A Head Above the Clickfraud Tide

When search Goliath Google settled a click-fraud suit with Lane’s Gifts last month, the search industry’s collective eyebrows went up. Maybe there was a problem.

Except no one knows how bad the problem is. The industry whisper number ranges from 10 percent to 30 percent of all clicks. And search providers insist they have mechanisms to keep it under control. But you can’t keep something under control if you can’t define it. The industry first needs to know what constitutes a fraudulent click and what constitutes an unqualified click.

A so-called unqualified click could be made by a person who either clicked on the ad by mistake or clicked expecting a different type of site.

Fraudulent clicks are generated by human hand or by bots programmed to hit competitors’ sites over and over. The result is a decrease in the retailer’s return on investment.

Some tip-offs to bad clicks are repeated clicks from the same IP address; clicks within the site that are random; a pattern of precisely timed clicks, such as several page views lasting exactly two seconds each; and clicks coming from countries known for fraud.

Search providers admit that some scammers click on ads, but insist the practice doesn’t negate the effectiveness of search marketing.

The Advertiser Eye

While search providers use a mixture of automated processes and human analysis to eliminate fraudulent traffic from their networks, it’s up to advertisers to report what they believe are fraudulent clicks.

“You can’t rely on search providers to be proactive about returning money,” Beal said. “I know they say they constantly look, but with billions of dollars a year flowing through their systems, it’s like relying on the IRS to find you a refund.”

Kevin Ryan, principal of search marketing firm Kinetic Results, agreed.

“I don’t think the onus should be completely on the search provider. There have to be architectures implemented to put our arms around the problem. Simply blaming Yahoo or Google is not the answer.”

Ryan said he’s never had a problem getting a refund for his clients because of the tools Kinetics uses to analyze traffic.

But he said search providers, advertisers and third-party traffic-analytics vendors need to agree on what constitutes a fraudulent click, a statement echoed by many others in the industry.

“It’s difficult to determine the intention behind a click,” said Yahoo spokeswoman Gaude Paez. “How does one determine whether a click is fraudulent versus unqualified?”

The Business of Click Fraud

Search engines charge advertisers every time someone clicks on an ad.

But sometimes rivals click on merchants’ ads to drive up their costs. In other cases, affiliate marketers solicit clicks on the links they publish to merchants’ sites in order to make more money.

Online retailer Lane’s Gifts and Collectibles sued Google in February 2005, claiming that the search giant collected fees for clicks that were not actually generated by consumers planning to shop at Lane’s site.

Lane’s also sued Yahoo, AOL, Netscape, Lycos, Ask Jeeves, Overture Services (now part of Yahoo), Time Warner (as part of AOL), Buena Vista Internet Group (operator of Go.com) and LookSmart.

The settlement between Lane’s Gifts and Google, which has yet to be approved by a judge, will presumably cover AOL and Ask Jeeves, which distributes Google’s ads.

The current model requires advertisers to notify Google within 60 days of receiving clicks they believed were fraudulent. Under the terms of the proposed settlement, Google will let all advertisers claim fraudulent clicks, no matter how long ago they occurred.

But Google won’t be shelling out any cash. Instead, the company said, it will reimburse advertisers with credits to buy more advertising, and only up to a total of $90 million, which will include attorneys fees.

Andy Beal, CEO of search marketing agency Fortune Interactive, said the settlement is a clear win for Google.

“Google has hit a home run with this,” Beal said. “Not only is the amount small, but it’s not even a refund; it’s a credit toward future advertising in the network.”

In other words, it’s the same deal advertisers claiming click fraud get anyway, except that the 60-day protest rule has been waived.

Lane’s Gifts referred queries to its attorney, who didn’t respond to multiple requests for comment. Nor was Google available for comment.

“It’s peanuts compared to the goodwill,” Beal said. “But it does set some precedent going forward.” He thought the search providers might be afraid of more suits.

Paez would say only, “We stand firmly by our proprietary click-protection system and look forward to defending our position.”

Meanwhile, Google faces a similar suit filed in June 2005 by Click Defense; the lead plaintiff in the class action now is AIT.

The Fraud in Clicking

Another problem is that fraudsters keep getting smarter, and their crooked technology keeps getting more sophisticated.

“We’re pretty aggressive about looking for bots, but it’s obviously harder to detect if [the click rate] is inconsistent,” said Bill Flitter, CEO of RSS ad network Pheedo, who added that it’s up to the ad network to stop click fraud.

“The people serving ads have to look for clicks; the publisher is not in that stream,” he said.

Because RSS ads are relatively new, Flitter said that click fraud has not been a big problem, but he expects more fraud as the sector matures.

He’s counting on analytics built into Pheedo’s ad-serving platform to stem the tide.

Kinetic’s Ryan said he’s seen some scary new scams, such as a toolbar that clicks on an ad, goes into the site, places an item in the shopping cart and then abandons the cart.

This is behavior that would be very hard to detect as fraudulent because it so closely mirrors human behavior.

Next Page: A Way Around The Fraud

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A Way Around The Fraud

One company has admitted its click-fraud role, and its CEO says the company is better for it.

At the beginning of 2005, LookSmart CEO Dave Hills realized that the traffic the search provider sent to advertisers wasn’t converting.

People clicked on the search ads, but when they reached the site, they failed to buy or perform other desired actions.

“I realized we had problem with the conversion of traffic,” Hills said. “Some was just low conversions; others were fraudulent in nature. I told analysts, ‘I have a lot of traffic I need to remove from the network.'”

In some cases, LookSmart removed publishers from its advertising network; in others, it worked with the publishers to help them understand how they might be enabling click fraud by affiliates.

“Being open allowed us to move through it really quickly,” Hills said. But the process cut that year’s revenue in half.

Revenue from clicks isn’t the whole story, however.

Hills said that after the weeding process was completed in mid-July, LookSmart’s cost per click (CPC) began to climb. By year’s end, he said, the overall CPC was up two cents, showing that the traffic LookSmart was sending to advertisers’ sites was more valuable to them.

Hill said that the cooperation of advertisers is key to combating click fraud. While some preferred to sit out the cleanup process, he said, others helped by sharing their own traffic and conversion analysis.

“One reason we chose to be so open was I wanted to make sure that both the advertiser and publisher community understood what we were doing,” he said.

LookSmart still is in litigation with Lane’s Gifts, and Hills wouldn’t comment on the suit or Google’s settlement.

Comparison shopping search engine Sortprice.com took a different approach to combating click fraud: It ditched the model. Last month it announced a flat-rate model for advertisers.

“Clicking on pay-per-click advertisements with no chance of a conversion produces no revenue and drives up the cost of business among advertisers,” said Sortprice.com CEO Doron Simovitch in a statement.

“The goal at the end of the day is to ensure increased traffic and sales and not to make them a target for click fraud.”

Click Forensics wants to apply the spam-fighting tactics used by ISPs to the click fraud problem.

The new company, a spin-off of Web analytics vendor Optimal IQ, launched the Clickfraud Network. It hopes to bring together advertisers, agencies and search providers to identify patterns of fraud.

Advertisers can feed the network up to 100,000 clicks and 50 terms at no charge; Click Forensics analyzes the traffic using a variety of attributes and then provides the advertiser with a report scoring the traffic for the likelihood of fraud.

More important, it aggregates the patterns and information to be used in refining its rating engine: The more examples it has, the better it can identify bad clicks. It plans to publish weekly reports on click fraud threat levels.

“If the search providers get through this and are willing to work to develop standards, it will mitigate a lot of concerns going forward,” said Click Forensics President Tom Cuthbert.

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