Web Marketing & Advertising

Are Sponsored Links Really Sponsoring Fraud?

AdWords Practices have been much improved since the article was written in 2004.

Imagine being able to affect your competitor's advertising budget significantly enough to alter that business' marketing decisions? Think about how would you feel if you found out the advertising dollars you were spending were being driven up by your competitors' fraudulent practices! If you have considered sponsored listings for search engine placement with search engines, you need to learn about and consider some of the pitfalls of this newest advertising strategy.

Sponsored listings often appear as highlighted links at the top or along the side of search engine results. Generally, these are clearly labeled to show potential visitors that a business has paid for that particular advertising position for the product or service searched. Sponsored links have become a core piece of the search engine revenue stream. Unfortunately, some advertisers may be investing significant amounts into sponsored links that yield little return on investment.

The Value of Placement Position

Sponsored links or Pay-Per-Click Advertising Search engine placement position can mean the difference between reaching previously unattainable sales milestones or being mired in page rankings so deep you cannot find your own business. For websites built by unskilled web developers, sites that are more than a couple of years old, or those engaged in extremely competitive businesses like mortgages, sponsored listings can help websites gain placement position where top rankings might not otherwise exist.

For example, let's say that ABC Tool Company introduces their newest line of tools, portable hydraulic scaffolding. If they are newcomers to the industry, the company website may not appear for months or even years for searches for the new product. Sponsored links allow businesses to purchase placement in one of two ways. ABC may elect to allocate a budgeted amount of advertising dollars, say $1000, for the sponsored link program. ABC must decide the search terms for which they want to be found--for example, portable scaffolding or construction lifts or even geographically defined searches like Texas hydraulic lifts. Then the desired placement position is chosen whether it is a first place placement at the top of a search engine's results or perhaps one in the 10th spot. The higher the position, the higher the cost. For each "click" of a potential customer on their website's link, a specified amount is deducted from that chosen balance. The other possibility allows charges for every click with no set budget. While this may drive a lot of traffic to your site, be forewarned that this can potentially be very expensive method of advertising with no real return on investment.

Aye, There's the Rub

So, where is the concern with purchasing search position on sponsored listings? If your competitor wants to drive you out of that sponsored placement, they can click on your link enough times to either deplete your budget--thus removing your site from the sponsored placement--or drive advertising costs so high that you are forced to abandon the marketing plan. Industry analysts suggest that fifty percent of sponsored link clicks are fraudulent. Worse, there is no way to reliably differentiate between solid leads or fraudulent clicks. Google's concern of fraudulent clicks appeared in their well publicized stock IPO pre-offering documents:

"We have regularly paid refunds related to fraudulent clicks and expect to do so in the future. . .If we are unable to stop this fraudulent activity, these refunds may increase. . .If we are unable to remain competitive and provide value to our advertisers, they may stop placing ads with us, which would negatively affect our net revenues and business."

With 95% of their revenue tied to the AdWords campaigns, Google's control of sponsored listing fraud is a priority.

From a web developer standpoint, our team at Thunder Data Systems first recognized the potential abuse in 2003 when we learned that one of our clients was spending thousands of dollars per month in advertising. Their dollars yielded sales at significantly lower amounts than the amount spent on the ad words campaigns. For their business, a consistent plan of search engine optimization by our team has them in the black with significant numbers of visitors without the high associated costs.

Now, sponsored ad campaigns are not without merit for many competitive businesses. If you are still interested in testing the waters of a sponsored link program, make sure you adhere to a budget for those first months. Alternatively, consider website search engine optimization for your Internet advertising or marketing plan. Talk to us about your goals, and we will share our ideas on what works and what doesn't in the website marketing arena.

Posted by:
Dawn Green
Project Manager

Related links:
Wired:Click Fraud Threatens Web
Search Engine Watch:Lost Per Click: Search Advertising and Click Fraud
India Times:India Times: India's Secret Army of On line Ad 'Clickers'
Media Post:Pay-Per-Click: Half of All Ad Clicks Deemed Fraud

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