Stemming the click-fraud tide: Ramifications for economic growth

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While bailouts and stimulus plans have largely dominated the economic headlines in early 2009, another recently released batch of quarterly click-fraud data underscores what many of us in the industry have been saying for quite a while: The severity of the threat click fraud poses to online advertisers, and by extension the broader economic recovery, is growing daily.

The picture painted by the Click Fraud Index, the industry’s barometer of click-fraud activity compiled by Click Forensics, is not a pretty one. The overall industry average click-fraud rate for the fourth quarter of 2008 was up to a record high 17.1%, while fraud on the cost-per-click (CPC) advertisements used by many small-budget Internet advertisers on such content sites as Google and Yahoo increased again as well.

Perhaps most alarming, click fraud perpetrated by “botnets”—groups of computers compromised by worms and other computer viruses—swelled for an eighth straight quarter, and now accounts for more than 30% of all click fraud, another record high.

We are losing the battle against click fraud at a most inopportune time, and the economic expansion we seek as a nation will be that much harder to realize without a broad, concerted effort to fight back.

Whatever the numbers may ultimately be, click fraud has evolved into much more than just a pesky nuisance. Simply put, it equates to millions of dollars in lost revenue for advertisers and marketers at a time when many of them are scrambling simply to survive. As click fraud continues to expand, those who are relying on Internet advertising to grow are finding their bottom lines severely diminished as a result.

As the data indicate, botnets are faster and smarter than ever before, hitting from different IP addresses at varying times and evading the filters designed to stop them. Link farms—groups of people hired exclusively to conduct fraudulent clicking—also are back in full force. As a result, online advertisers will be forced to allocate even more budgetary dollars to combating the problem this year. And it doesn’t take a seasoned economist to understand the domino effect such actions will have on consumers and spending.

Absent any outside or government intervention, the onus for combating click fraud still lies with advertisers themselves. A diligent and concentrated approach is crucial, one that carefully monitors traffic and analyzes click logs on a regular basis to spot the practices and trends normally employed by botnets.

Advertisers must maintain strong relationships with their network providers as well, keeping them abreast of possible fraud with periodic reports and requests for investigations into suspicious activity. Finally, some may benefit from diversifying their advertising budgets with the incorporation of CPA (cost-per-acquisition) and monthly flat-rate models that can be just as effective while offering less risk.

Though these steps will likely result in higher short-term costs and a greater commitment of time, the continued high rate of click fraud leaves no real alternative. Our economic future—and the viability of our status as a world leader in technology and innovation—depends on strong, swift action.

Doron Simovitch is CEO and co-founder of the shopping search engine, which offers flat monthly fees for product listings rather than cost-for-click (CFC) pricing. He can be reached at [email protected]

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