The key point is that click fraud will be the downfall of Google, not users' switching to a different search engine. I disagree. The beauty of Google's ad model is that it's extremely sensitive to market forces. This means that click fraud probably won't matter to most advertisers—it's just priced into the ads. If 25% of clicks are fraud, then ads will be approximately 25% cheaper than they would be if there was no click fraud.
A major media or government expose on click fraud could cause Google short term problems, but there are lots of advertisers who are addicted to Google's traffic. If they stop buying it, where will they go?
I'm sure there are some edge cases where click fraud is a serious problem for individual advertisers, but Google can likely address those more effectively because they should be easier to spot.
My second though is that Google has amazing resources available to combat click fraud. Who else is going to do a better job than they will? Nobody has at much at stake as they do.
I think you're right that in aggregate it doesn't matter. There are enough people willing to put up with it for Google to be impressively profitable.
But sign up for an AdWords account, turn on the display network, and then tell me click fraud doesn't matter when some site in India takes half your advertising budget for the day. Google isn't as smart as everyone assumes.
In my experience, it's not an edge case - it's common and Google doesn't know or care about it if you're not spending the $10k per month they require to actually talk to a person. You just have to suck it up and not allow ads to be automatically placed.
Exactly. Click fraud is just part of the cost of doing business, like shoplifting for a retail store. The problem is that the individual stores don't have a lot of control over the level of fraud that Google will tolerate. There's a big difference between stealing a Slim Jim from the 7-11 and stealing a diamond necklace from Tiffany's. If you are successful on AdWords it's only a matter of time until the fraudsters realize it and leech on your success.
Chris Dixon just made this point on Twitter. http://twitter.com/#!/cdixon/status/26679729247485952 Advertisers who optimize for CPA pay for this less (but not zero since CPA is in arrears). The publishers are the ones that pay the most. Hmmm.
A major media or government expose on click fraud could cause Google short term problems, but there are lots of advertisers who are addicted to Google's traffic. If they stop buying it, where will they go?
I'm sure there are some edge cases where click fraud is a serious problem for individual advertisers, but Google can likely address those more effectively because they should be easier to spot.
My second though is that Google has amazing resources available to combat click fraud. Who else is going to do a better job than they will? Nobody has at much at stake as they do.