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Why CPA is Not a Cure for Click Fraud

Isaac Scarborough
Why CPA is Not a Cure for Click Fraud Isaac Scarborough

Rarely does the first solution to a problem actually succeed. How often do we hear about a new breakthrough drug that's supposed to work wonders? Then comes a realization: oops, this doesn't work as well as it was expected to, and now we need a new approach. This seems equally true in the marketing biz: when a new technology or advertising program is rolled out, we can't be sure that it will appeal to its target audience or solve the problems at hand. We've really just got to watch and wait.

Just like everyone else, trial and error is sometimes our only choice.

This should be easy to see in the rapidly-changing debate over click fraud. Of course, click fraud has been around for a long time, but in the last year has a lot of serious attention been paid to overcoming the problem. The discussion has calmed down for the moment, but you never know when it might flare up again. Moreover, I think we might learn a lot about future initiatives by taking a closer look at what's been said in the past.

There have been three major suggestions for dealing with click-fraud:

  1. Look to the FTC: This hasn't been mentioned recently, but about a year ago -- when reports of rampant click fraud began to surface -- it wasn't clear at all what the response should be. Google, approaching its IPO, was talking up its "fraud squads" but many wondered if click fraud would prove to be a serious problem for search-based advertising.  So it was suggested by some that the FTC needed to step in and mandate changes.

  2. Take a case-by-case approach: Cooler heads -- primary amongst them, iMedia's own Kevin Ryan -- prevailed. Early and overblown reports of click fraud were scaled down, and instead of looking for an industry-wide answer, it was suggested that marketers should keep a closer eye on where clicks are coming from. Ryan outlined a number of methods for tracking ads that might be fraudulently clicked on, and new technological solutions began to appear from companies like ClickLab, and Zunch, which has a new Click Fraud Detective.

  3. Move away from CPC: More recently, Ron Belanger argued here in iMedia Connection that to deal effectively with click fraud many of the smaller search engines need to move away from the cost-per-click payment model, and instead embrace the cost-per-action (CPA) model used by many affiliate networks. The affiliate networks seem to have done well with it CPA, and many of them are moving away from CPC entirely. And they, as Belanger suggests, will tell you that CPA is something of a panacea for most issues of fraud.

This newest argument has much to recommend it. And I think my basic inclination is to agree with Belanger: CPA avoids click fraud. So, if the search engines were to make this move, there would be less click fraud. There's something to this. But it forgets that for this to occur, search engines are going to have to make the move. And this, I think, is less obvious.

Most of the affiliate networks that I've spoken to recently generally confirmed Mr. Belanger's belief that CPA is a remedy for Fraud. Elizabeth Cholawsky, Vice President for Marketing at ValueClick -- the parent company of affiliate leader Commission Junction -- said that ever since 2001 Commission Junction has only worked with a CPA model, in large part to avoid problems of click-fraud.

But Ms. Cholawsky also pointed out that CPA doesn't get rid of fraud entirely. "We have a dozen people whose job is entirely network quality," she said, and I got that sense that she felt it wouldn't be bad to have even more. There hasn't been a lot of chatter about CPA fraud (although there are a few reports), but this shouldn't necessary lead to treating CPA as a true panacea for fraud.

Others in the affiliate space agree. Choots Humphries, President of LinkConnector advised me that "there's still a lot of fraud in affiliate marketing." CPA pricing goes a long way, he argued, but one still has to be on guard. And just as important, Mr. Humphries said, was the fact that "a lot of merchants left the affiliate game because they couldn't participate in CPA" due to the increased technological sophistication necessary.

The real difficulty may actually have more to do with incorporating search engines and merchants into the CPA model than avoiding click fraud once they're there. When I asked Lance Podell, CEO of Kanoodle -- a search engine mentioned explicitly by Belanger -- if his company had any plans to move away from the CPC pricing model, he told me, "Kanoodle's current pricing standard is cost-per-click, and while we are always looking for improvements to our business, we do not have plans to change this model in the foreseeable future."

I think we can understand why. There's a certain niche to be filled here -- a lot of smaller merchants choose CPC because of its simplicity and perceived efficacy. And if the search engines were to shift towards the more complicated CPA model, they could easily alienate a large number of these merchants.

The pay-per-click model is probably here to stay -- and not just with the biggest players like Google and MSN. It might make sense for some players to move towards the CPA model eventually, and we should always applaud an idea that looks for a way that the industry can police itself. But for the moment, we're probably going to have to stick with the more incremental solutions, dealing with cases of click fraud individually (and there are a number of new technologies that are making this more effective). And even moving to CPA doesn't entirely alleviate the need for a bottom up approach -- pay-per-click or not, you've still got to watch those traffic numbers.

Isaac Scarborough is manager of market intelligence at Chapell & Associates. Read full bio.

