Executive Fraud Blog

Click Forensics reports that click fraud is on the rise in Q1 2008 over the prior year period. At 16.3% in Q1 2008 it is higher than the first quarter 2007 click fraud rate of 14.8%. Even more alarming, Click Forensics reports

[t]he fraud rate on third-party sites, such as ads placed through AdSense on non-Google websites, also rose from 21.9% in Q1 2007 to 27.8% in the first quarter of 2008.

Following Google's release of their click fraud report and the subsequent criticism of its accuracy, Yahoo has responded in their own way bringing in Reggie Davis to deter click fraud. His main focuses will be ensuring quality in clicks, traffic, and network placement. To address the largest concern for advertisers, Yahoo is looking to allow blocking traffic from certain areas that are known for having the highest levels of click fraud. This appears to be a statement here that they intend to respond to the concerns of their advertisers but they have also still not subjected themselves to a study to determine the prevalance of click fraud to date either. It will be interesting to see how this all pans out for their ad program.

Google has officially released the extent of the click fraud through their Adsense program. Based on prior estimates, the actual click fraud is less than expected with only 10% of clicks being invalid. Although they have admitted that click fraud is an issue they do not seem to agree with the seriousness of the problem despite offering a total loss projection of $100 million a year.

Google has focused their efforts to ensure that click fraud numbers do not continue to rise. They have implimented a system that utilizes real time filters, reactive investigations, and offline analysis. Despite this system, rogue software designers constantly fight back with new unique ways of making clicks to appear authentic.

Third party fraud investigators still see the problem as significant and offer services that will audit the clicks from Adsense. Google has been critical of the reliability of these services but its obvious they would have a motive to feel that way. To Google's credit, they compensate advertisers for any amounts discovered to be click fraud but the questions remain are they detecting it all and are they reporting everything they detect?

Click fraud is any form of false internet traffic to websites that pay per click for advertising. Since these advertising programs began, savy computer programmers have been designing programs that automate the actual click fraud. Marketing executives have estimated that click fraud represents at least 20% of the fees that are paid by the companies paying for internet advertising.

Last year that was a man from California that tried to blackmail Google with the threat of releasing open source software that would allow any user to scam Google by fraudulently clicking the advertisements. The US Attorney's Office is now ready to press charges against these fraud schemes and in the near future there will surely be some scammers that are made an example.

Other than automated clicking there have been two other methods of click fraud that have come into the scene in the last few years. With the abundance of cheap labor in China and India there are companies that solely click advertisements for their clients in order to generate advertising revenue. The other method of click fraud that is now common is attacking a competitor by clicking their links and draining their marketing budget. These tactics are on the rise as is the value of creating a solution.

The average cost per click is now around $0.45 and the total industry has sales of approximately $3 billion. Currently the main protection for these marketers are using IP address tracking but there is also software called IP spoofers that will cycle through different IP addresses. It will be interesting to see how this battle for the most innovative technology will resolve.