Danger: Clicking Ahead
By: John Gartner
Searching for light at the end of the click fraud tunnel.
Sometimes a click isn't really a click. Sometimes the person knocking on a website's door is really a wolf in shopper's clothing, perpetrating a fraud that wastes marketers' advertising dollars or steals commissions.
Skip Pratt says his Web hosting company BAPort.com was being defrauded on 20 percent of its clicks. He was so frustrated by the problem that he developed a click fraud analysis application and started PPC Trax, an analytics company.
While most agree click fraud is a growing concern, there is no consensus on just how widespread or costly it has become. Depending on whom you ask, the amount of advertising dollars lost to fraudulent clicks ranges from negligible to as high as 40 percent.
The Interactive Advertising Bureau estimates that from 20 to 35 percent of ad clicks are fraudulent. When asked about click fraud, 25 percent of online marketers say it is not a problem, 45 percent say they are concerned about it and 6 percent view it as a serious problem, according to a 2004 Search Engine Marketing Professional Organization (SEMPO) study.
The study also indicates that the majority of the click fraud is thought to occur on publisher and affiliate sites, not on search engines websites.
Chris Henger, vice president of marketing at Performics, says click fraud is not occurring on a large enough scale to have a material impact on the return on investment of advertisers that are Performics partners. He says click fraud is analogous to shoplifting in the retail world: companies have to watch out for it, but it won't ruin the industry.
"I recognize that it is an issue, but it has gotten blown out of proportion," Henger says.
He says that if click fraud really constituted 20 percent of advertising, it would show up in advertisers' ROI and would cause search-marketing prices to fall.
But some think click fraud is a much bigger deal. ClickRisk president and CEO Adam Sculthorpe says the click fraud he has observed for his clients ranges from 15 to 70 percent of the total traffic. Sculthorpe has detected click fraud occurring on more than 1,200 websites and says his random sampling of log files indicates that "potentially there has been several hundred million dollars of total click fraud since 2003."
Regardless of the actual numbers, there has been more media coverage of click fraud over the last several months. That media attention fuels the perception that click fraud is on the rise, and that is creating a real problem for search engines and threatening the pay-per-click model.
"After The Wall Street Journal published its article (in April), there was panic in the streets," says SEMPO president Dana Todd.
Todd says that while the majority of smaller companies have heard about click fraud, many feel they do not have the resources to compare their performance with the reports they get from their search engines.
"Thousands of businesses that spend less than $1,000 a month are not going to spend the time to go through extensive reports," she says.
Unfortunately for online marketers, there is no surefire technology solution to prevent click fraud from occurring, and it is becoming increasingly difficult to detect. "Despite what anyone tells you, it is technically impossible to stop," says Steve Messer, CEO of LinkShare.
Messer says click fraud first became rampant in 1998 and 1999, causing LinkShare to shut down its pay-per-click TrafficShare network. "We had Ph.D.s working around the clock on click fraud defense technologies," Messer says. But like many other cost-per-click networks at the time, LinkShare could not maintain a profitable business.
Commission Junction similarly ceased its pay-per-click advertising in 2001 because of click fraud, according to Elizabeth Cholawsky, the company's vice president of marketing and product development.
Fraudian Slip
Companies that generate revenue for themselves by clicking on their ads use websites both created expressly to defraud as well as legitimate destinations, according to Ben Edelman, a Harvard law student who tracks online activities. Edelman says legitimate websites that artificially raise their revenue by a small percentage are very difficult for search engines to detect. "The system is set up so companies should be a little dishonest," Edelman says.
While there are many not-so-bright fraudsters who do not mask their IP addresses and are easily identified, other more nefarious types are developing sophisticated software applications to commit click fraud.
LinkShare's Messer says software that covertly requests advertisements or other Web pages is freely available on hacker message boards. Clever click fraudsters embed that code within other software – such as chat applications – so that each time a user sends a message, a "click" is also made.
Such click fraud software can be distributed through viruses that exploit software vulnerabilities and permanently reside on users' machines, creating a network of unknowing accomplices with IP addresses that look genuine, according to Messer.
While ISPs can somewhat protect against spam by blacklisting known spammers and blocking messages with phony IP addresses, there is no automated mechanism for identifying click fraud in real time, says Messer. He says the only way to protect advertising dollars is to identify what appear to be fraudulent clicks after the fact by sorting through server logs.
Also, because advertisers and search engines are unwilling to share information about who is committing click fraud, there is almost no industry coordination in fighting it. Industry groups are talking about it more openly, though, including the Dallas/Fort Worth Search Engine Marketing Association, which has made click fraud the subject of several recent monthly meetings.
Defensive Measures
Along with Pratt's PPC Trax, several other startups including ClickDefense, WhosClickingWho and VeriClix now offer fraud protection services that separate the wheat from the chaff in Web traffic data. These companies place snippets of code within ad pages that capture and analyze data from the computer requesting the page to look for signs of click fraud.
Pratt says PPC Trax's software algorithm compares 22 to 24 characteristics of a click, including IP addresses as well as other factors that he considers proprietary information. However, sorting legitimate clicks from fraudulent ones is an imperfect science at best. "It's virtually impossible to prove click fraud," according to Pratt, who says he has more than 35 clients.
VeriClix offers a free pay-per-click auditing service that monitors ad programs from Google, Kanoodle, Overture and others. VeriClix founder Jeff Martin says he was working for an advertising agency when he saw an "obvious need" for a service that scrutinizes clickthrough rates. VeriClix is able to provide the service for free because it receives funding from search engine optimization firms Zunch and Search Engine Optimization Advantage.
VeriClix determines suspicious activity based on an algorithm that tracks the frequency of clicks, originating IP address and other identifying information. Continued on Page 2...
Tags:
clicks, click fraud, commissions, commission fraud, redirect, shopping, search, ranking, google, legal, regulations,
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