Battling Click Fraud One Click at a Time

While Google and Yahoo are trying to curb pay-per-click fraud, some say their solutions are not enough. In the meantime, quality publishers are taking control in the war against click fraud by bringing inventory management in-house rather than syndicating ads to large ad networks. By providing a source of traffic and positive ROI, publishers are able to prove their value directly to online advertisers.

It's an issue that is costing search engine marketers millions of dollars each year. Click fraud is the act of repeatedly clicking an online advertiser's pay-per-click ad with sinister motives. Since the advertiser has to pay for each click the ad receives, fraudulent clicks can be very costly when foul play is involved. Take, for example, the competitive vendor who wants to bleed his rival's ad budget dry. Or, it could be an angry customer who is trying to get even with a merchant.

Whatever the motive, the costs can mount quickly when the intent is malicious. An estimated average of 14.6 percent of billable pay-per-clicks are fraudulent, according to Outsell Inc., an information industry research group. Outsell estimates that advertisers wasted over $800 million on click fraud in 2005. This nemesis of search engine marketing (SEM) has prompted nearly 30 percent of advertisers to stop spending on search-engine click-based initiatives, the firm reported, and losses to Google and Yahoo total more than $500 million to date.

So what is being done to stop the money drain? Web analytics vendors and software makers are running to the firing line with their own solutions designed to eliminate -- or at least curtail -- click fraudsters. But is it enough to get to the root of the issue, or will these money-motivated schemers find a way around the technology? What roles do search engine marketers and ad networks play?

The answers to those questions demonstrate that click fraud is a complicated issue that may mean the unwanted traffic is here to stay. Let's take a look.

Sources of Click Fraud

Techniques for click fraud fall into two broad categories: automated and user initiated, which we will discuss in a moment.

It is also important to point out that some unwanted clicks may come from spiders and robots. These crawlers are not part of the click-fraud problem. They merely collect information to use in their search engines, and as part of the process, they generate clicks to test the links on a Web site. Despite the harmless intentions, there can still be a cost for advertisers, although online publishers usually have ways to reduce or eliminate the impact of these spider clicks.

The bigger issue is the money-motivated offenders, said Nils Winkler, managing director of digital marketing firm AdTech US. "Click fraud is a major problem that comes from several different directions," he explained. "Fraud clicks, for example, are generated by click engines to increase click rates. Actual human users in third world countries," he said, "get paid to click by hand."

Winkler also cited a major problem that is not often talked about: cost-per-view or forced-click paradigms at online gaming portals. Cost-per-view eliminates the need to click on the ad. The ad is displayed regardless of the user's intentions. Gamers who only have a few points on their score account can earn extra points to play more games by clicking on banners, according to Winkle. These clicks earn money for the gaming portal, but the gamer may not be at all interested in what the ad is selling. That means an automatic loss for the advertiser.

The Role of Search Engines

Considering click fraud class action suits against both Google and Yahoo, it is clear that search engine marketers and search engines are also paying the price. Google and Yahoo have put practices in place to prevent click fraud, but some anti-click fraud vendors do not believe these actions are enough to stop the problem.

Google recently released click fraud rates. The search giant reported fraudulent clicks account for just 0.02 percent of all activity. But some industry experts argue that the number is misleading because it accounts only for the percentage for which Google has agreed to reimburse advertisers and the company has declined to allow independent audits.

Of course search engines claim they have click fraud under control, said Tom Cuthbert, CEO of ClickForensics, an anti-click fraud technology vendor that publishes the Click Fraud Index quarterly.

"It reminds me of what Bill Gates said in December 2004 about spam. He said that the industry would have the problem solved by 2006. But in 2006, Postini reported that spam increased 147 percent and that 94 percent of all e-mail sent was spam. So, not only was the problem not solved, it got worse," Cuthbert said, noting that fraud cannot be obliterated when there is significant economic incentive to commit it.

This type of click fraud can only be mitigated, he said, with sophisticated detection systems that continually adapt to new techniques. Tackling click fraud, Cuthbert added, will take an industry-wide effort among search engines, advertisers and third-party monitoring companies.

Taking Their Business Elsewhere

John Linden, CTO of the Think Partnership, a performance-based marketing company, said quality publishers can take control in the war against click fraud by bringing their inventory management in-house rather than syndicating ads to large advertising networks.

By signing-on their own advertisers, he explained, and providing these advertisers with a source of traffic and positive ROI that is independent of their pay-per-click search-engine marketing campaigns, online publishers can prove their direct value to advertisers.

On the flip side, Linden pointed out, advertisers can also get vocal about their demands for a solution to thwart click fraud by pulling their budgets out of ad networks that are allowing it and placing those budgets elsewhere. Linden said he is already beginning to see this happen.

"Advertisers won't ever be very effective at preventing click fraud because they won't ever have enough transparency from the search engines due to security Relevant Products/Services reasons to see what traffic they are being charged for and what they aren't," Linden argued. "Advertisers can simply watch their ROI on a keyword level and adjust their PPC bids accordingly." The ultimate solution may come from networks that have the ability to see traffic on both the publisher's Web site and the advertiser's Web sites. Employing technology at the network level is the only way to detect all types of click fraud and completely eliminate it, Linden said.

Protect Yourselves, Marketers

Web analytics software can also help advertisers audit the effectiveness of their advertising campaigns, with an eye toward identifying click fraud. ClickTracks offers robust click-fraud measurement in its Web analytics package and niche players like ClickDetective, ClickFacts, AdWatcher and WhosClickingWho are also springing up to serve the needs of search-engine marketers.

These programs offer features such as the ability to validate the clickstream from end to end and assess the total online spend holistically across many platforms, not just per click by search engine. Some programs even allow the user to block a fraudster after as few as two clicks.

Marketers sometimes blindly trust their ad agencies and analytics firms to "do the right thing" and protect them against click fraud, according to Michael Caruso, CEO of ClickFacts. Or, he said, they might not suspect that a search engine would allow this sort of fraudulent activity.

"We propose that marketers take back control and run their business by the numbers, not by blind faith," he said. "They need to demand full accountability for the money being spent on search marketing campaigns, as well as total transparency by the search engines to show both legitimate and bad traffic."

Click Fraud Over-Hyped?

Despite the cage rattling, not everyone in the search engine marketing space sees click fraud as a major threat. Miki Dzugan, president of Internet marketing firm Rapport Online, said she has been managing pay-per-click advertising since Yahoo Search Marketing was GoTo.com. From her perspective, companies that sell analytics tools are making a mountain out of a click-fraud molehill, and climbing that mountain could be an expensive undertaking.

"Just like spammers, the click fraudsters have a financial incentive to learn ways around detection, so obsessing over whether each and every click is real or fraud can become more costly than the loss due to fraud," Dzugan said.

"While advertisers should be aware of the problem," she advised, "measuring the pay-per-click program based on the result of the leads or sales from the ads should be the primary concern."

Of course, no business -- large or small -- wants to see its advertising dollars go down the drain. And ultimately, a combination of caution and careful monitoring will be key to protecting ad dollars spent on any pay-per-click program.