"For several months now I’ve been troubled by a nagging and unpleasant thought that there is a potentially large vulnerability in Google’s Adwords business model. ... A billionaire has arranged to give $100m to the first person that clicks on a special link that looks like a Google text ad."

I.e. the billionaire attempts to get a mass number of Internet users clicking on every ad, in order to find the "golden ticket"... AdWords advertisers would find they were paying for huge numbers of clicks that had no intention of converting to buyers. A panic could ensue, and everyone would stop investing in AdWords campaigns.

This is interesting to think about, but I think it misses a key point. Google has created a market - much like the stock market. Since the AdWords market does have intrinsic value to a lot of players, it would be hard to "corner".

If someone offered $100M dollars to incent mass number of users into click-fraud, it would shock the market for a short time, but the market would quickly "discount" the attempt. In other words, the advertisers would recall they can still derive value from placing ads, and actual buyers would still find their sites. In response, they could simply lower their bids to reflect the influx of non-converting clicks.

Google could also adjust quickly to such a threat, by lowering minimum bids requirements, for example.

So in the end, everyone's conversion rate might go down by a factor of 10 or 20, but the actual number of conversions wouldn't be affected too much. So you'd still spend the same on ads to get the same result.

I do think it's an interesting question - and it could definitely affect the stock market's view of the company. Remember when Jim Clark announced his confidence in Netscape by saying he would invest $30M of his cash back into the faltering stock? That move bolstered NSCP quickly enough so that Clark's overall stake increased in value by over $100M...

Via GoogleBlogoscoped. Philipp notes the other interesting part of this thought experiment - Google could eventually move toward a pay-per-conversion model, rather than a pay-per-click.

¶ 2/06/2005