Before the current wave of consolidation, ad networks essentially positioned themselves in one of three ways:

  1. Remnant repositories: Networks that bought or represented remnant inventory and resold it offered marketers cost-efficient reach and/or cost-efficient actions. They essentially strip-mined a massive supply of low-cost inventory to reach marketers' goal metrics as efficiently as possible. Companies such as ValueClick, Casale Media, Undertone Networks and many others operate in this space.

  2. Behavioral targeting: Not unlike the above model, these networks typically bought or represented remnant inventory but added value through behavioral targeting. Marketers are able to reach the same anonymous user over many properties and target advertising to them based on their behavior across the network. Both Tacoda and Revenue Science are among the leaders offering behavioral targeting on their networks.

  3. Content and context: Networks aggregated and sold inventory based on content, offering loose targeting parameters, such as sports and finance. This strategy was essentially the "poor man's" content play, allowing networks to offer similar reach to the major publishers such as Yahoo or Disney, if not always the same inventory. Within this category, a marketer can find networks such as Blue Lithium, offering branded, content-focused inventory as well as Google AdSense, focusing on unbranded, contextually relevant inventory.

Even before the flurry of M&A activity currently taking place, the ad networks began to promote multiple targeting solutions and ad sales packages to media buyers. The networks began to move all of those models under one roof, offering buyers the ability to buy multiple solutions in one place, hoping to exploit the long tail of available inventory.

Before long, networks like Blue Lithium became generalists. The single model -- such as Tacoda's -- became increasingly rare. Essentially, the business models used to differentiate the networks from each other disappeared, resulting in the commoditization of network service offerings.

At the same time, major media companies that were often the sources of network inventory began adding their own network-like capabilities. Sites like AOL and Yahoo, which had previously allocated large swaths of inventory to the networks, began to offer themselves packaged as a network offering, such as AOL's performance network. All of a sudden, there was no way for ad networks to differentiate themselves from each other anymore, except on the basis of cost. And the situation became even more confusing for buyers, who were no longer able to distinguish between the various network offerings.

With AOL and Yahoo stepping into the network fray and keeping more inventory to themselves for their own network offerings, one might think the pool of available remnant inventory might become constrained. However, while the size of the online population may be leveling off, the amount of time spent online continues to rise, resulting in more pages generated and greater inventory supply. Yet despite the increasing supply of available inventory, the supply of quality inventory becomes constrained as the major publishers hold on to more of their own supply and remove inventory from the general marketplace. Thus, while there is seemingly no shortage of inventory overall, premium branded inventory becomes even more constricted.

The standalone networks are thus competing for the same inventory, driving up bids for remnant inventory. Consolidation allows networks to merge, combine sales forces and remove much of the competitive pressure for inventory. It also greatly benefits buyers.

While consolidation in media industries typically means a shift in power to sellers, the ad network's M&A activity can benefit smart buyers. As media companies such as Yahoo, AOL and Google certainly gain a strategic advantage by adding more network service offerings under a single umbrella, buyers can also profit from the agglomeration of network opportunities. Now buyers have the opportunity to buy search, premium display advertising, sponsorship opportunities, behavioral targeting and performance-based inventory at a single vendor. The entire buying process has the potential to be greatly simplified. As Eric Druckenmiller, media director at entertainment ad agency Deep Focus, reiterated recently "Navigating [the ad network space] is frustrating. The lack of differentiation makes you want to walk away from ad network solutions. Now the landscape is starting to gel a bit."

Consolidation not only means that the buying process can become more streamlined, but also that buyers can improve their relationships with the major sellers. The trend towards consolidation allows agencies and buyers to justify bigger buys with companies like AOL, Yahoo, Microsoft and Google. As Rudy Grahn, director of analytics at media buying shop Optimedia explains, "The more business you do with Yahoo, the better the deal and better the relationship." Buyers would much rather achieve scale and improve performance from the remnant inventory of a few premium, branded sites than from thousands of smaller sites.

Agencies have traditionally fought an uphill battle with their clients to include networks on a media plan. Many clients have understandably been reluctant to advertise on them due to the lack of site transparency. Agencies have also been disinclined to expend the energy to re-educate clients on the value of ad networks, which the agencies themselves are often wary of as well. With the current consolidation, however, the environment is ripe for agencies to do just that.

The early days of the ad network space quickly became synonymous with extremely cheap inventory and an utter lack of transparency. Networks such as Advertising.com, as part of the AOL family, gains more credible brand equity and cachet. The acquisition of ad networks by larger media brands lends legitimacy to the model, in addition to improving the convenience of the network model.

