Tom Foremski on what would happen if someone created a treasure hunt with a large cash prize awarded to a single click of an unpublicised adwords ad. A subsequent clicking frenzy could drain advertisers’ accounts, prompting them to ask for a refund.
This hypothetical idea is part of a more serious problem – pay-per-perfomance advertising is open to fraud – when you click something, money drains out of an account – this doesn’t happen with TV, print or radio ads. See Adbombing.
In the same way that companies like Paypal spent a considerable proportion of their resources dealing with fraud, so will Google.
If Google succeeds then its anti-fraud measures will be a competitive edge. If it fails there will be a problem.
The moral to all this is that Google’s business model landed on their laps via Scott Banister at Idealab, it is a new model and its weaknesses are not yet exposed, let alone tested.
Given the risk (and the fact that the existing behemoths like Ebay are beginning to plateau earlier than thought) a price/earnings ratio of half its current level of 140 would seem optimistic.