Delayed payment suggested against online advertising fraud

Quite often it is discussed how online advertisers can cope with click fraud or affiliate fraud, because it is not too easy to separate the good clicks from the bad ones. The first creates value for the advertiser and the latter only takes it. There is always someone trying fraud as all the revenue created by fraud clicks turn basically to pure profits.

Benjamin G. Edelman, assistant professor in Harvard Business School suggests that delaying payment is a working tool against online advertising fraud.

“Delaying payment distinguishes the rule-breaking affiliates from the good ones who are actually helpful. Rule breakers know that the longer they have to wait, the more likely they are to get caught. The more likely they are to get caught, the less likely they are to get paid… So just by paying more slowly, it seems to be possible to reduce the number of bad affiliates and thereby reduce waste and increase profit.“

Just by delaying the payments, the advertisers would lose also customers who are following the rules. For them Edelman suggests to pay bonus and interest for waiting.

Read full interview by Martha Lagace from HBS Working Knowledge and download the working paper Optimal Deterrence when Judgment-Proof Agents Are Paid In Arrears—With an Application to Online Advertising Fraud as a pdf here.

Photo above used under CC license, credits Tracy O.