Flipping Fraud: Why CPA Signifies the Logical Step for Advertisers and Networks

by Chad Little, President and CEO AdOn Network

At the recent ad:tech event in New York, one of the most common words or phrases making the rounds on the exhibit floor (other than 'Datran Media Party') was 'CPA' or 'Cost Per Acquisition'.

The CPA auction model is a natural response to advertiser's fear of click fraud in addition to their desire to increase the accuracy of their conversion tracking. CPA advertising is a perfect example of the inherent benefits of advertising on the Internet because no other media can match its tracking ability. CPA advertising is also one of the primary reasons that affiliate networks, like the ones that overran the exhibit floor at ad:tech, are thriving.

Along with the benefits of accurate and precise tracking, however, comes the inevitable outcry from advertisers that a percentage of the budgets are being wasted on the "Joe Mc. Hremlin's" of the world. In case you are not familiar with Joe, he is one of the made-up names from a made-up testimonial on the website www.clickingagent.com that sells click fraud software. Not to be confused with click fraud detection software, this is click fraud enabling software. For the purpose of this article, we'll assign the name Joe to all of the mouth-breathing types that make a living off cheating and scamming their way through life.

This Website and their product is only the tip of the iceberg. I'm amazed at the marketing copy (I use that term loosely so as not to offend anyone who actually writes marketing copy for a living) on their site: "Take your chance, try to fool advertisement companies and earn money! It only gets better - 1) Make your site more interesting to others, and/or 2) simulate that traffic and ad clicks so that advertising company thinks you're a hell of a web-master!" Overlooking the horrendous grammar and creative use of the English language, the claims on this site are pretty clear: "Lie, cheat and steal your way to a better life…and do it all from the comfort of your living room/garage/trailer."

While much of the click fraud that occurs is caught before it ever gets to the advertiser, the industry will always be at disadvantage. As long as the Joe's of the world can make money by defrauding ad networks, they will continue to develop methods to stay one step ahead (or they will purchase software from more intelligent people who actually develop it).

The irony of this issue is that our ability to accurately track views, clicks and conversions is also a disadvantage when compared to traditional media. Conversion tracking for off-line media is inexact at best. Advertisers seem to have a certain degree of blind trust when it comes to magazine advertising for example. How do they know the circulation and subscription numbers are real? How do they know the people that did purchase the magazine actually looked at their ad? Where's the discussion on inflated subscription numbers and fraudulent page turners? What if Joe has 100,000 copies of a magazine shipped to his house and the locals all come over to flip through pages to view the ads!? Where's the outcry for flip fraud? But I digress…

Getting back to the reality of online advertising and tracking, the solution to creating a better online advertising model is simple. In my opinion, a big portion of the market will be moving to an auction-based CPA model. Google is already moving in that direction along with a number of leading edge companies like www.turn.com. Google's moves into and shopping cart functionality play into this strategy as well.

While ad networks of all sizes will continue to work extremely hard and preventing as much click fraud as they can, I believe we should move forward with the understanding that there's a built in cost for fraud and I also believe it's not going to go away. There are some very smart companies out there that will help keep it in check and prevent if from growing further, but I firmly believe they'll never catch-up to Joe and his network of fraud-perpetrating friends. For this reason, the move to a CPA model is the most logical evolution for advertisers and ad networks alike. Alternatively, we can choose to stay on the same path and continue to supply Joe with the discretionary income he needs to purchase that new set of rims he wanted for his truck (that may or may not be located on blocks in his front yard).