Sometimes it's amazing how people misinterpret what others say and then run with it. In the last few weeks, the buzz in the search engine world has been about how Google CEO Eric Schmidt apparently said that the company was okay with click fraud because it'd all balance out due to economic factors.
It should be no surprise that he didn't say that, actually, and now Google's issued a clarification that makes for interesting reading:
"You may have seen some of the media coverage generated by a blogger's quoting Eric Schmidt about click fraud. By using select excerpts and ignoring the context of the remarks, that blog post made for an interesting read, but was unfortunately misleading.
"Eric spoke at a SIEPR economics event at Stanford in March. At the end of his remarks he took questions. (You can view the whole presentation and Q&A that followed here.)
"Here's the relevant question Eric was asked about click fraud: "Recently there’s been some talk about click fraud being a potential threat to the entire advertising business model. I was just wondering what your thoughts on that were and if there’s an economic solution to it more than just technical solutions."
"Eric made clear from the very beginning that he wasn't describing our approach to click fraud and was answering hypothetically. He introduced his answer by saying: "Let’s imagine for purposes of argument that click fraud were not policed by Google and it were rampant ..."
"The "let it happen" excerpt followed, in which he discusses the economic forces that can retard click fraud: "Eventually the price that the advertiser is willing to pay for the conversion will decline because the advertiser will realize that these are bad clicks. In other words, the value of the ad declines. So, over some amount of time, the system is, in fact, self-correcting. In fact, there is a perfect economic solution, which is to let it happen."
"But he made clear that we don't take that approach, by adding that click fraud is "a bad thing and because we don’t like it, and because it does, at least for the short-term, creates some problems before the advertiser sees it, we go ahead and try to detect it and eliminate it." He also said, "In Google's case, we worry about this a lot and we have a number of technical engineers who think that this is great fun to try to go ahead of this and get ahead of it."
Read the original article.
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You are correct, but I would think Eric Schmidt would recognize the
seriousness of the situation and not make a comment that could be so
easily misinterpreted. Google is a public company, and remarks that
its executives make can have a major impact on its stock price. The
suggestion (not the reality) that Google thinks the market solution is
to "let it happen" is enough to send the stock sharply downward, the
same way it dropped about 60 points after some of CFO George Reyes'
comments about slowing growth a few months ago. In this case, that
didn't happen (yet), but still, I would think he'd be more
circumspect, and just make a commitment to fighting click fraud.
Inadvertently, he may have given advertisers their best weapeon
against (what they consider to be) unprofitable clicks. There are an
increasing number of people in the Google AdWords forum of
WebmasterWorld who have reduced their AdWords ad spend, if not
eliminated it entirely. While this is not necessarily indicative of
an industry trend (there still seem to be advertisers who are able and
willing to commit their entire budgets to AdWords), it's worth noting.
As an aside, I have never understood how Google didn't realize that
PPC advertising would result in click fraud, especially AdSense