Clicks Forensics Inc. begs to differ. The independent click fraud monitoring and reporting service released its most recent findings last month. Their figures reveal that not only is click fraud a continuing problem, the rate of ascent affecting both ad networks and the online world as a whole has been dramatic.
According to the company, 15.8 per cent of all click traffic for the second quarter of 2007 was considered fraudulent. That figure rises to 16.2 for the third quarter of the year, up from 13.8 for the same period last year.
When viewing click activity within ad networks, the numbers are even more compelling: 21.9 per cent for the first quarter of this year, rising to 25.6 per cent for the second quarter, and 28.1 over the third quarter for 2007. Given the expected Christmas bottleneck in both ad sales and network traffic, it's safe to assume that figure could hit the 30 per cent plateau and beyond, by the time this year is out.Pay Per Click (PPC) advertising was launched in 2002, and over the past five years has exploded in popularity, quickly evolving into a billion dollar industry. However, such success ultimately draws out unsavory opportunists who see a quick buck in the making by bending the rules and circumventing the process.
In a nutshell, ad clicks generate revenue for ad publishers, which charge an advertiser for each click-through on a posted ad. As popularity grew, a number of ad networks sprung up, serving as a middleman between the publisher, and the advertiser. Under this system, each time an ad is hit by a legitimate user, the advertiser pays a fee to the ad network, which in turn pays a share of the profit to the publisher.
This, according to [Wikipedia] is the root cause and effect of fraud.
The basis for click fraud can be as varied, and as complex as the PPC juggernaut itself. Advertisers can target competitors, by initiating so many clicks to a competitor's ad that the resulting cost could seriously deplete the competitor's ad war chest, thereby taking them out of ad circulation. Another is when one ad publisher attacks another by making it appear as if the publisher is clicking on its own ads. This, in turn, could provide cause for an ad network to reject a publisher.
Of course, the most obvious fraud is for a publisher to make multiple hits on its own ads, making it appear as legitimate web traffic. This results in a larger bill to the advertiser and a larger, albeit dishonest, payout to the publisher.
Critics of Google cite the fact that the massive enterprise can profit both ways, both as a publisher with its search engines, and its AdWords/AdSense network. While Google AdWords/AdSense would be in a position to lose money to undetected click fraud through increased payouts to the publisher, it would earn that money back and then some through increased billings to the advertiser.
In this way, Google--according to Wikipedia—has the potential to profit from PPC fraud. Some view this as a conflict of interest.
Click Forensics Inc. is of the view that the major players, including Google and Yahoo, are not doing enough to stem the flow of fraudulent traffic, noting that while active discussions have led to constructive ideas, after 18 months there is little progress to show for it. Google disputes this, and also takes issue with Click Forensics numbers. Google maintains it has greater transparency, and a larger pool of users from which to pull data than the 4000 advertisers and publishers Click Sense has in its roster. Google also points to a number of tools available to detect, and track fraudulent traffic, although Click Sense is on record as saying those tools are too cumbersome to use.
In the meantime, PPC fraud appears on the rise, while quality traffic is decreasing, tainted by fraudulent activity mimicking legitimate traffic to avoid detection. Advertisers, as a result, are seeing their ad rates rise without the returns that more legitimate traffic would generate, giving pause for many advertisers to rethink their network strategy.
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Some advertisers fight back. One class-action lawsuit initiated by Lane's Gifts of Arkansas against Google for alleged click fraud was settled last year for $90 million.And lawmakers are intensifying the consequences. Use of a computer to commit PPC fraud is a felony in many jurisdictions. In California, for example, click fraud is governed by Penal Code 502. In the United Kingdom, the Computer Misuse Act 1990 sets out similar punishments.
In the meantime, industry watchers maintain the key is to not simply block click fraud, but to expose and shut down those who commit the deeds. Until that happens, however, advertisers will continue seeing their return on investment drop, as costs rise and quality traffic falls, leaving advertisers caught in the mousetrap to seek compensation from either their publisher or network, or through the courts.
