According to Schmidt, Google’s auction-based pay-per-click advertising model is inherently self-correcting. Schmidt’s scenario for what would happen if Google did not police click fraud and it was “rampant”:
Eventually, the price that the advertiser is willing to pay for the conversion will decline, because the advertiser will realize that these are bad clicks, in other words, the value of the ad declines, so over some amount of time, the system is in-fact, self-correcting. In fact, there is a perfect economic solution which is to let it happen.
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