Media Analysis: Click fraud rears its head

Although there is no comparable research on the UK's £750m search market, those involved in the sector contend that it isn't a major problem - yet.

Click fraud - or bogus clicks on search links or advertising - is generated either by infected computer programmes or by hired operators, who are sometimes even outsourced to 'click-shops' in India, Russia or South Africa. The activity is funded by companies wanting to waste their rivals' online ad budgets.

In some cases, website owners have been know to engage in click fraud to inflate their advertising revenue, as brand owners often pay them for each click on a search-engine link or banner ad.

Supporters of search marketing say click fraud is easily detectable, and both media owners and agencies can track it by monitoring their advertising campaign web logs and websites.

Amanda Jones, head of search at digital agency i-level, says: 'The majority of brands using paid-for search are looking for a tangible return - orders, requests and so forth. If you see a spike in clicks going up when you are not used to seeing user activity - often in the middle of the night or weekends, say - and if you don't see the same spike in your post-click analysis, then you know that something is wrong.'

Major online media owners in the UK, such as Google, Yahoo! and MSN, are on the trail of the cyber fraudsters. Google UK recently said, in a written statement: 'We have sophisticated technology that detects click fraud. We have many ways to look at the data to help us surface abuses quickly. While we cannot promise that we will be able to prevent all instances of click fraud, we are pleased with the results to date. We take the issue very seriously. We have devoted significant resources to managing the problem, believe we manage it well and believe it is a small problem.'

Richard Firminger, regional sales director for northern Europe for Yahoo!, says that though click fraud in the UK is relatively small, it is a problem Yahoo! is treating seriously. We have been doing lots about it for a long time,' he says. 'What is a good click and what is not a good click is always difficult to identity. What we look for are certain kinds of behaviour - repetitive clicks from the same IP address, for example, as we often work with advertisers on their web logs.'

Yahoo!, MSN and Google all reimburse advertisers with credits or discounts for clicks that they identify as fraudulent. Clients can query click patterns with media owners within 60 days of them occurring. But none of the media companies are willing to discuss the scale of the problem.

Jones says that in her five years of search marketing at i-level, there have been fewer than a dozen cases of click fraud, a view backed by Jim Brigden, managing director at The Search Works, who says: 'From our perspective, 90% of clicks are genuine. Last year, we spent £25m on search in the UK and we got back £250,000 in credits. If you compare that to the waste in direct mail or print advertising, that is nothing.'

Media owners' responsibility
It could be argued that it is not in the interest of media owners to fix the problem, as it is their pockets that money goes into, whether or not the clicks are genuine. But the website owners disagree, saying that heightened awareness on the part of marketers and agencies mean it is harder to sweep fraud under the carpet. 'Advertiser experience is very important and anything that diverts away from what we deliver will always be an issue we take seriously,' says Firminger.

Rhys Williams, a founding partner at online marketing agency agenda21, adds that media owners need to address the problem, as if they do not, advertisers might drift away from the search medium. 'People are becoming a lot smarter about putting their money into search. If they are not seeing a return from money they are investing, then they will move it elsewhere,' he says.

As Williams notes, just because click fraud is not yet a major problem in the UK, it does not mean this will always be the case. 'I still believe that we need to get this issue on the table and debate it without scaremongering and without affecting the market,' he says. 'It is far better to deal with it now rather than 12 months down the line when everyone has decided to file court cases.'

Such legal action is already taking place in the US. Last month, Yahoo! announced that it had reached a settlement with Checkmate Strategic Group, which launched a class-action click-fraud lawsuit against the website in June 2005. As part of the agreement, Yahoo! said it would provide more clarity about its click-protection efforts and provide more transparency to advertisers.

Ultimately, if client distrust of the pay-per-click model becomes widespread, the payment structure will have to change to one based on clicks resulting in a sale or a qualified sales lead.

DATA FILE - ONLINE CLICK FRAUD
$800m was wasted by US advertisers on fraudulent clicks last year

16 % of US advertisers ditch pay-per-click campaigns due to suspected click fraud

$90mV was paid out by Google in advertising credits earlier this year to settle one click-fraud case

Source: Outsell

Online fraud in the US is either more advanced or better documented than on this side of the Atlantic.

A report by Outsell, which questioned 407 advertisers responsible for more than $1bn in adspend a year, estimated that internet advertisers in the US wasted $800m on fraudulent clicks last year.

'Google, Yahoo! and MSN are stonewalling on click fraud, to their own and others' detriment,' says the report. It claims that 27% of the advertisers surveyed have reduced their pay-per-click campaigns as a result of fraud, while 16% have axed them.

Chuck Richard, Outsell's vice-president and lead analyst, says: 'The study covered exclusively North American advertisers, but it is of equal concern in the UK.'

Media owners have also been paying a price. Google recently announced that it had to pay up to $90m ($49m) in advertising credits as part of a court settlement involving click fraud.