That lawsuit fits in perfectly. It seems Google is almost completely concerned with adwords purchasers, because they can actually fight back against Google, in the courts. Since adsense suppliers have a different relationship to Google, and I think the lawsuit forced Google to lean more heavily on adsense suppliers, in order to benefit adwords purchasers.

That is, the lawsuit would encourage Google to err on the side of calling something fraudulent, even if it is actually a legitimate click. The adsense supplier loses, the adwords purchaser gets a free click, and Google gets to charge a higher average rate for clicks.

The fraud-factor means Google's revenue doesn't have to directly map onto the amount they pay suppliers - by over-marking fraud, Google can lower expenses too. Of course, over-marking fraud means Google is not getting money from those clicks, either.

I guess the argument is that this should primarily punish sites that primarily generate fraudulent clicks. So, I guess this is the question: does the supplier break even if Google over-marks for fraud? That is, will the increased VALUE of real clicks balance out the decreased VOLMUE of clicks that are considered to be real. I'm going to guess that, for the vast majority of sites with low traffic, this amounts to a rounding error... in Google's favor.

Well my perspective is different, while I agree with most of what you said.
The company I work for uses Adwords extensively (spending 6 figures a year) and we've had problems with fraud. In fact, we don't even use content ads anymore. If you recall, last year Google settled a $90 million lawsuit, which we received a small amount of. However, the money we received was only in Adwords credit. It was also a very small amount, not even enough to cover a day of advertising costs. Today we still pay for fraudulent clicks. In the end I feel the people that pay for Adwords lose the most from click fraud. Google earns money from click fraud at the cost of their reputation, which is really their only incentive to battle it.


link about Google's fraud settlement: http://blog.searchenginewatch.com/blog/060308-1...

Yeah - it's sortof a red herring to say Google loses. As an adsense participant, Google penalizes me for any clicks they suspect as being fraudulent. There is no recourse that I am aware of. I think this is done to shield advertisers from being burned... so I don't completely agree with your conclusion.

However, the general level of fraud in Google's advertising DOES cost Google in the long term, because it will gradually decrease the sale price of their ads. In terms of supply and demand, Google is in a fortunate position to have complete control of the supply. By marking clicks as fraudulent, they lower the supply of clicks being sold to advertisers, which should increase the value of the "good" clicks.

However, the suppliers of clicks - namely adsense participants - have no control over how Google identifies fraud. This means, from the adsense perspective, that I cannot count on reliable demand, and I cannot count on a good "sale price" per click.

Unlike advertisers, who can readily move to a competing advertising wholesaler, it is difficult for a supplier such as myself to become affiliated with a new wholesaler. No doubt, Google is aware of this.

I will stop short of accusing Google of defrauding suppliers by manipulating its fraud-detection-parameters to control the supply-demand ratio. However, it's relevant, anyway.