What Is Click Fraud?... and
how will it affect me?By: Jeff Howes - TrafficSentry.com
When I ask our
clients, all of whom are online advertisers and search marketers,
whether they are concerned with click fraud, surprisingly
many will answer “We know it exists but we just consider that as part
of the cost of doing business…”.
Let’s consider this statement. For many online merchants, search
engine advertising represents 50% or more of their entire monthly
expenses. For example, a small business generating $60,000 a month in
online sales might spend as much as $10,000 to $20,000 on keyword
advertising without thinking twice. After all, it’s what’s driving the
sales. But if I were to ask that same client “Would you be concerned
if someone were entering your office every single night and taking
$150 out of the cash drawer?”, or “defrauding your credit card account
for thousands of dollars each month?”…. Now, would that be considered
a cost of doing business?
There are a few main
reasons that advertisers are willing to accept this problem:
They are not
aware of the scope. An average marketer can throw away from 15% to
as much as 70% of their ad budget, amounting to hundreds or
thousands of dollars each month.
What they really
mean is that “I don’t have time to deal with this now and keyword
advertising is still cost effective despite the problem”. They
might be aware that uncovering and proving invalid clicks can be a
time consuming process, or they have no idea how to do this.
They are under
the assumption that nothing can be done about it, so if you need
to be on the search engines, you have to live with it.
This logic was fine, two or three years ago when invalid clicks
represented a much smaller percentage of an advertiser’s monthly bill.
In recent months, however, the same marketers are scratching their
heads and thinking to themselves “Gee, the results from my search
campaigns keep declining, while at the same time, keyword prices are
higher than ever…”.
With the problem of invalid clicks ballooning over a relatively short
period of time, many marketers are assuming that most of the decline
in performance is the result of other factors, like increased
competition, saturation, frequency, and normal business cycles. While
all of these do play a role in performance changes, most advertisers
may underestimate the scope of the largest single factor affecting
their PPC performance.
I have been performing click traffic audits for clients and my own
businesses since 1998. What many people don’t realize is that this is
not a new problem at all; it’s a rebirth of a problem that actually
peaked back in 2000 and then went away for a while, while internet
advertising on mid-to-low tier sites moved from the CPC
(Cost-per-click) to CPM (Cost per 1000 ad views) and CPA (Cost per
Action). As founder and CIO of a CPC based ad network, launched in
1998, I witnessed the most sophisticated click fraud schemes I have
ever seen in 1999-2000, dwarfing the complexity of today’s new robot
and botnet systems, and effective enough to elude the current measures
taken by the search engines to detect suspicious activity.
In 2001, Commission Junction and other affiliate networks quietly
phased out all CPC pricing in favor of CPA, citing other reasons, such
as decreased advertiser demand for CPC, but not disclosing that one of
the main reasons was the epidemic of click fraud that had become
impossible for them to control.
At the same time, ad networks (serving primarily graphical image ads)
moved to impression based campaigns (CPM). So the decline of click fraud
was in direct relation to the decline of PPC advertising. Also at this
same time, even Google was only offering CPM based ad positions, at
the top of their search results.
Tips to instantly reduce your exposure to click
Our recent studies have indicated a direct relationship between
the average price-per-click and the ratio of invalid clicks
vs. high quality clicks. The higher the price paid per click, the
higher the percentage of invalid clicks. One of several reasons
for this is that the higher number of clicks required to profit at
a low CPC is much easier to detect than the low number of clicks
needed when the rate is high. Another possible problem associated
with high CPC is that competitors can deplete your ad budget which
much less effort. Unfortunately, many advertisers have no choice
but to pay high CPC if they want traffic to their campaign. We do
not recommend reducing bids or ended high priced keywords,
however, it is essential to realize the increased risk and
allocate your scrutiny of paid traffic relative to the price you
are paying per click.
Risk increases in direct relation to the number of affiliate
sites you are running on through a particular ad program. The
ratio of invalid clicks is significantly greater on search
“networks” as compared to the search engine itself, and on content
“networks” as opposed to individual content sites. For this
reason, if a campaigns run on both the search engine itself and
search traffic from affiliated sites, attention needs to be paid
to the percentage of traffic derived the affiliates as
compared to direct search on the search engine.
Risk increases proportionate to the quality of the network’s
affiliate sites. If you are studying your referring pages and
are finding a large number of pages with little or no content
other than the paid listings, this traffic should be more closely
analyzed. The same applies to unprofessionally designed pages,
pages that redirect to another page or refresh automatically,
pages that open invisible or blank windows, pages with
controversial content, pages with keyword spam, and pages that
seem to be of little relevance to your campaign or keywords. If
you do not know what pages your traffic is coming from, it’s time
to start using a good tracking software or service, which will
give tons of information on your traffic that the search engines
and networks do not provide in their reports.
Unfortunately, risk increases significantly with traffic from
certain geographic locations. If you are running your
campaigns without geographic targeting, or targeting one of these
regions, additional precautions should be taken to monitor this
traffic. We have had some clients completely block their
(otherwise global) campaigns from entire countries for the sole
reason that the majority of traffic they were receiving from these
countries was found to be invalid. (Note: As many international
affiliate fraudsters become more sophisticated, they are
developing methods to hide behind US proxy servers and use US
based slave computers.)
Record, and Compare
your traffic with the clicks you are being billed for. High
quality click tracking and auditing services can cost as little as
one penny per click and save you hundreds or thousands of wasted
ad dollars every month.
Then, in 2002, with
the overhaul of Google’s AdWords program to what we know today,
PPC was reborn. While advertisers were reluctant to pay for
impressions of text links ads (which offer little to no
branding value), direct marketers were eager to pay only for
clicks, and only when a prospective customer was searching for
their keywords. This was the most effective (in terms of direct
response) form of online advertising ever; hence, its mass
popularity. Over the past year it has become so popular in fact;
that the same affiliate networks who vacated the CPC model years
ago have recently announced a return to CPC, and phasing out of
their CPA programs.
Unfortunately, this new frenzy of spending on PPC eventually woke
up the old, dormant click fraudsters as well as the new
opportunists that appear wherever there is money to be taken.
Additionally, new types of click fraud emerged as otherwise
legitimate businesses discovered they could quickly deplete a
competitor’s ad budget by repeated clicking on the PPC links.
There are several other varieties of click fraud, as well as other
types of inadvertent invalid clicks that also waste advertiser’s
money, but these are beyond the scope of this article, which is
focused on deliberate affiliate fraud, as a means of directly
profiting from PPC advertising with no intention of doing business
with the advertiser.
In response to the growing scale and increased awareness of the
problem, a cottage industry of click auditing services and click
fraud prevention software was born. While the search engines and
ad networks increased their in-house measures to prevent and
discount invalid clicks, growing distrust and an apparent conflict
of interest has more and more advertisers seeking an unbiased,
third party opinion, and one that is backed up by evidence not
provided in the ad networks’ reports.
About the Author
Jeff Howes is
founder and CEO of IAT, Inc. (Internet Advertising Technology), and
co-developer of TrafficSentry.com, and its click tracking software
product ClickHawk™. Prior to work on the TrafficSentry™ product, Jeff,
a Computer Science major and entrepreneur, with 15 years of business
marketing experience, has been in ad network industry for 8 years,
beginning with the launch of a leading ad network in 1998.