Consolidation means greater transparency for advertisers as well as a more refined marketing solution. The networks are finally beginning to deliver on early promises of sequential targeting across a large swath of sites and the ability to pull users down the purchase decision tree, as well as both reach and frequency. The current consolidation spree means networks have the opportunity to re-enter the fray as a legitimate solution and offers buyers a more streamlined, elegant solution.

Black-hat SEO

Put this concept to the "should be gone already but strangely isn't" bucket. Black-hat SEO tactics -- shady tactics that marketers employ in efforts to game the search engines -- have long been frowned upon by much of the industry. (At least outwardly. I've certainly known marketers who publicly decried black-hat SEO but secretly gave some pretty questionable advice to clients when the microphones were turned off.) The tactics have persisted for years because, well, they worked pretty well, at least for a time. Keyword stuffing, selling and farming links -- people did in fact manage to get a boost from these tactics, so there was always plenty of people willing to provide such services. Sure, it was risky. But the potential reward, especially in the short term, was big enough to merit it.

As we knew it would be, the party is over. Google and the other engines weren't born yesterday, and they've decided that marketers need to knock that shit off. With its 2012 Penguin update, Google doled out the granddaddy of all spankings to sites making use of aggressive black-hat tactics. Some of these sites are still trying to undo the damage.

Of course, for a time, we're still going to see plenty of black-hat SEOs trying to crack the code and find another easy win in the search game. Old habits die hard. But if they haven't already, most are going to realize very soon that good things don't come easy in the search world -- not anymore. Time to bleach that hat -- or take it off altogether.

Link bait

This ties into the previous point regarding undesirable SEO strategies, but it doesn't necessarily cross the line into black-hat waters. Rather, "link bait" conjures mixed reactions among the marketing crowd. Some see it as a goal in creating content -- the idea that others would see a piece of content and deem it worthy of a link. Others see it as a scandal involving low-quality content and manipulative headlines. It can be both. But it is usually the latter.

The fact of the matter is that link volume and nothing else shouldn't be the end goal. To continue mindlessly creating "link bait" content is a fool's errand. Stop. Step back. Think about quality. Think about relevance. Yes, getting quality and relevant links back to your content over time can help your SEO efforts immensely. But amassing a ton of low-quality back links with trite, rehashed, or needlessly inflammatory content won't do you much good in the long run and can even damage your site's search engine reputation. So knock it off. And if you want to refine your thinking on the subject, I'd recommend checking out this article from Moz that distinguishes link bait from linkable assets.

Mobile strategies

Don't misread here. "Mobile" isn't going anywhere. Quite the opposite, in fact. My assertion here is that mobile will become (and arguably already is) so ubiquitous that the idea of separating "mobile" out as a strategy on its own will become simply ridiculous -- if not impossible. Mobile shouldn't be an add-on or silo -- not today, and certainly not in five years.

People do not and will not remember where they first (or last) engaged with your brand. They simply remember the experience and how they felt about it. If that experience sucks, then your brand sucks -- remember that. More and more of those experiences will happen on mobile devices in the future, and so that needs to be the experience you're thinking about when you think "strategy" at all. Mobile site? Website? It's just your site. And it -- and everything else -- damn well better work well on a mobile device.

Traditional media

TV. Magazines. Newspapers. Direct mail. Billboards. Today we all accept that these represent "traditional media" buys. On the digital side, we covet the "old school" dollars and have been chipping away at those budgets for years.

Now, mind you -- these media are not going away. Some -- in certain cases, many -- of the outlets and incarnations of these media will. But the notion of TV, magazines, etc., will persist. However, in the very near future, there will be nothing "traditional" about these media buys. Any newspaper or magazine buy will be intricately and essentially tied to digital media as well, be it within an app or web/mobile site environment. Many of these "traditional" buys will, in fact, be only digital opportunities in the future. (Some have already made this transition.) And while TV certainly isn't going anywhere in the next five years, the notion of buying a simple 30-second spot in primetime will. The processes of buying online video and TV are necessarily converging, and the measurement of these integrated buys is scurrying quickly to keep up. It's not there yet, but it will be.

Social media

Let's put this one in the "hopeful" bucket. Like "mobile," the relevance and usefulness of distinguishing certain media as "social" is fading fast. If you find yourself evaluating a media opportunity that has absolutely no social properties to it whatsoever, you probably shouldn't be evaluating it at all. And increasingly, that applies to "traditional" media as well (see my previous point). TV, billboards, even print media -- these media plays have to be made with an eye toward the digital realm, and that digital realm is inherently and inextricably social.

Hopefully in the near future, we won't see a need to make the "social" distinction. It unwisely buckets media opportunities that should ever-more be viewed in an integrated, holistic fashion.

Drew Hubbard is a social media strategist and owner of L.A. Foodie

On Twitter? Follow Hubbard at @LAFoodie. Follow iMedia Connection at @iMediaTweet

"Scary background for Halloween," image via Shutterstock.


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