Is Microsoft walking into a click-fraud quagmire?

Wired on Friday: There once was - and perhaps still is - an endlessly forwarded e-mail that claimed to be from Bill Gates. In it, he declared that Microsoft was beta-testing a new e-mail tracking system, and that he would personally pay $10,000 to the person who forwarded this mail to the most people.

It was a fake offer, of course, but a very effective one. The cash offer tempted recipients to keep forwarding the message, ensuring the fraudulent mail's continuing existence. Although it wasn't really fraud, since no one truly benefited.

I suppose it was just meant to be an amusing prank. But its ingenuity kept it alive long after any humour had bled from the idea.

I was reminded of this mail after hearing reports of a speech given by Bill Gates (the real Bill Gates) in India.

There, in response to the inevitable questions about how Microsoft might plan to do battle with Google, he suggested that Google was pulling in excessive profits from advertising - money it pocketed instead of sharing it with its users.

Microsoft's own search services, Gates implied, would take some of that advertising money and pay it back to the users.

A future Microsoft web product would, in effect, pay its users to search.

It's not the first time Gates has suggested remunerating searchers - he said something similar in a Computing magazine interview last month. But I can't help feeling that somebody, somewhere, is misunderstanding what Gates is attempting to explain in these scenarios that he paints. Because if his company really is planning to cut searchers in on the profits of search, he's walking not into a competitive fight with Google, but straight into the quagmire in which Google is likely to get bogged down in the future.

It's true that Google doesn't pay users to search, but it does have at least one other payment package for the average net user: sites which show on their pages advertisements provided by Google get a cut of the money that those advertisers pay Google.

The line between average net user, advertising host and advertiser is small in the Google business world. Websites operated by a single teenager with only a few thousand fans make money, and advertisers with a €20 budget are happily accepted.

Payments to webmasters are often microscopically small - but Google has many hundreds of thousands of these users, so the revenue adds up. And the transactions themselves are fully automated, so the cost of processing these payments (and Google's cut) is minimal.

What isn't a minimal cost, and is, indeed, an increasing headache for Google, is "click fraud".

Here's the problem: Google charges advertisers for every person that clicks on their advertisement.

It also pays out a cut of that charge to the person who hosts the clicked advertisement. Naturally, there's an incentive for those hosting advertisements to trick people into clicking the ads on their webpage, or faking those clicks using software.

Google has smart software to detect the tell-tale characteristics of a faked click. But its detection can never be perfect.

And every time Google gets its click-detection wrong, it's a minor public relations disaster for the company.

Let false clicks go undetected, and Google is effectively defrauding its advertisers. Unfairly reject legitimate clicks, and Google's other customers, those hosting the ads, are up in arms.

Really, the only reasons the constant embarrassments of these missteps (and miss-clicks) are not a more public feature of Google's image is that the errors don't affect the average Google user - you and me. Add to that the terms in Google's contract with both advertisers and advertisement hosts that ensure they are not allowed to talk about their deal with Google, and you have a muted, but growing, problem.

Now imagine Bill Gates's suggestion, as interpreted by those who have heard him speak. Microsoft would, remember, pay people not just to click on adverts, but merely to conduct searches.

Just as in that pretend e-mail, who could possibly turn down the chance of earning a cut of Mr Gates's billions?

And how many hackers and unscrupulous businesspeople out there would quickly devise elaborate electronic scams to "pretend" to make hundreds of searches a second?

And what would the headlines say when Microsoft first starts to refuse to pay some innocent customer under the wrongful accusation of being a "click shyster"?

Google survives by being a newcomer with a good reputation. The moment Microsoft wobbles these days, the only ones rushing to the scene are class action lawyers and angry stockholders.

It's easy to imagine that this idea of paying searchers is a Gatesian misreading of human nature, that just because he has dedicated much of his life to the accumulation of money, the general public would have their heads turned by the promise of a few cents per search.

Or that there were fraudsters and con-men out there that even his company could not outwit.

But actually, I believe that there's something smarter going on here.

There may be other rewards Gates is planning to offer, cleverer deals being engineered by his programmers.

Perhaps the rewards will be like air miles, some commodity that means very little for Microsoft, but is of great value to others.

That would, perhaps, work as a lure.

But Microsoft must be careful. Its pay-for-clicks idea must work hard not to be seen as a tawdry scam - or become embroiled in the scams and frauds of others.