Why it’s sales not clicks that matterAnd yet the world of advertising is changing. Revenues from print and television are in decline as more and more people go online. Recent statistics from the Internet Advertising Bureau revealed that UK consumers spend an average of 23 hours per week online, resulting in a 40% growth in the online advertising market in the first half of 2006. These figures are representative of a general trend in Europe which is seeing advertisers plough more money into a medium which reaches millions of people directly.

However, with every success comes an undercurrent of threat. Click fraud is being heralded as the ‘dark side’ of online advertising which could bring down major players such as Google and Yahoo who depend on revenue from the Internet. Advertising on search engines is the most popular method of advertising online and works by advertisers paying every time someone clicks on their ad. Whilst search has many benefits including its ease-of-use and its reach, it is also open to abuse. Competitors to individual advertisers have been known to set up human networks with the sole purpose of clicking on adverts to run up huge costs for their rivals, in some cases even putting them out of business. ‘Click bot’ software has long been running to automatically carry out this process and the latest development is a click fraud worm which led Yahoo users to visit fake websites that display Google Adsense adverts.

This is where we need to stop. It’s easy to get carried away with the hype and herald the end of the Internet as an advertising channel. It cannot be denied that click fraud is a problem and it is unjust and wrong that advertisers are paying for quantity not quality of clicks to their site. It is indeed a worry that advertisers may be put off because 10%-15% of the clicks they receive may be illegitimate. The fact is that click fraud is pretty impossible to stop. Just like any other crime, there will always be people out there that will find a way to illegitimately capitalise on someone else’s success. However, if we pause to put this into perspective, the Internet remains the only medium where absolute transparency and measurement of advertising success is possible. This is the key to getting around the click fraud problem.

Cost-per-click (CPC) is simply one method of paying for online advertising. However, the cornerstone of any kind of advertising is sales. If you can prove that your advert resulted in a greater conversion of people buying products or services then you’re onto a winner. Cost-per-acquisition (known as CPA) does exactly this. You only pay when your advert has resulted in a sale. That way it is possible to measure the quality of your traffic and not just the quantity.

This model has been used for a considerable time now in affiliate marketing. With this marketing model our advertisers pay on a CPA basis thereby eliminating any risk of paying for fraudulent traffic.

We have a range of different products and irrespective of whether our advertisers are paying on a straight CPA, a CPC or a cost-per-thousand impressions (CPM) basis we always allow them to see what their effective CPA has been. The payment method itself is not that important, it’s how its effectiveness is evaluated that matters. It is the lack of ability to prove the true effectiveness of the Search model that has resulted in more and more advertisers to utilise the affiliate marketing model. CPA is understandable, precise and focused on results hence advertisers are demanding it. After all, it's simply good practice. It is therefore not surprising to see that Google is now testing its own CPA network.

I believe that the online advertising market will naturally migrate towards reporting based on sales because advertisers will come to expect it. Google recently announced that it will report on invalid clicks but although it’s a step in the right direction, it’s just another number – it doesn’t solve anything. I’m not saying that CPC should be abandoned, far from it. Customers need choice. However, calculating the effective CPA in any online advertising campaign should be applied as standard so that advertisers can see whether the style, location and reach of their advert is having the desired affect.

At the end of the day, there needs to be an ongoing, industry-wide effort to tackle click fraud. In the meantime, advertisers should be demanding a solution which tracks and monitors the quality of those clicks as well as the invalid ones. That way they can take action and make sure the proportion of their positive conversions outweighs the percentage of fraudulent clicks. That way the focus will remain on the potential that the Internet offers advertisers and not the negatives which will always be there to one extent or another – just like any other industry.