Economics of Adsense Click Fraud

Are you advertising on the Adwords content network?

When you advertise on the content network your ads are displayed on the websites of independent publishers. The publisher places this “Adsense” on their site and earns a commission every time somebody clicks on those adverts.

But there is a VERY compelling reason not to advertise on the content network. It’s called “Click Fraud” and it’s quite profitable.

The economics of Click Fraud revolve around masses of cheap labour.

To commit click fraud successfully on any discernable scale and in a sustainable fashion you need a few ingredients. You need to have lots of natural browsing, and you need lots of different identities. Cheap labour is the answer to natural browsing, and private proxies provide the solution to different identities.

But the vast majority of click fraud comes from the third world – people who’s mothers, fathers, brothers and sisters only earn $1 per day. No joke, a teacher in Cambodia earns $30/month, as does a Policeman.

With an IP address costing about 4c per day, and a site costing 10c per day, a person in a third world country only needs to generate 5 clicks on their site each day to be earning a better than average wage. When its done on such a small scale it becomes impossible for Google to identify the click fraud. Spread those clicks over 12 sites, with 24 IP addresses, here’s the economics:

96c/day for Proxies
$1.20/day for Sites
Average CPC (Commission per click): 70c (if the site is about mortgages or loans, or leasing, 70c/click is an easy average)

24 clicks at 70c/click = $16.80

Or $14.64 profit per day… This person now earns fifteen times more than his/her peers. Believe me, a $400/month wage in most third world countries is HEFTY!

“Haven’t made your $1 online with the thirty day challange – try click fraud” but obviously, don’t!

Expand this model into a professional click fraud operation – but now you need to pay staff. A very good wage would be $2/day and let’s pretend we’ve hired 15 staff.

The profit per head of staff has dropped to $12.64, but our daily profit has risen to $189.60 – We have 360 IP addresses and 180 websites. $70,000/year income, not bad.

I’ve met individuals who earn their daily living with click fraud, and I’ve met a couple of people who operate click fraud sweat shops. It’s very profitable and very sustainable, and there isn’t anything Google can do about it. Occasionally a site or Adsense account gets banned, but the replacement cost is miniscule. The largest click fraud sweat shop I’ve visited hosted 180 staff on 24 hour shift rotations… it was pulling in over $5000/day profit. The guy running this sweat shop complained that too many of his staff left the business and set up their own little click fraud operations.

In this largest operation one IP address would be used to click on one advert on one set of sites, and would then be dumped for a replacement IP – this becomes absolutely impossible to track from Googles end.

The damage of Click Fraud extends beyond the earnings of those committing click fraud since a critical part of the natural browsing is to also click on other adverts on other sites. For every $1 earned through click fraud, about $5 will be spent on other adverts. The damage of the operation mentioned above would account for almost $1,000,000 per month of worthless click fraud.

And this is why it’s a stupid idea to consider advertising on the Adword’s content network – unless you have a philanthropic streak and you like supporting the third world, but this is a hard business case to justify to the board. If you are currently advertising on the content network there is very little doubt you are a victim of click fraud.

If you need help managing your Adwords to maximise return on investment, get in touch.

3 thoughts on “Economics of Adsense Click Fraud

  1. Is this for real?

    Ethics aside – aren’t you a little concerned Google will pick this up and ban your adsense account?

  2. If I did commit adsense fraud then I would be concerned. I don’t. This post is a warning to people advertising on the content network, and a discussion on how this is extremely lucrative to those in the third world.

  3. mike b on

    Wow. Serious stuff.

    But surely proper placement ads on high ranking sites for specific traffic terms are less vulnerable to clck fraud – it is one thing to replace junk sites and adsense accounts, not so easy to replace high ranking sites for high traffic terms if google takes a dislike to you.

    So is this a penalty for being lazy with the content network, and not selecting sites properly?

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