As we discussed in our last blog post, A Look Back at 2005, 2005 was a year of major changes for 180solutions, including technology upgrades and even more aggressive enforcement efforts, but the biggest change of 2005 was the complete overhaul of our distribution model.

In March of last year, 78% of our monthly installations came from third-party distribution partners (partners of partners). By the end of October, just seven months later, third-party distribution was completely eliminated. In a few months, we completely changed our operations by cutting out the distributor and instead working directly with the publisher.

The reasoning behind this move? Simple, really…given the fact that our business model provided a legitimate means for distributors to make money, the model thrived. Unfortunately, while the success of the model gained us many new legitimate business partners, it also brought with it the attention of bad actors, some of whom eventually found a way to defraud the system. Fraud found the model and created an issue of negative public perception. In order for us to effectively and successfully create the content economy, we had to go to the very core of our model and rebuild.

Is it just our business model that was susceptible to fraud? Absolutely not. Unfortunately, while the Internet creates endless opportunity, it is also a playground for fraudulent activity. What’s interesting is that, while a lot of attention has been on fraud in the adware industry, no one seemed to be devoting any significant coverage to the issue of click fraud . . .  no one, that is, until Wired magazine.  The January 2006 edition of Wired includes an interesting write-up titled “How Click Fraud Could Swallow the Internet.” 

Here’s a thought-provoking snippet:

The amount of click fraud is difficult to quantify; estimates of the proportion of fake clicks run from as low as 1 in 10 to as high as 1 in 2. In a widely cited recent study, MarketingExperiments.com, an online marketing research outfit, reported that "as much as 29.5 percent" of the clicks in three experimental PPC campaigns on Google were fraudulent. Whatever the exact figure, click fraud has become pervasive, and Google, Yahoo!, and the other major PPC firms have found themselves caught in a game of cat and mouse with its perpetrators. Even as the search engines shore up their defenses, click scammers are becoming more sophisticated, increasingly deploying complex software to disguise the origins of clicks. For now, the search companies and many of their clients maintain that the problem on their networks is under control. But some observers…believe that click fraud is "a billion-dollar mess" that "has the potential of destroying the entire industry." 

The bottom line is this: wherever there is money to be made, fraud will find its way in. Considering the Internet is still in what many consider the Wild West phase, the bad players are largely able to act without fear of significant recourse and, because of this, it is up to the technology developers to create safer, more fraud-resistant systems.

What are you doing to prevent fraudulent activity within your business model? Sure, making the necessary changes to not only prevent fraud but to correct past fraudulent activity could have a significant impact of your bottom line in the short term, but your company will be unable to grow if it is plagued by modern-day outlaws.

Think of it as adding a second story to your house. As nice as it would be to simply build the second level, you can’t do anything until you fortify your foundation, which can be a spendy little project in terms of time and money. However, once the foundation is strong enough to support growth, it’s up to you as to how you want to build.

In terms of distribution, we’ve demolished the framework and have rebuilt the foundation from the ground up so that we can effectively pursue our content economy vision.