Click Fraud: Problem and Paranoia

Source: - Wired News

Last week, I served on the "Click Fraud: Problem or Paranoia" panel at the Search Engine Strategies conference in New York. At one point, Jessie Stricchiola, one of my fellow panelists, tried to gauge the extent of the problem by asking the 80 people in attendance to raise their hands if they had ever been victims of "click fraud."

About half of the audience members, most of them small businesses owners, raised their hands

Then Stricchiola, founder of Alchemist Media, wanted to know how much each had lost. Most reported losses in the $5,000 to $10,000 range. A couple hit $20,000, and the biggest loser of all claimed his company had been fleeced for more than $300,000.

That's when I realized the panel might have more aptly been called "Click Fraud: Problem and Paranoia."

Click fraud -- the skewing of pay-per-click advertising data with illegitimate hits -- can be accomplished in a number of ways, ranging from manually clicking on the same ad link repeatedly to deploying automated bots. Whatever the method, the results are the same: Merchants pay for traffic from someone who has no intention of purchasing anything. Return on investment: bupkis.

It doesn't just affect online merchants. Google, Yahoo and other search engines may also be vulnerable. In the "How We Generate Revenue" section of its latest quarterly report (.pdf), Google stated, "We derive most of our revenues from fees we receive from our advertisers" and acknowledged it has "regularly refunded revenue" to click-fraud victims. (In fact, a full third of audience members reported that they had received refund letters from Google.)

"If fraudulent clicks are not detected," Google went on to say, "the affected advertisers may experience a reduced return on their investment (and) could lead the advertisers to become dissatisfied with our advertising programs, which could lead to loss of advertisers and revenue."

To paraphrase another panelist, Danny Sullivan, editor of SearchEngineWatch.com, if Google is concerned, that's good enough for me.

So who commits click fraud? It could be a scurrilous search engine ad affiliate who clicks for dollars. Auction Experts International, a Google AdSense partner located in Houston, allegedly reaped $50,000 in commissions by hammering away on ad links until Google sued in November. Its principals never showed up in court, and Google won by default. (The site dissolved into the ether.)

Or a company might do it to deplete or expand a rival's pay-per-click budget. Some businesses that pay Google or Yahoo's Overture $20 a click to appear as the No. 1 or 2 ad for a specific keyword estimate that as much as 35 percent of their traffic is fraudulent. Who do they blame? Competitors seeking to bankrupt them.

This is what happened to Tammy Harrison, president of 2K Medical, which markets billing software to doctors. A year ago, she reviewed her log files and noticed a repeated pattern of clicks for keywords that were not normally searched. She realized a majority of the clicks originated from IP addresses located in the same state, and immediately suspected a former employee who had started a rival firm. Total cost to Harrison: $100,000 in sales, time spent determining the extent of the problem, and money wasted on useless ads.

You'd think that victims like Harrison and others who attended the panel discussion might consider confronting the search engines. But many are afraid to complain because of the fear they will get blacklisted by Google, Yahoo and the others, which provide most of their traffic.

I am scared to death," Harrison said, "but I feel someone needs to speak up so this problem will be resolved. They are the search engines gods and I respect their powers." That said, she emphasized that she is interested in working with the search engines and not against them, and Google and Yahoo have provided refunds for fraudulent clicks, although not for the 200 hours she put in sifting through her logs.

If the Googles of the world are off-limits, perhaps merchants who suspect rivals of juicing up their search ad traffic should consider suing. But this also presents significant obstacles. First, to build a case, they'd need cooperation from the search engines, which are paid whether the clicks are fraudulent or legit. Says Ben Edelman, a panelist who made his name fighting adware companies: "Search engines don't have the incentive but have the data, while the advertisers have the incentive but not the data."

Besides, as Peter D. Raymond, an attorney at the international law firm Reed Smith, said during the panel discussion, "There are three certain things in life: death, taxes and legal fees." It simply might not make sense to spend money pursuing a lawsuit when the outcome is uncertain but the retainer fee isn't.

What can a victim of click fraud do? One solution bandied about at the conference seemed simple enough. Contest the charges on your credit card as fraudulent. If enough merchants did it, they could enlist powerful allies: American Express, Visa and MasterCard, who would likely pressure the other search engines to do something about it.

It sure beats trusting Google to mail you a refund check