Concentrated benefits, dispersed costs: million dollar fraud that no victim has strong incentive to fight

Michael Giberson

Christopher Mims explains a “A Web Scam that Makes $500,000 a Month” in MIT’s Technology Review. In essence, a web programmer set up websites to generate revenue off of pay-per-click or pay-per-impression online advertising. That isn’t the interesting part, since many folks have tried to scam money this way. The interesting part is how the programmer managed to hide his work even while generating what is likely to be a few million dollars.

The article subtitle provides some clue, mentioning the scam “…  skims such a tiny amount from so many sources that no one has much incentive to shut it down.” Bad public policy can sometimes survive because a few proponents have much to gain from its survival, and opponents individually lose so little that they have little incentive to fight. Here is a case of fraud that spreads itself thinly across the defrauded advertisers.

The first part of the article subtitle is, “A computer scientist discovers a scam that …” That computer scientist was Panos Ipeirotis of the Stern School of Business at New York University, working with a group at AdSafe, a service that helps to protect brand names online. Ipeirotis detailed how the fraud was uncovered on his blog.

See also the related Wall Street Journal article.

For a bit more on the lobbying logic mentioned, see “Concentrated benefits and dispersed costs.”

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