Click Fraud Rears Its Ugly Head

Click fraud has been back in the news these last few weeks. As well it should be. Click fraud is the single biggest threat to search, and by extension all online, advertising, at the moment.

Wait: did I say click fraud was the biggest threat? I’m sorry. I meant the perception of click fraud is the biggest threat. The actual size of the click fraud market is unknowable. It may be minute, as Eric Schmidt says it is. It may be massive, as companies selling services that claim to ferret out click fraud in your campaign say. It may be somewhere in between. Or massive during the holidays, gone in January.

What’s very easy to measure, however, is how advertisers feel about click fraud, and they don’t feel good. JupiterKagan’s search analyst was recently quoted as saying Google decided to make its systems that measure click fraud more transparent in an effort to ensure “Google and click fraud are not synonymous.”

Talk about a threat to the brand. Let’s not pick on Google, but rather extend the concept to every company built on a PPC (define) service. If PPC becomes synonymous with click fraud, regardless of the statement’s verifiable reality, advertiser confidence will drop like a stone. With that gone, there goes investment, too. If confidence is gone, protestations that click fraud is really not a problem will fall on deaf ears. Those ears will have gone on to other advertising methods.

Is Click Fraud Really a Problem?

Arguments have been made that click fraud is really not a problem at all. As stated earlier, Schmidt has said the number of fraudulent clicks is tiny. I’ve spoken with people at the big affiliate networks, such as Commission Junction and Performics, who assure me click fraud is a good problem to have because it’s extremely easy to detect. Some economists have even argued click fraud makes no real difference because the market will naturally correct itself: the number of fraudulent or worthless clicks will dilute the overall efficacy of a program and advertisers will respond by lowering their bids. Finally, every company (of repute) has a policy in place; if you can demonstrate fraud, you don’t have to pay. A click incurs only a fractional cost for the search engine or affiliate network, so there isn’t a huge loss in simply removing it from the books.

All good arguments. Unfortunately, none really hold up, simply because click fraud isn’t a bunch of interacting systems. It’s a bunch of interacting humans, and human behavior has a nasty way of throwing off even the most perfectly designed system. Let’s examine each argument:

  • The number of clicks is small. Right. Of course a company representative would say that. He may be telling the truth, but we’ve had a long line of corporations tell us everything is fine, only to see an accountant perp-walked out in handcuffs. There’s no reason to believe this is the case, of course. But the image is there, all the same. It’s hard to take someone at his word, especially because, although a click may not cost much, it can have a tremendous amount of value.

  • Click fraud is easy to detect. Actually, this has a lot of validity. Any PPC system collects enormous amounts of data, making trending and forecasts highly accurate. Click fraud should represent an anomaly in these trends. Even if you can’t precisely say which clicks are fraudulent and which are valid, you certainly could say, with a high degree of accuracy, a certain percentage of clicks are fraudulent. You simply then remove those clicks from the system.

    The problem is this creates an arms-race between fraudsters and systems operators. There will always be a risk that fraudsters will invent newer, more clever ways to avoid detection. Even if their clicks get caught, they won’t.

  • The market will correct itself. In the real world, markets infrequently self-correct. Most of the time, deregulated markets need a series of controls to prevent all sorts of abuses. With click fraud, the practice is often predatory. Not all advertisers bidding on the phrase “pony ride” will be subjected to click fraud. Often, only one will. That means the advertiser is forced to lower prices to compensate for the bad clicks, dropping his position.

    An interesting twist on this is the increasingly common practice of determining ad position by combing bid and clicks. A click fraud victim may actually get a position bonus because he’s getting more clicks than the competition. Whether that represents an increase in good traffic, however, is difficult to determine.

  • Clicks can be removed from bills. The ability to remove clicks from your bill is often touted as a safety net. If you can demonstrate you’ve got fraud, state your case and have the clicks removed. Fair enough, but it certainly puts an extra burden on site operators. Of course, they should do this anyway, but shifting responsibility for a problem isn’t the same as trying to solve it.

The Click Fraud Solution

What should PPC vendors do about click fraud? Simple: take it seriously. If the threat of click fraud lies primarily in its perception in the marketplace, vendors must be up to the task. Freeing up information so operators have a better chance of finding problems is good, as is putting together specific teams to not only police the network but also talk with customers. Vendors should learn from craigslist and eBay and put a “flag” button on their management interfaces, letting customers click their way to alleviating (or at least airing) concerns.

If search and online advertising are built on the belief we can recapture that mythical “half of advertising is wasted,” we certainly can’t sit by and watch some portion of that fall to fraud.

Meet Gary at Search Engine Strategies in San Jose, August 7-10, 2006, at the San Jose McEnery Convention Center.

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