Monday, April 11, 2005

Web analytics vs. click fraud

The Internet Stock Blog covers the click fraud issue again, this time talking about how increasing web analytics impacts fraud. ISB is optimistic that
    As web analytics improve, click fraud will be more easily detectable and advertisers will be able to manage more closely to RoI.

This is true, from the advertisers' point of view. But the corollary is that improving analytics will expose lower-than-expected ROI (due to fraud), which causes advertisers to spend less. Which is very ironic, considering Google's recent acquisition of Urchin.

What exactly is their strategy here? Increasing the general use and efficacy of web analytics is not in their interests, since it risks demolishing their entire business model. They would only benefit from making these tools available to their publishers, thus enabling them to increase traffic, and therefore click counts.

Another issue is that a decrease in advertiser spending will not only affect the AdSense program. Advertisers can only manage their campaigns on a keyword basis, since Google does not differentiate between AdWords and AdSense clicks. So, a spending decrease would affect the entire Google ad revenue stream. Look for an increasing AdSense share of total revenues, accompanied by slowing total revenue growth.