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Click Fraud Internet PPC Advertiser Risk #1
must read

 3:43 pm on Dec 30, 2005 (gmt 0)

One of the most powerful peices yet on click fruad ran this month on Wired [wired.com].

Pay-per-click advertising is big, big, big business. So are bogus hits on Internet ads. It's search giants against scam artists in an arms race that could crash the entire online economy.

Bill Gross, the man who invented PPC back in the late '90s when he presided over the startup incubator Idealab, has argued that, despite the cleverness of the various methods used to fight it, click fraud will continue to cast a shadow over PPC advertising. Ultimately, he believes, advertisers will switch to another model...



 4:04 pm on Dec 30, 2005 (gmt 0)

Unfortunately, when marketers move to a new ad model the fraudsters will find a way to exploit that as well. It's a cat & mouse game.


 4:07 pm on Dec 30, 2005 (gmt 0)

Personally I see everything moving more toward the affiliate model. 100% pay-per-conversion.



 4:14 pm on Dec 30, 2005 (gmt 0)

Fraud can be rampant in the affiliate model as well.

If your affiliate partner tells you that only 1% of your clicks actually resulted in sales, how do you know for sure it wasn't 5%?


 4:26 pm on Dec 30, 2005 (gmt 0)

I was reading this article (in the print mag) on a plane trip over Xmas.

The person sitting next to me on the plane noticed the article and asked if I'd ever tried advertising on the internet.

A nice conversation ensued about business advertising and online vs offline. It turns out the person was a small businessman who has read more about click fraud and internet advertising horror stories than actual success stories - hence, is very reluctant to actually try advertising on the web.

While this might seem like an isolated incident, it's probably my 3rd-4th conversation with a random person in the last 6 months that has gone roughly the same way.

Seems the horror stories (as usual with the press) are being seen - but the success stories are being buried. I only remember reading one success story from an offline source, and the numbers (something about steel contracting or some such) were so profitable the story came off that internet advertising was instant profit.

There is a very solid middle ground - just seems the media doesn't like to report this area - and a lot of extreme views of web advertising are being seen by the general public.


 4:51 pm on Dec 30, 2005 (gmt 0)

Personally I see everything moving more toward the affiliate model. 100% pay-per-conversion.

As the Yahoo rep mentioned in the article, that requires Yahoogle to learn things about your business that you don't necessarily want them to know. And they'll know it about your competitors, too.

Not going to happen, my friend.


 4:52 pm on Dec 30, 2005 (gmt 0)

When the internet started to become popular during the 90s, newspapers openly expressed their concern that they would lose advertisers to the internet. If they still feel that way (even though most newspapers have an online version now) then it's in their interest to emphasize click fraud.

I would expect that any educated businessman with a website will try PPC out and judge it by his own experience.

From the above-mentioned article:

"Which is why Cauff was infuriated when he discovered that up to "40 percent, maybe more" of the clicks on his keyword ads apparently came not from potential customers around the nation but from a single Internet address, one that belonged to a rival based in New York City."

Either the above example is very very old or fabricated. Surely search engines will spot the simplest form of click fraud: when a large portion of clicks come from the same IP.


 5:17 pm on Dec 30, 2005 (gmt 0)

I think the Wired article (in its usual style!) is exaggerating the extent of click fraud .I would guess it will be in the range of 10-15% …but the thing is most PPC advertisers calculate ROI on their spending (except the bigshot branding guys who are clueless about online advertising anyway!) …They adjust their bid according to the ROI and so one can say the clickfraud is already priced on the bid price in most areas!


 5:18 pm on Dec 30, 2005 (gmt 0)

No surprise that traditional media, a/k/a print media-TV-radio, has and will continue to lead with stories about PPC click fraud and the problems of online advertising.


 5:51 pm on Dec 30, 2005 (gmt 0)

Exaggeration is relative to the scope of one's own experience.

Many sectors experience high levels of click fraud. I'm certain all of you who are active PPC buyers have been subject to some level of fraudulent clicks, whether from a competitor (as noted, simple to detect), from affiliates looking to boost their revenue (tougher to detect, but possible) and/or from schemers testing their automated click fraud software (sometimes easy to see, sometimes hard).

If you don't know or haven't taken steps to find out how much fraud you are being subjected to, you should probably check it out.

The part of the article that struck me as the most important was the section that warns about sabatoging the whole system. What if the PPC system became unuseable overnight? What would your company do?

I'm used to reading the bad news, as I can't think of any media outlet that reports primarily good news, and I believe we should take a look at what we can do proactively now that we've been warned.


