ClickFacts: Protecting Advertisers from Click Fraud

By Carol Johnson

Pay-per-click advertising has become the gold standard for Internet marketers seeking an innovative way to advertise a product or service using the global reach of the Internet. Companies gain exposure by placing ads on Web sites and paying for the advertising only when people click on their ads. Unlike advertising in traditional media outlets such as billboards and print ads, PPC advertising should give businesses the ability to compute return on investment (ROI) definitively by comparing their advertising budgets with the number of clicks an ad receives.

However, confidence in the integrity of PPC advertising is rapidly waning due to the growing prevalence of click fraud—a pervasive attack on the PPC advertising model that wastes millions of advertising dollars and gives unscrupulous businesses an unfair advantage over their competition. As a result of click fraud, companies think their ads are generating legitimate interest, but they are not generating revenue.

Understanding the Problem

For small to medium-sized businesses, the allure of PPC advertising lies in the fact that placing ads on Google, Yahoo!, and other large major PPC Web sites enables them to target their advertising to specific audiences. Because of their tighter advertising budgets, smaller businesses have embraced the concept of paying for ads only when site visitors click on them. Companies bid on keywords and specify the limit they want to spend on advertising, and when they reach that limit, the PPC site drops their ad until the next day. At that point, competitors can buy in and have their ads posted at a lower price.

Such a system seemingly invites fraud because of the ease with which a business owner can click on a competitor’s ad repeatedly until the ad falls off the PPC site. This type of straightforward click fraud not only eats up the competitor’s advertising budget with no ROI, but also shuts down their ad prematurely, allowing the scammer’s ad to take its place. Because small to mid-sized businesses rely more heavily on PPC advertising than large businesses and their advertising budgets are smaller, click fraud affects them more severely.

A more complex type of click fraud occurs when a major PPC search engine such as Google or Yahoo! indexes the contents of an affiliate Web site—which can be as simple as a personal blog or as sophisticated as the Web site of a major corporation—and then feeds relevant ads to that site. When site visitors click on one of these affiliate ads, the PPC company splits the fee with the Web site where the ad appears. Unscrupulous site owners need only contract with a PPC provider to attract affiliate ads and then click on them repeatedly to earn revenue from unwitting advertisers who think their ads are attracting attention.

Although search engines are increasing their efforts to tighten PPC advertising security, scam artists are growing increasingly sophisticated in their efforts to disguise the origins of clicks. Malicious software programs called "bots" allow fraudsters to automate the generation of bogus clicks while changing the program regularly to evade security software and filters. It is difficult to quantify the amount of click fraud being perpetrated, but marketing analysts estimate that anywhere from 10 to 50 percent of all clicks come from scammers who have no intention of purchasing the product or service being advertised. MarketingExperiments.com, an online marketing research firm, conducted three experimental campaigns on Google last year and reported that as many as 30 percent of the clicks may have been fraudulent.

According to the Interactive Advertising Bureau, PPC advertising is growing faster than any other marketing segment. Industry analysts estimate that PPC advertising revenue accounts for at least half of the billions of dollars earned each year by both Google and Yahoo!, and keyword advertising may soon become the most prevalent form of marketing in the U.S. However, such predictions will dissipate quickly if the growing tide of click fraud cannot be stopped.

Shoring Up Defenses with Best Practices

It can be virtually impossible to prove click fraud in many cases because it is difficult to identify where a click came from and whether or not it is genuine. However, businesses can implement security measures to deal with click fraud so that the advertising dollars they spend generate revenue for them rather than padding the pockets of click fraud artists. New antifraud technologies being employed include click fraud filters that analyze incoming clicks to identify patterns suggesting fraud. Google and Yahoo! claim to be successful at combating click fraud by blocking known fraudulent IP addresses to prevent them from viewing or clicking ads.

Businesses may be able to detect click fraud abuses simply by maintaining tight control over their PPC advertising budgets. Marketers can start small and compare the amount of advertising dollars invested in PPC with the percentage of increase in sales to see if their PPC investment is improving overall revenue. If advertising costs continue to rise without an increase in revenue, click fraud is most likely the culprit.

Hiring a Watchdog to Sniff Out Fraud

The most effective way to detect click fraud and improve advertising ROI is to contract the services of an auditing company. ClickFacts based in San Francisco, CA, works directly with online advertisers, Web publishers, PPC networks, and search marketing firms to analyze all aspects of advertising campaigns and uncover fraud as it happens. The ClickFacts team consists of technologists and online advertising professionals who approach Web site auditing from the advertiser’s point of view, keeping in mind that every Web site is different and has its own issues to consider.

For advertisers, the ClickFacts support team works one-on-one with clients to deploy the patent-pending ClickFacts audit system, track every click, and deliver a detailed report that clearly identifies fraudulent activity. The support team then helps companies negotiate with advertising networks to prove their case and obtain a refund or credit for advertising dollars spent on fraudulent clicks. Plans are affordable and flexible, and the ClickFacts system can handle sites that receive from 30 to 3,000,000 clicks a day.

For publishers, ClickFacts provides a proactive approach to eliminating click fraud. The ClickFacts patented audit technology monitors search engine services, tracking each click and alerting site owners to fraud as it happens so they can take action to protect their advertisers. ClickFacts clients receive a CLICK FRAUD FREE certification to display on their Web site and marketing materials to reassure advertisers that they can spend their advertising dollars knowing that they will not be attacked by click fraud scams.

The threat of click fraud should not prevent businesses from using the valuable PPC advertising model to open global doors and generate positive revenue growth. A ClickFacts audit helps advertisers and publishers identify click fraud and fight back, to ensure that the doors remain open and advertising dollars translate to increased revenues.