Click Fraud Blog
How Click Fraud Software Boosts the Bottom Line
November 26th, 2007
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I have held the opinion for a long time that click fraud software is an investment rather than an overhead. In this post I intend to publish the figures which I believe support my opinion that click fraud solutions boost the bottom line of a pay per click campaign.
Assumptions
My calculations are based on a number of assumptions, these are of course subjective, please feel free to challenge my assumptions and produce your own figures in the comments of this post. I see this post as a discussion on this topic and I am keen to gather feedback on my calculations.
Assumption 1 - click fraud is 16%
There are many, many opinions in the level of click fraud. Pay per click suppliers such as google suggest it is very low (2-3%) whilst some players in teh click fraud monitoring commuinity suggest it is in the upper 30% bracket. I don’t have the resources to do my own analysis of the click fraud problem, but I know a company which does. Click Forensics published the much respected (except by Google that is :-)) Click Fraud Index, which suggests that click fraud is currently running at 16% of all clicks. After analysis of their methods, I am happy to use their numbers.
Assumption 2 - average cost per click USD 0.05
The second assumption I would like to make in my calculations are an average cost per click value. For the purposes of this post, I am being very conservative with my costs and I am stating that avertage cost per click is USD 0.05. It is my experience that the majority of campaigns cost more than 5 cents per click, so assuming this low amount helps to highlight how click fraud can become a very big problem with high value key words.
Assumption 3 - conversion rate of clicks to sales is 5%
To create an income calculation, I need to give a conversion rate of clicks to sales. Again like the cost per click calculation I would rather err on the cautious side and I will set a value of 5%
Assumption 4 - each sale brings USD 10 income.
The fourth and last variable in this post is the average value of an action. This value is entirly dependant on the type of product or service a website sells. I have therefore taken a completely arbitary value of USD 10 as the value of a sale.
The Figures
Our imaginary campaign is reasonably large, it has 50,000 paid clicks per month, below are the sums:
Cost of Clicks
50,000 clicks / month @ 0.05 =usd 2,500
Projected Income from Clicks
( 5% of 50,000 ) * 10 = USD 25,000
Cost of fradulent clicks
16% USD 2,500 = 400
Cost of lost business
16% of 25,000 = USD 4000
Total Potential Losses
4000 + 400 = USD 4,400
Conclusion
These are very large amounts, and when multiplied to very large campaigns, the amounts become very substantial. When considered that the average cost of click fraud for 50k click per month is only USD 50 (source Adwatcher and Who’s Clicking Who) I reiterate my claim that click fraud software is not a cost but an investment in your pay per click marketing campaign. Using this model, it is feasible that a tuned campaign with click fraud software installed for monitoring could make an additional 4k USD per month.
Caveat
The glaring ommission from this model is that pay per click suppliers filter invalid clicks at source and either do not charge for clicks or refund any invalid credits which get past the filters. The problem is, in my opinion, the filters do not catch all click fraud attacks. In support of this statement I set my readers a task. Check the credits on your account, do they look like the figures I am quoting? I doubt it.
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Tags: click fraud software
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