 6:07 pm on Dec 30, 2005 (gmt 0)

Do anyone here think with all this click fraud going around do you they will ever just stop the whole PPC system.


 6:12 pm on Dec 30, 2005 (gmt 0)

It is likely the case that pay-per-conversion will never be implemented by off-line businesses but I beg to differ with regards to on-line businesses.

If the money is there to be made, businesses will let Google/Yahoo see all they want. After all they already see more than most realize.

With regards to businesses saying you sold X when you actually sold 5X, that really doesn't matter. All that matters is how much you can get for the ad space. If publishers can make more with someone elses ad on their site they will. If you as an advertiser are screwing the people that publish your ad then you will inevitably loose your spot on the page. This of course assumes that publishers actually test and compare earnings. The idiots you can screw.

This already a proven system in almost every marketing medium. Why give page space to an ad that pays $5 CPM when another ad is giving $10 CPM?



 6:20 pm on Dec 30, 2005 (gmt 0)

Why pay for clicks? Use standard advertising. You want to be in the #1 spot? Fork over X amount of dollars each day. That would surely hurt the small mom and pops but not the biggies IMO.


 6:24 pm on Dec 30, 2005 (gmt 0)

From Wired:

"All you have to do to make some money is find a way to click the ad sent by Google or Yahoo! to your own Web page," says search marketing consultant Joseph Holcomb. "Click! - there's 10 bucks. Click! - there's 10 bucks. It goes on all the time."

I can't imagine search engines will send $10 ads to new sites. I'm sure they have some kind of TrustRank system that will analyze your data over a period of time and send the most expensive ads to the most trusted sites.

Search engines can get a pretty good impression of your traffic by looking at how you're doing on their own index, so exorbitant click rates on a low traffic site should ring an alarm bell or two. Only high traffic sites are likely to be able to push their click rate and make serious money on click fraud. If click fraud really gets out of hand then Google, for one, can make Analytics obligatory. Then they can statistically analyze your traffic.

LostOne said:

"Why pay for clicks? Use standard advertising. You want to be in the #1 spot? Fork over X amount of dollars each day. That would surely hurt the small mom and pops but not the biggies IMO.".

That's the kind of advertising that made the dotcom bubble burst.


 6:32 pm on Dec 30, 2005 (gmt 0)

Nothing goes away, it just gets devalued until the cost justifies the return.

That is why pay-per-conversion is such a good model.

Unfortunately, as was mentioned it has it's own fraud opportunities but they are balanced to the benefit of the advertiser.

Fraud #1- Bad advertisers screwing affiliates/publishers.

Fraud #2- Bad affiliates/publishers screwing other affiliates/publisher (and possibly the advertiser) by taking credit for conversions generated by someone else.

(Yes there are more...)

But, the main benefit is that an honest advertiser has nothing to worry about. They don't pay a thing unless there is an actual sale/conversion. So long as they don't set their payout higher than their profit margin they will make money.



 6:41 pm on Dec 30, 2005 (gmt 0)

Gopi is bang on. Most of us online advertisers already factor click fraud into our bid prices and ROI calculations. If you're not making positive ROI, you reduce your bids...easy as that. If after that you are still not making money, then and only then you may think about abandoning the PPC model. There's still HUGE money to be made doing PPC.


p.s. I think you'll find that most second tier PPC companies are plagued with click fraud more than the 2 biggies, Google and Overture.


 8:39 pm on Dec 30, 2005 (gmt 0)

I think it depends on the industry. We have no (or no detectable) click fraud, in our market, which is a niche based retail market.


 10:24 pm on Dec 30, 2005 (gmt 0)

Shame at least 2 of the biggest perps ( m*va and k*n**dle ) are amongst the sponsors of some events right here ..:(


 10:32 pm on Dec 30, 2005 (gmt 0)

We all know you can't stop click fraud. Google does too.

All they can hope to do is help advertisers increase their ROI in other ways (conversion tracking, etc.) and hope that at the end of the day the advertiser still makes a profit and thus will continue advertising via the PPC model. If this doesn't happen, PPC will slowly die out because I'm pretty darn sure click fraud will continue to rise.

There is nothing wrong with CPA - most advertisers only care about their bottom line and they will embrace CPA. Their heads aren't filled with "Google is evil" conspiracy theories.

There are a few problems with the CPA model though. For one, advertisers will be required to do more work - adding more code to their pages, etc. Less sophisticated advertisers might be unable to do this easily and efficiently. The bigger problem though is that Google will make a lot less money, so I wouldn't expect them to embrace a CPA model unless they absolutely had to.


