveats, you allow for the meteoric rise of YouTube within the zero-sum universe that is Alexa’s database.  I actually love using Alexa as a bizdev tool… but I digress. As for Nielsen//NetRatings… I was always a huge skeptic of their reports, and so I can’t wait to see what happens with this new inquiry.