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SEM Reputation Risk
Click Fraud and Reputational Risk:
Search Engine Marketers' (SEM) Credibility at Stake
Click fraud has been established as an information-based type of attack. It is also a business risk exposure that a Search Engine Marketer (SEM) cannot afford to ignore for its paid-search clients. This is because SEMs are paid to develop and execute client ad campaigns and anything that can jeopardize the campaigns' Return-On-Investment (ROI) should be cause for SEM concern. The risk of click fraud exposure threatens an SEMs credibility and reputation with clients.
Our forensic testing experience in identifying click fraud for our clients has shown that the incidence of click fraud risk exposure can range anywhere from 15-70% of paid click-throughs. This represents a significant amount of fraudulent clicks for which search clients are paying their ad networks.
For example, if your client is in the financial services sector, average Cost-Per-Click (CPC) rates may range from $6-12. If a client is spending $1 M per year on online ad campaigns based on an SEMs advice, it may be costing the client anywhere from $150,000 - $700,000 per year in click costs that never had any chance of a sales conversion. That is, it would result in an ROI of 0%. And ROI is the name of the game in the online ad world. Without an SEM generating positive ROI for its advertising clients, its credibility is seriously at stake.
Reputation should be the cornerstone of business strategy. A 2001 survey conducted by the insurance company Aon, which polled the UKs top 2000 private and public organizations, showed that ‘loss of reputation' was seen as the greatest risk, followed by ‘failure to change'. This was a significant shift from its 1999 survey where reputation ranked in fourth position.
Any elements that compromise campaign profitability, such as overpaying ad networks for illegitimate clicks, can affect an SEMs ability to successfully:
- Secure a competitive advantage;
- Develop favorable media relations campaigns;
- Maintain stakeholder loyalty, trust and confidence;
- Navigate through pressure group interests; or
- Secure legitimacy and ‘license to operate' in an increasingly regulated corporate governance climate (e.g., Sarbanes-Oxley).
Although concepts of formal risk management have been around for many years, businesses still find it easier to focus on risks that have a clear and quantifiable impact. Sound business risk management is about making sure (1) good things happen, and (2) bad things don't.
It should never merely be assumed that controls are working as intended when there is no supporting evidence. A previously unblemished record is no guarantee that losses are not just around the corner.
Given the sophistication of e-attacks, the security of an SEMs ad campaign can never be 100% guaranteed. Click fraud attackers have proven to be very sophisticated and can inflict serious damage in compromising the effectiveness of an online ad campaign. Some campaigners use e-savvy ‘hactivists' to paralyze company websites through denial-of-service (DOS) e-mail flooding attacks. This threat can be partially mitigated by investing in online security software tools to counter the e-peril.
Several highly respected industry sources claim the cost of click fraud may range anywhere from 5-20% of total on-line industry ad sales. The Internet Advertising Bureau (IAB) recently estimated that 20-35% of ad clicks are fraudulent (Revenue Today, Fall 2005, p. 53) Variances have ranged with respect to click fraud incidence detected. In our experience, the highest percentage of fraudulent clicks detected was in excess of 70% of click-throughs during an analyzed period.
Resolving the click fraud problem has proved to be a formidable task, with far reaching industry-wide implications. Leading advertising networks, such as Googles' CFO, George Reyes, told investors in Dec 2004, "...something has to be done about this really, really quickly...it [click fraud] threatens our business model".
Threats are the cornerstone of any credible risk management program, and click fraud is a type of business risk SEMs and their advertiser clients may be exposed to. As SEMPO President Dana Todd summarizes the click fraud challenge, “Search engines have a responsibility – it’s [click fraud] a trust issue.” (Revenue Today, Fall 2005)
Doubt has been cast on the effectiveness of the industry's click fraud self-policing mechanisms. The recent wave of lawsuits, including a class-action suit in Miller County, Arkansas is a case in point. Advertisers have alleged that ad networks are not providing adequate protection from click fraud and, as a consequence, are overcharging them for click-throughs.
Exposure to this form of collateral damage can be mitigated. The trick is to respond swiftly and positively by reminding your advertiser clients what you stand for, and what differentiates you from other SEMs.
And gaining the trust, confidence, and credibility of advertisers is paramount for SEMs.
FURTHER INFORMATION:
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