 10:50 pm on Dec 30, 2005 (gmt 0)

"We all know you can't stop click fraud. Google does too."

That's what they said in the '90s about hacking web servers ("hackers will ALWAYS find security holes"..etc etc), but that has become harder and harder, until all security holes have been hacked and plugged.

Ditto for PPC.


 11:08 pm on Dec 30, 2005 (gmt 0)

until all security holes have been hacked and plugged

Dream on ...;)
Curiosity will always have it's place .. your cat and other cats and kittens know this to be true ..~¦)


 11:14 pm on Dec 30, 2005 (gmt 0)

I don't see how you can compare the two. How in the world are you going to stop the click fraudster who hides behind anonymous proxies, etc.? You can't. All they can do is try to identify "potentially fraudulent" clicks and not pay out on those clicks. Publishers aren't going to just sit there while this happens - they will find other ways to sell their ad space once their ecpms drop to a certain point. End of story.


 11:45 pm on Dec 30, 2005 (gmt 0)

As the owner of a small directory, I am well versed in the areas of fraud, not only coming from the engines but also like has been mentioned, in the affiliate department whether from the sponsor or the affiliate, it doesn't matter who is lying, but someone is almost always cheating.

The reason I know this is because most sites hardly get 10 thousand data requests / week, but look at statistics anywhere and suddenly they speak an entirely different language which requires wearing tall hipboots... Next come sponsor claims which require even taller hipboots, and last but not least come ALL the folks claiming they earn ten times the money on the Internet than they ever did in the real world, and with hardly an hour's work per day. So perhaps it's not entirely the engines who are at fault.

Lets take another look, I know ppc's tolerate (and incentivise) clicks to some extent.
This is nothing new, if you own a ppc engine, you hardly have a choice in the matter.

Put yourself in their shoes:
You own a search engine. It is a ppc engine, and you get a TON of people sign up and bid on terms, now what?
First you need to satisfy the demands of customers HUNGRY for traffic, so hungry that some would like the ability of you being able to deliver upwards of 500 clicks / hour, and below 4 cents / click would be nice.
In addition, most of your advertisers are folks who can not advertise anywhere else on the Internet, most of them come from the viagra / casino / get-rich-now line of products, or something along those same lines.

So your job isn't to provide traffic to Walmart.com, if your job were that easy, then everybody would have a ppc engine. Instead, your job is to drive visitors to certain online genitalia enlargement sites you can't even be sure exists as a store in the real world... And if you're not sure, I guarantee neither is the visitor.

What would you do?
How would you provide tens of thousands of daily clicks to sites and products that, as a rule, have a very low interest tolerance to begin with, and a very high competition margin next. If anything, I place the blame square on humanity as a whole, look on the Internet and every place you look, it would APPEAR as IF scamming was the only thing anyone does on the Internet! Slews of garbage sites selling us every pos under the sky, it makes me as sick as it does you, but to the newcomer that is all they see! Perhaps a general cleaning up of the entire affair would pretty up the picture, but somehow I don't see this happening in my lifetime.

At the same rate, it promotes natural selection, for those of us familiar with the term, there suddenly comes a fair amount of acceptance and tolerance with this.

Not to say I take sides with fraud (I don't), but I have a pay-get-listed NO-questions-asked thing myself, sometimes it's the only way to earn a profit. The traffic suffers hard from this but paying webmasters are not easily put off. Money talks, and that's the end of the story, they want traffic NOW, can you deliver?

For those who want quality, I suppose Overture / Adwords is the route to go, lets not forget the cost / click in all of this.

[edited by: topsites at 12:04 am (utc) on Dec. 31, 2005]


 11:53 pm on Dec 30, 2005 (gmt 0)

The server software analogy doesn't really work. All of the interaction with the outside world that an operating system does can be controlled.

The same is not true of a PPC affiliate program, nor can it be without major changes to the internet.

I have been working on the anti-fraud side of this particular arms race for years now and there are a few things I can say without a doubt...

The problem as it currently exists is greatly exaggerated. Aside from a few markets the fraud rates are not as high as the numbers that you commonly see printed. The Wired author made a good point when he mentioned that a lot of people involved have a clear interest in scare tactics.

Speaking of the big two here. The fraud rates at many of the smaller PPC players are pretty high.

At the same time few people seem to understand how hard it is to stop (or even detect) well implemented click fraud. This is especially true of automated methods which are essentially the ONLY way to fight click fraud. Humans can still audit ratios, stats and flagged suspicious activity but it's not economically possible to hire enough of them to review full logs anymore.

