Legal and Strategic Perspectives on Click Measurement

Search engines, such as Google and Yahoo!, have revolutionized the way people search for information. Advertisers, eager to take advantage of this great potential for customers, have been bidding to display clickable links to their websites as sponsored search results. This revolution, however, and the ten-billion dollar industry it created have been threatened by the rising number of invalid clicks. The viability of the performance-based Cost-Per-Click (CPC) advertising model, which is the search engines' basic business model, may be in jeopardy. There is no consensus on the proportion of invalid clicks in the industry, but reported estimates range from 5% to 50% (Kitts et al., 2005). Invalid clicks are often due to click fraud, a term, which broadly speaking refers to various practices that produce invalid clicks. Search engines, in fact, have recently been sued by advertisers who have argued that the search engines have not done enough to curb click fraud. There is no consensus among advertisers regarding the legal and economic implications of click fraud. Some have argued that click fraud would only lower CPC levels, if it affects every advertiser equally (Kitts et al., 2005), while others have argued that it may destroy the entire Internet economy (Mann, 2006). Google's chief financial officer (CFO) characterized click fraud as " the biggest threat to the Internet economy " and he added " potentially it threatens