Click Fraud Concerns Crossover to Mainstream Media

Click Fraud is one of those blockbuster issues that are inarguably important but often pushed to the backburner in lieu of an industry consensus and solid solutions. Estimated to range between 5% and 20% of all pay-per-click traffic, click fraud is said to cost its victims (PPC advertisers) over $1Billion per year. Advertisers involved with pay-per-click marketing should, by now, have some knowledge of click fraud, or at least understand it is a potential threat. For those who don’t, two of the heaviest hitters in the mainstream media carry stories detailing the issue of click fraud.

On Saturday (Sept 23, 2006), the New York Times published technology writer Karen J. Bannan’s story, “Click Fraud is Growing on the Web”. The October 2nd edition of Business Week Magazine will hit store shelves featuring cover story, “Click Fraud – The dark side of online advertising”.

Both stories note advertiser frustration with increasing costs and decreasing conversions. In the Business Week article, PPC advertiser Martin Fleischmann is quoted saying click fraud “… has cost his business more than $100,000 since 2003.” The New York Times quotes Joe Tedd, another PPC advertiser, saying his company lost $17,000 over seven months to click fraud. “In November, we saw the number of searches going up on all the engines we had placement on,’’ Mr. Tedd said. “But while all the other engines were seeing higher conversion rates, this one engine was doing so poorly, we actually took the campaign offline.”

Both pieces also go out of their way to note that Google and Yahoo are good at detecting and deleting illicit clicks over their own networks but question the validity of clicks from several third party distribution channels, most notably at Yahoo.

Yahoo has been singled out due to its ongoing relationships with firms like Oemji, a company that makes and distributes a tool bar that has been linked to spyware and browser hijacking by analytic and security firms such as, Click Forensics, Sunbelt Software and Aladdin Knowledge Systems. Yahoo has twice been the focus of reports by Harvard Law School click-fraud expert Ben Edelman detailing connections between spyware makers and the second largest pay-per-click player.

While both articles focus primarily on the PPC programs offered by Google and Yahoo Search Marketing, the NYTimes piece takes time to note there are several smaller search firms selling pay per click advertising that generate far higher levels of fraudulent click charges.

Author Karen Bannan quotes PPC advertiser Iain Burton saying, “It’s a bigger problem with companies outside of Google,” he said. “When you look at your stats and find that — with a popular keyword — some smaller engine is sending through 10 times more traffic than Google, which gets by far the largest amount of traffic, then you know there’s a problem.”

Many search marketers who have ran campaigns across smaller PPC engines would agree that there is a higher prevalence of PPC fraud on the smaller engines. Major discrepancies between reports from second tier PPC engines and reports from Google or Yahoo also show that there is either more traffic generated by the second tier engines or Google and Yahoo have far better fraud filters.

Though there is a great deal of controversy over click fraud, data provided by WebSideStory shows a 3.4% conversion rate for sites visited from PPC ads v/s a 3.13% conversion rate for sites visited from an organic placement. Lee Odden at the TopRankBlog wrote a good review of the report today. Clearly, paid search advertising works but with an estimate billion or more dollars per year in fraudulent charges, advertisers are starting to demand much stronger accountability on the part of the paid search providers.

That call for accountability insures click fraud is an issue that is going to get a lot more attention in the near future. The FBI and US Postal Service have recently opened investigations of the issue, the US Congress is interested and several lawsuits are winding their way through the court system. Paid search marketing has provided the profit model that has propelled search into one of the fastest growing marketing channels. Search marketing will account for one third to one half of the $16.3billion spent on online advertising in 2006. There is a lot to learn and online advertisers need to pay stricter attention.