It's possible to fool all of the current anti-fraud systems, including those that the big two are using. In fact, some of the smaller PPCs have better (or more aggressive) filtering out of necessity. The reason the numbers are as low as they are now is that most of the people behind the fraud are lazy and stupid.

Fortunately the race is far from over, there is still a long way to go before we run out of new strategies to reduce click fraud.

The prediction by some that click fraud is going to kill PPC is a long way from coming true. Fraud isn't going to go away but it doesn't have to. As long as it can be kept below a manageable limit it will continue to be written off as a business expense in exactly the same way that fraud is assumed and compensated for in so many other industries.

Lets not forget that PPC click fraud has been around since the day after GoTo.com launched their bid for rank service 8 years ago.


 11:59 pm on Dec 30, 2005 (gmt 0)

As Davewray points out, PPC advertisers can track their ROI, so why get worked up over theoretical risks?

Fact is, there's waste in all forms of advertising. If you advertise on TV or the radio, some of your spots will play to an empty room. If you buy ads in magazines or newspapers, there's no guarantee that every one of the publication's readers will see your ad. If you run direct-mail campaigns, you can be sure that a lot of your mail will be tossed directly into the wastebasket or recycling bin.

Affiliate programs will never be a substitute for paid advertising for many reasons, most notably the difficulty of getting exposure. (It's a lot easier to buy a flight of ads than it is to get a successful publisher to accept a new affiliate partner.)

If advertisers are nervous about PPC campaigns, then they can follow tradition and buy CPM ads--preferably from sites or ad networks that reach appropriate audiences. (For what it's worth, the travel advertising network that I use on my editorial content site is having great success in attracting advertisers. I think we'll see a lot of growth among specialized ad networks that have relationships with media buyers and are selective about the publishers they work with. There's more to targeted advertising than just matching ads to keywords.)


 11:59 pm on Dec 30, 2005 (gmt 0)

As a casual AdWords advertiser, my perception is that Google has gotten better at controlling the fraud so click fraud is on the decrease with AdWords, not an increase. Sure I'd like to have a better ROI than I'm currently getting, but it's already pretty good. It's a dead story for G advertisers, as we pretty much have the system figured out and if it wasn't profitable, we wouldn't be doing it. For the 2nd and 3rd tier, that's where the story is.


 1:40 am on Dec 31, 2005 (gmt 0)

You really have to watch when you are doing PPC, but I will agree that Google and Yahoo/Overture are pretty good as far as fraud goes. You *really* have to be carefull with the 2nd/3rd tier PPC engines though. Some of them are complete BS with the amount of fraudulent clicks you can get.


 1:43 am on Dec 31, 2005 (gmt 0)

Lets not forget that PPC click fraud has been around since the day after GoTo.com launched their bid for rank service 8 years ago.

Yeah but clicks for popular terms were 10 cents back then, not $5 to $50 like they are now. It's a whole different ballgame now ...

Bid prices will continue to rise. They will continue to rise forever, as long as the biggest and most well-funded advertisers are at least able to breakeven. That's just how new advertising mediums mature.

As bid prices continue to rise, so will click fraud. And despite what anyone says to the contrary, you can NOT stop well implemented click fraud. This is a fact. Another fact is that the fraudsters will stop being "lazy" if they have to. The only reason they are lazy now is because it's so darn easy to "earn" free money right now ...


 3:36 am on Dec 31, 2005 (gmt 0)

The point is that throughout those 8 years there has been an ongoing war between PPC search providers and people trying to exploit the system. This isn't an even remotely new issue despite new media coverage.

It's true that there are ways of committing click fraud that nothing out there right now is going to catch. I can think of a variety of automated fraud methods that could make virtually endless money without ever raising a flag in current systems.

To my knowledge none of them are being used on a large scale so far, fortunately.

On the other side, I can think of various ways to both identify and eliminate them so I disagree that it's impossible to catch well implemented click fraud.

That's exactly like saying it's possible to make an unstoppable bullet or unpiercable armor.


 4:17 am on Dec 31, 2005 (gmt 0)

Periodically I got money back from google for clicks they considered suspicious. I wonder how many of the ones I was billed for were fraud. I turned off adwords etc. a few months back and have not seen a difference in sales , nor traffic. This came after a series of clicks i traced myself that seemsed suspicous. I found sites cloaking one link to visitors and at the back end was an adword. That was not the only reason I stopped.

Im putting the money in my back pocket at the moment , but next year will move into traditional media to experiment with the spare cash.

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