Sunday, August 19, 2007

A Rare Misstep from Google?

We've always been big Google lovers. We think the way they structured their business is brilliant: create a graduate-school like atmosphere. Serve gourmet meals. Embrace open source. Make everything simple and fun.

Paul Graham, a geek much smarter than either of us, pointed out how Google's clean, simple and mostly white space look was not so much an aesthetic choice as a recognition, years ahead of its time, that mobile would become an important part of how people access the Internet, and so it would be smart to create a look that would work well on tiny mobile screens.

It's rare for us to think ill of Google. But we believe the company has made a big mistake in how it's handling its Adsense program, and how it's dealing with clickfraud.

Much of Google's revenues (which topped $1 billion in a single quarter) come from its programs to help advertisers large and small place text ads on Web sites large and small. It works like this: advertisers buy space for text ads on Web sites that relate to their product or service. Owners of Web sites sign up to run these ads on their pages. Ever time a viewer clicks one of the ads, the advertiser is charged, and a small sum is paid to the Web site owner's account. (The difference between the two, needless to say, is how Google makes its own profits.)

Simple, and brilliant--except for the phenomenon of clickfraud, in which nefarious users manipulate the system for their own ends. For instance if you want to harm one of your competitors, you can click its ad over and over, thus running up its Adsense bill without the benefit of a possible customer actually looking at the ad.

A more common, and worrisome, form of clickfraud involves web site owners using either humans or bots to repeatedly click ads on their own sites so as to generate Adsense payments. This practice has led advertisers to sue Google (and Yahoo, which has a similar program), claiming they were paying for fraudulent clicks.

Google negotiated a favorable settlement in the lawsuit, but it also cracked down--hard--on clickfraud. In the process, it has alienated many of its smaller business partners who carry the Adsense ads, by summarily closing their accounts--and keeping any owed money not yet paid to them--without explaining why it was doing so. Site owners are informed that because of the confidentiality of Google's algorithms, they can't be told exactly what they did wrong, only that it appears they've engaged in fraudulent behavior. That's that. And don't even think about coming back.

Though the web site owners are given no information, a tiny bit more can be gleaned from Google's site directed at advertisers, which explains (with a helpful graphic) that "invalid" clicks may not necessarily be fraudulent clicks, that Google is casting a wide net for these invalid clicks and doesn't mind getting false positives. Although I couldn't find anything that said so on the site, a PC World story says that something as simple as having a user click the same ad twice (which can easily happen anytime someone's computer or Internet connection is slow to respond) is considered an invalid click from Google's point of view. Given rules like these, it's easy to see how almost every innocent site might be getting its Adsense account closed.

And that seems to be what's happening, to web sites medium sized and small, including the popular British gay site pinknews.co.uk, and our friend, Rocketeers author Michael Belfiore. Supposedly, there's an appeal process, but when even a publisher with a respectable quantity of hits every month can't get anything beyond e-mail repetition that we're closing your account but won't tell you why, and you won't be able to open another one, it seems unlikely that anyone with the authority to do anything actually is reviewing the appeals. The last threat, by the way, isn't true: pinknews.co.uk had no trouble creating a new account for itself after it was told it wouldn't be able to.

It's obvious why Google is taking these draconian measures: for fear of losing its advertisers (who, are, after all, its only paying customers), not to mention running afoul of another lawsuit. The question is, how badly does it need the other element in the equation, the web site owners? Many of them have decided that, all in all, they'd rather do business with Yahoo! Especially since Yahoo! promises to provide a live human being to talk to if you run into a problem. Google has not given any indication that it minds sending these thousands, if not hundreds of thousands of content providers away in such a way that they're virtually certain never to return. And, from a short-term point of view, that strategy may be right. There are millions of fish in the Web site owner sea. Who cares if some of them are peeved; they'll be easy enough to replace.

But there's also a long-term view. Google thrives on its nice-guy image. All the way through its rise to search engine dominance, through a supposedly overpriced IPO that went nowhere but up, even through being included in the S&P 500 (!), it's retained its image of a bunch of nice Stanford kids sitting around making cool stuff. A major corporation that puts its software in the hands of the little people.

Shutting the little people out without explaining why doesn't help that nice-guy image. Keeping the money you promised them for ads that have already run on their sites doesn't seem like a nice thing to do at all. It seems like the arrogant behavior of a major corporation. The class-action lawsuit that seems like a no-brainer response to that move will probably make Google look even less like a nice guy than it already does.

So maybe there was something to lose here, after all. And maybe, for once, Google was too big and too full of its own power to recognize it.

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