Pay-per-click is the fastest-growing segment of all advertising reports Interactive Advertising and according to many marketing experts, is poised to become the single most important form of marketing in many countries. But, is click fraud set to bring it plummeting down?

The ramifications of click fraud are already starting to resonate throughout the search engine industry. By splitting revenue with the sites that host the ads, search engines have become, in effect, the Internet's venture capitalists, funding the content that attracts people to the computer screen. But, unlike the VCs who backed the boom-era Internet, search engines now provide revenue to thousands of wildly diverse sites at little up-front cost to them. PPC advertising is one of the few income sources available to bloggers, for instance. If rampant click fraud overwhelms the system, it will put a muzzle on the Internet. The figures are already scary: As much as 70% of online advertising spending is wasted because of click fraud. In 2004, at least US$500 million in pay-per-click online advertising expenditure was wasted through click fraud. In 2008, the estimated cost of click fraud to online advertisers was estimated to be in excess of US$1.6 billion. Corrupt affiliates of ad networks such as Yahoo! and Google account for 85% of all click fraud.

But what exactly is click fraud?

David Perry, global director of education, Trend Micro, Inc.,explains, “Click fraud occurs in pay per click online advertising when a person, automated script or computer program imitates a legitimate user of a web browser clicking on an ad for the purpose of generating a charge per click, without having any actual interest in the target of the ad’s link.”

According to Perry,  the most common method of click fraud is through the use of “bots” – online robots programmed to click on advertisers’ links that are displayed on Web sites or listed in search queries – and botnets – a collection of controlled programs to do whatever the ‘herder’ wants. For example, he notes, botnets can raise the popularity of one product over another. He adds that an average of 50% of machines in an ISP’s network, are infected by botnets.

Click fraud is also perpetrated via the human route for example, by employing low-cost workers who are hired in China, India and in other countries to click on text links and other ads. According to a report in the India Times, residents are being hired to click paid links from home, with the hopes of making between US$100 to US$200 per month.

Another form of click fraud occurs when employees of companies click on rivals' ads to deplete their marketing budgets and skew search results.

Unfortunately, human operations can be more difficult to detect because a wide network of people can click on ads from different computers across many regions, without a steady pattern.

“Click fraud is a good example of how crime is moving away from email to the Internet. Click fraud is what we call a web-based threat and as the click through industry evolves, so will click fraud, mainly because it offers a very high profit margin. Click frauds’ rise goes hand in hand with the rise of cybercrime and Asia is listed as the new growth region for cybercrime. Although the extent of click fraud is impossible to measure with any certainty, its persistence has exposed a fundamental weakness in the promising business of Internet search marketing,” elaborates Perry.

He points out that a lot of money made of the Internet is for advertising, and he adds that this is the most honest way of advertising. “So many people actually look at the ads unlike other mediums such as television, and what’s even better is that the click rate of the ads can be monitored. The downside is - just how many of the clicks are real? There are not very good methodologies to see how honest the clicks really are.”

Perry goes on to say that many people are producing fraudulent clicks simply because there’s real money and profit in it. Affiliate marketing comes in, in a big way here too, he adds, as many people set of illicit affiliate marketing domains to get the clicks and make their money. In addition, bigger criminals have been accused of artificially raising the price of company stocks (stock manipulation) and stock fraud is set to become a huge problem.
“There is definitely an organized crime element in click fraud. It is not perpetrated by amateurs alone. Click fraud is attractive because of its ability to gain large amounts of money/profit. However, the stealing of important data is also a big problem. Right now, click fraud is low risk, high gain,” says Perry.

Commenting on click fraud and if legislation can help relieve the situation in any way, Perry states, “Click fraud is not a new phenomenon – it has been in the news for the past 4 years and only lately has legal action started to take place. Legislation will only help if it is good legislation and fairly enforced.

In addition, technological solutions are coming into place, but Perry admits that there are very few solutions that are presently available to combat click fraud and they are not very effective.

He adds that everybody will have to band together to combat click fraud – including the ISPs, search engines, advertisers and the users. The future of Internet Security, according to Perry, depends on:

  • The actual systems we use have to be more secure (e.g. browsers, applications, etc.)
  • Security products have to get better. In addition, Perry feels that substantial portions of what we call the Internet will have to be rebuilt with security in mind in order to make it more secure for everybody
  • User education – users have to be made aware of the problem
  • The role of law. Currently, what’s happening is the haphazard prosecution of cyber criminals.

There is no doubt that click fraud has become pervasive and will continue to do so until a good solution is found, and everybody works together to ensure it is implemented. Until then search engines like Google and Yahoo!, PPC firms and advertisers, and maybe even users, will be embroiled in a game of cat and mouse with its perpetrators. Even as the search engines beef up their defenses, click scammers are becoming more sophisticated, increasingly deploying complex software to disguise the origins of clicks.

For now, many search companies maintain that the click fraud problem on their networks is under control. Unfortunately, the major burden still rests squarely on an advertiser's shoulders to identify click fraud, build a legitimate case, and demand a refund where a refund is due. So if you are in PPC, audit your logs for suspicious activity, and contact your search engine if you suspect any foul play at all, After all, every click counts.

By Shanti Anne Morais