Baidu’s click-fraud problem, and more on Fraudwall

baidulogo.bmpChinese search engine Baidu is apparently having more problems with click-fraud that Google is — and it has hurt Baidu’s stock.

Click-fraud is a major problem, and it is rampant in China. Click-fraud is when people click on an online ad and have no intention of buying anything, thus driving up the cost for the advertiser, who pays on a per-click basis. The fraudsters can be any number of people, including competitors who want to drive up the advertiser’s costs.

The study, conducted by Peter Lu, of the China IntelliConsulting Corp (copy of pdf here), found that advertisers believe 34 percent of all clicks on Baidu ads are fraudulent, compared to 24 percent on Google. The report has other warning signs for Baidu, including suggestions that more advertisers plan to cancel campaigns with Baidu, compared with Google, and that more advertisers plan to begin campaigns with Google.

Also, note the graphics below, which also show Baidu is inserting ad keywords in its generic search results, a blurring of ads and results that would cause a furor here if Google tried that.

fraudwall.bmpRelated but seperate: We’ve learned more about the investors in the new anti click-fraud company, Fraudwall. It is an impressive group that Google is likely to be partial to, but only if it can execute. Aside from early Google backers Ram Shriram and Ron Conway (as reported here and here), investors include Paul Buchheit, the former Google engineer who wrote GMail; Steve Anderson and Frank Caufield, both formerly at venture firm Kleiner Perkins; Michael Parekh, of Goldman Sachs, Rajeev Motwani, a Stanford professor and former Google advisor, Peggy Taylor, a board member at Fair Isaac, which does credit and fraud scoring for the financial industry, and others. Among its board of advisors are Chuck Geiger, chief technology officer at Ask.com; and two executives at IAB, which is a trade association that has played a significant role in creating standards between advertisers and ad networks: Rich LeFurgy, founder, and Greg Stuart, chief executive.

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