Click Fraud: What it is, What You Can do About it

Click fraud has received a lot of news coverage recently; even Google’s chief financial officer admitted that it was a serious threat to the company’s business model. It could also become a serious threat to your business model, causing your pay-per-click advertising costs to skyrocket with no return on your investment. What is click fraud? And more importantly, what can you do about it? Read on to find out.

You expend massive amounts of funds, perhaps tens of thousands of dollars every month on sponsored pay per click advertisement on the major search engines. Your idea is clear-cut: you settle upon a bid for the chosen keywords, you engineer and launch a simple creative ad and then sit back to wait for visitors to beat a path to your website. The price paid for those keywords depends on the amount of competition there is for those keywords, as well as how often your ad is clicked.

Now think for a moment. What would happen if someone – perhaps a competitor – spent all day clicking your ads? This type of behavior would definitely hurt the budget; before too long, the bid will rise on the price of your keywords and could cause your ads to exceed your maximum daily spending limits. Ultimately, your products and services may end up not seen by legitimate buyers, as intended. Worse, what about the professional online con artist who uses your banner ads in order to drive the prices way up for the market? This has the same hazardous effect on your advertising budget!

It is no secret that our world is vulnerable to fraud, whether it occurs over the Internet or in the mainstream business realm. Fraudulent activity played out in the media spotlight recently when the mounting risks of Internet click fraud were finally exposed. The problem has been around for a while – indeed, in July of last year some marketing executives reportedly estimated that as much as 20 percent of the fees in some advertising categories were fraudulent. It wasn’t until November of 2004, however, that Google filed a lawsuit against a company it accused of engaging in systematic click fraud. Finally, in December, Google CFO George Reyes admitted the magnitude of the problem. “I think something has to be done about this really, really quickly, because I think, potentially, it threatens our business model,” he said.

It not only threatens the search engines’ business model, but potentially yours as well. In the Google case, Auctions Expert International allegedly agreed to display Google’s targeted text advertising on its website, and then, using either humans or a software program, fraudulently clicked on the ads. Since it displayed the ads on its website, Auctions Expert International received paychecks for the clicks. Can you guess where the money came from? It came from advertisers…just like you.

{mospagebreak title=With These Numbers, Why Do So Few Complain?}

The amount of money invested in this industry attracts fraudsters like bees to honey. Sales from advertiser-paid search results in the U.S. alone were expected to reach more than $3 billion in 2004, after seeing explosive growth in 2003. Nor is it only the size of the market that draws the con artists; it is also the unlikelihood of being caught. Some observers of Google’s lawsuit think the search engine giant is prosecuting the case to hide the fact that their own technology is not up to speed at catching the bad guys.

Until recently, many advertisers have also been hesitant to complain about the problem. Google and Overture (owned by Yahoo), who make the vast majority of their income from advertisers, say that they have teams of people dedicated specifically to fighting the click fraud problem. Such statements might help to reassure an advertiser that click fraud is not happening to them.

A second reason that advertisers hesitate to complain is the sheer technical complexity of the problem – given that some advertisers use up to a million keywords in a campaign, there is a lot of data to crunch. That is not an easy task, even for companies that specialize in analyzing online marketing campaigns and detecting click fraud.

A third reason for the hesitation is the nature of the advertiser’s relationship with the search engines. For the moment, never mind the ads themselves; search engines are the main method used by Web surfers trying to find something on the Internet. Would complaining about this issue jeopardize the website’s listing in the engines? I would like to think that it wouldn’t…but who wants to take that risk?

{mospagebreak title=Click Fraud Detection}

How do search engines and other companies detect click fraud? With software-based methods of click fraud, it can be as simple as analyzing website traffic or surfing behavior. For instance, a page turned every couple of seconds over a period of time would look suspicious and get flagged as potentially fraudulent.

If there are humans at the other end rather than bots, click fraud can be trickier to detect. In that case, you could be dealing with a wide network of people using different computers across many parts of the world. This behavior will not yield a steady pattern that can be found easily with data mining. It is definitely occurring, however; at least one advertising technology company found click fraud operations in China. Additionally, the India Times reported that some companies are hiring locals to click paid ads from home, and offering them $100 to $200 per month.

Overture and Google use technology that evaluates clicks based on up to 50 data points. For example, while Overture states that it has two patents pending on its technology (so it does not wish to reveal too many details about it), the list of data points it evaluates include:

  • IP address
  • User session information
  • User cookie information
  • The network to which an IP address belongs
  • The user’s browser information
  • The search term requested
  • The time of the click
  • The rank of the advertiser’s listing
  • The bid of the advertiser’s listing
  • The time of the search
  • The time of the click

How can you determine whether you are a victim of click fraud? Sometimes it is as simple as comparing the numbers. For instance, in the case of one online insurance consulting business using Google and Overture, the business owner noticed a discrepancy after eight months: someone was clicking on his ads at a rate more than 20 times the frequency of a person looking for a quote. He estimated that that instance of click fraud alone was costing him as much as $300 per month. If you cannot do this yourself, there are a number of companies, such as Clicklabs, WhosClickingWho, ClickAssurance, and others, who will perform the analysis for you, charging a fee likely to be significantly less than you are losing from fraud.

{mospagebreak title=Becoming Proactive}

What should you do if you have determined that you are a victim of click fraud? As reported by ClickZ, the owner of the online insurance business came up with a clever solution. Since he was able to trace the clicks to a local IP address, WhosClickingWho helped him set up a customized pop-up window. Whenever the person from that IP address clicked on that ad, the window, featuring the business owner’s text, appeared. It said, “Stop, you weasel! I know who you are and have reported you to the proper authorities.” This stopped the problem cold.

This was only the first step, however. The business owner took his documentation of the click fraud to both Google and Overture, and the reaction he got was most instructive. By his own estimate, Overture reimbursed him for 95 percent of the fraud, but Google only reimbursed him for 50 percent, and took longer to get back to him besides.

If you want to do the analysis yourself, you need to obtain your website’s server logs. You should be able to get these from your Web hosting company. Once you have them, there are a number of data points to examine. These include the following:

  • Repetition of IP addresses
  • A large or irregular number of clicks from the same geographic area
  • IP addresses that belong to cloaking software companies
  • A change in the amount of traffic seen for certain keywords, particularly a rapid increase
  • A doubling or tripling of clickthroughs without any bid changes or rank changes (or, possibly, a corresponding increase in business)

This is not something you can do once and then just forget. Compiling statistical data takes time and effort, but it is the kind of data that Google and Overture will take seriously; you cannot approach them with a suspicion and expect them to listen unless you can back it up with hard data. You should monitor you bids daily, and even review them weekly or monthly. Remember, nobody is going to be as interested in making sure your business succeeds as you.

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