24 Mar 2008  Research & Ideas  Reducing Risk with Online
Advertising  Fraud is fairly easy in the world of online
advertising, particularly for determined adversaries. In this
Q&A, HBS professor Ben Edelman, who designs electronic markets,
explains how contract terms can be managed to both reduce
advertisers' risks of being defrauded and reward good suppliers.
"The idea here is to make everyone better off, except of course
the fraudsters," Edelman says. Key concepts include:    •
Delaying payment separates the wheat from the chaff and good
affiliates from bad ones. Rule breakers know that the longer
they have to wait to be paid, the more likely they are to get
caught.   • In online advertising, it is often hard to know
whether you've received the service you've contracted to receive
and have paid for.   • Online affiliate programs are a big
source of fraud. Because these programs are perceived to be low-
fraud marketplaces, advertisers omit many ordinary protections
they use when dealing with little-known supp