Click Fraud in Search Advertising

July 16, 2008

Click fraud (or “Click Spam”) has been a concern for search engine marketers since the beginning of pay per click (PPC) advertising. In the early days dozens of smaller search engines lost their credibility and today there are those who claim that even among the larger engines like Google and Yahoo the problem remains a concern.

So what is click fraud? Well quite simply the illegitimate clicks on paid advertising links and not as a result of genuine interest. The business model for search advertising is built around two types of relevant placement. The positioning of text ads on search results pages for search engines is the first type of placement, and text box ads on affiliate sites. When clicks are generated out of malicious intent and not a genuine interest in the advertisement this is described as click fraud.

There are two main causes for click fraud both driven by financial gain, affiliate fraud and competition. Affiliate sites that show text ads, make money from clicks generated by their users on those text boxes, and by generating more they stand to make more. This activity is presumed to cover over 90% of click fraud.

The other cause for clicking is competition. This is done as a measure to deplete the competing advertiser budget and then eventually taking over a lead position for a lower rate once the competitor has given up.

Click fraud can be done manually or in some cases with the use of custom “hit bots”. In some cases robot applications and software is developed to repeatedly click ads on a predetermined “human like” cycle. These robots can sometimes be blocked and identified but otherwise the “war” continues and the stakes are rising. In either case, the advertisers always stand to lose and search engines stand to gain, at least in the short run. In the long run this problem goes to undermine the credibility of the search engine and in past cases, cause the business model to fail and smaller search engines to disappear.

Going back to Google, where revenue from search engine advertising in the first quarter of 2005 was $1.24 Billion, click fraud is something that needs to be addressed and to a certain degree some attempts have been made to reduce this problem.

Estimates of click fraud are anywhere from 10% to 35% in some cases (depending who you ask) and if you do the math, well…ouch. In a recent search engine event, a third of the search advertisers have reportedly received refund checks from Google for click fraud. A Google statement read, “If fraudulent clicks are not detected, the affected advertisers may experience a reduced return on their investment (and) could lead the advertisers to become dissatisfied with our advertising programs, which could lead to loss of advertisers and revenue.”

There are some ways to avoid click fraud, keep a close eye on the spending levels of your accounts and apply common sense. Check your site stats and where you’re getting traffic from (referral information), if there are sites that are doing any worth while activity, check them out. Watch for sudden shifts and spikes in behavior. Words and phrases that have a certain delivery rate all of a sudden may begin to deliver more in cases of fraud. IP addresses (although these can be hidden) may also reveal dubious sources, check the “rising stars” in your stats reports and cross them against reverse IP tools, a sample selection should do.

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