Click fraud is a serious issue to online advertisers, search engine marketing companies and the search engines themselves.
Just last week, Google settled a high-profile class action click fraud lawsuit for $90 million. Lane's Gifts & Collectibles filed the suit in February 2005.
Lane's maintained that the major search engines, including Google, Yahoo! and AOL, have billed for fraudulent clicks and not compensated advertisers properly.
Other click fraud suits against Google remain, including CLRB Hanson Industries d/b/a Industrial Printing, which filed its suit last August.
Some search industry professionals say search engines rightly deserve the blame, contending that they do not adequately protect advertisers from click fraud. Yet several marketers say the click fraud issue, while a concern, is overblown.
Click fraud occurs when a person or an automated computer program clicks on an ad as a way to generate a fraudulent cost-per-click charge.
Last August, a study by MEC Labs/MarketingExperiments.com found that the instance of click fraud in Google's pay-per-click search engine might be as high as 29.5%.
In light of Google's proposed offer of $90 million settlement with Lane's, Flint McGlaughlin, director of MEC Labs, said he is pleased to see Google's effort to resolve the problem. "As our initial click fraud research study showed last year, there is an obvious problem in the online advertising world," McGlaughlin said. "The challenge is that I'm not sure anyone really knows the extent of the click fraud problem." He said MEC is conducting additional research.
Michael Caruso, co-founder of ClickFacts, which audits click fraud, characterized the problem as an "epidemic," adding, "there's a lot of money being wasted." In the case of a b-to-b automotive client, he said, 35% of the clicks where fraudulent.
But some marketers say the impact of fraud on search marketing campaigns is less than these numbers suggest. "I don't see it as a significant issue," said Holly Noah, director of field programs at Gevity, a human resources management provider.
Executives at Agency.com, which handles Gevity's interactive marketing, agreed. "It's probably not the No. 1, or No. 2 or No. 3 issue that a search advertiser has to think about, especially in the b-to-b space," said Chris Bowler, VP-media director at Agency.com in Chicago. "There's much more [concern] about how much do I have to budget, what keywords do I have to buy, how do I create compelling creative, how do I get my site listed [organically] ... and what resources do I need either in- house or with an agency partner or search specialist," Bowler said.
ROI VERY HIGH
Caruso said advertisers' blase attitude toward fraud could be because their ROI from search is still very high. "A b-to-b advertiser may not care because the ROI on online search is so great that they consider it an accounting error," he said.
Google and Yahoo! representatives continue to defend the search engines' efforts on behalf of advertisers to conquer click fraud. "An important part of monitoring a pay-per-click campaign is to monitor clicks and conversions," said John Slade, director of product management at Yahoo! Search Marketing.
Noah echoed those comments. "The way that search marketing campaigns are managed, there's a daily budget, and it doesn't go over that amount on any given day, and any astute marketer or their agency paying attention to their campaign will notice a spike," she said.
However, since it has the potential of becoming an issue, Noah and Agency.com conducted a test over the course of a few months. "The keywords we're promoting are not inexpensive and, with a limited budget, we wanted to make sure there was no waste going on," she said.
Keywords for Gevity on Google can range from $1.50 to $8.75 per click, Noah said.
Another marketer, CDW, is very active in paid search but said click fraud is not its No. 1 challenge. "It's making sure we're ROI positive and bringing in quality customers," said Kurt Baldassari, director of e-commerce at CDW. "We're focused on bidding on the right keywords and bringing in the best business customers," he said. "That's the No. 1 concern for us."
Despite that, CDW has a system in place to catch click fraud and audits its search marketing on an ongoing basis because there have been instances of fraud in the past. "We always have a healthy cynicism," Baldassari said. "All you can do is audit and be diligent."
He added publishers work with CDW to credit anything they deem unusual. "It has happened, but I can't even remember the last time," he said.
Google's business product manager, Shuman Ghosemajumder, said the company is doing a good job in its efforts to prevent click fraud. "This is something we take seriously and it's also something, fortunately, where we do an effective job," Ghosemajumder said.
Others strongly disagree that Google and Yahoo! are doing an adequate job, saying the search engines fail to provide click fraud protection and service to advertisers. One executive said that is partly because the search engines do not offer partner or affiliate sites technology to combat fraud.
"More time seems to be put into protecting the mother ship, but those same technologies are not being shared with their partners," said Greg Boser, president of WebGuerrilla, a search marketing consultant.
Ghosemajumder said Google terminates publishers from its network on a daily basis as part of handling click fraud.
Who gains from click fraud
Click fraud can be committed for financial gain by such parties as contextual ad affiliates, which profit when clicks occur on their sites because of revenue-sharing agreements with search engines. An advertiser's competitors similarly might engage in this practice to drain the marketer's pay-per-click ad budget.
Another complaint directed at search engines is that while they are the ultimate arbiters of which clicks are billed, they don't share their data with customers.
"Search engines are no longer giving up log data," said Jessie Stricchiola, president of Alchemist Media, a search engine optimization and click fraud auditing firm.
"The search engines admit they don't have the crucial data points that are primarily site visitor behavior. They admit for a majority of advertisers they don't have that, since advertisers are not about to disclose their conversion data," she said. "Search engines on one hand are saying, `We'll protect you,' and on the other hand they're saying, `You can't expect us to really protect you because we don't have all the data.' "
Stricchiola said Google made a subtle but significant change in the wording on its Web site regarding click fraud around the second quarter of last year. The phrase changed from "we detect most invalid clicks and reach them before they reach your reports," to "our goal is to detect most invalid clicks." "That might not seem like a big difference, but it is a huge difference to advertisers," she said.
Stricchiola added she is working with Fair Isaac to study the scope of the click fraud problem. There are also a host of companies that have developed tools to track click fraud.
Representatives from both Yahoo! and Google said they support industry efforts to combat fraud. "We're very supportive of cross-industry efforts to attack this challenge," Yahoo!'s Slade said.
However, Stricchiola and Boser indicated current litigation against Google and rival Yahoo! exists because of a lack of cooperation on the part of the engines. "This issue really should be addressed by the industry themselves," Stricchiola said. "We wouldn't have this problem if things had been addressed from a more advertiser-centric perspective," she said.
Some say it's the little guys, small b-to-b companies, that are especially susceptible to click fraud, since they may not have the infrastructure to combat it.
Claudio Caballero, principal at Felisa Technologies, an IT consultancy, ran a limited search marketing campaign last month on Google, and Google's numbers were very different from his own. "Google reports show many more clicks on my ad than my Web logs have recorded," Caballero said. Whether the problem is error or fraud, Google indicated Caballero's keywords were clicked three times as much as his own records showed. He received a standard e-mail form letter from Google. Google subsequently told Caballero in an e-mail that not all clicks occurred on Google's main site. "They say that not all clicks show Google as the referrer or show the search term that was used," he said. The matter has not yet been resolved.
Gevity's Noah said that a woman she knows did keyword advertising on her own for her small online boutique business and ended up with a $10,000 bill for all the keywords.
"She didn't know some of the particulars about managing a budget" and tracking campaigns, Noah said. "Businesses that have the time, budget and expertise to devote to this hopefully can avoid some of these issues and challenges."