CLICK FRAUD 101: 5 BASIC TIPS
By Asaf Klibansky
According to TractionSearch.com, the definition of click fraud is "the act of purposely clicking ad listings without intending to buy from the advertiser," which is a rising problem on the Internet. Click fraud occurs when Web users and robots click on your PPC (pay per click) online ads for the sole disingenuous purpose of making a profit or draining your advertising budget.
This has turned into an epidemic that until only recently major search engines thought they could ignore. However, with major class-action lawsuits pending, these online giants have started to acknowledge that indeed not everyone online has the best of intentions and have begun to take accountability for this costly matter.
 
Until this problem is tackled head-on by limiting the amount of clicks that can occur from the same IP address, here are some precautions you should take.
 
1. Monitor and log the traffic you receive.
With some minor changes to your landing page, a skilled programmer can add the option of tracking the clicks that your website receives. If you're receiving repeat and suspicious traffic from a single IP address, you can create a false-click report by logging the IP address, date, referring page and the type of browser used.
2. Analyze your logs on a regular basis.
Typically, clicks that are received by the same IP address multiple times are a red flag and are likely to be fraudulent. Also, clicks that occur every day at the same time are likely to be false. These are examples of click patterns. When these events occur, check the origin of the IP address by using services such as Arin or Ripe. Keeping reports of click patterns will be useful and beneficial for the future.
3. Notify your PPC provider with periodic reports.
Generate reports and submit them to your PPC advertising network (a.k.a. provider) periodically. Request that your PPC provider investigate any clicks that seem suspicious or questionable. Be persistent if you truly believe you are a victim of click fraud and request a refund. Remember, like anything else, the key to proving your case to your PPC provider is a solid paper trail.
4. Don't give up.
Your pay-per-click advertising network might not refund your money now, but they might in the future. I suggest you retain the entire log for future reference and keep trying. You may not be lucky the first request, but you may win them over the second time around.
5. Diversify your advertising budget.
Like the stock market, you don't want to put all of your eggs in one basket, so make sure you diversify your advertising budget. Research and acquaint yourself with other cost-effective advertising models that are safe from click fraud, such as CPA (cost per acquisition) and monthly flat rates. These methods have become increasingly popular among Internet advertisers because there is lower risk involved.
Click fraud is unavoidable in today's world, but being aware of these five points will at least provide you with the arsenal on how to best protect yourself and your company from prospective losses.
 
In one recent example of the problem, law enforcement officials say a California man created a software program that he claimed could let spammers bilk Google out of millions of dollars in fraudulent clicks. Authorities said he was arrested while trying to blackmail Google for $150,000 to hand over the program. He was indicted by a California jury in June.
 

Matt Parrella, chief of the San Jose branch of the U.S. Attorney's Office in Northern California, said that case was "not unique." The problem "is certainly not shrinking, and we're ready to prosecute people," said Parrella, whose office handled the Google case.

Click fraud is perpetrated in both automated and human ways. The most common method is the use of online robots, or "bots," programmed to click on advertisers' links that are displayed on Web sites or listed in search queries. A growing alternative employs low-cost workers who are hired in China, India and other countries to click on text links and other ads. A third form of fraud takes place when employees of companies click on rivals' ads to deplete their marketing budgets and skew search results.

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. Google's pending initial public offering has been widely anticipated as a barometer of online advertising and the post-apocalyptic dot-com climate in general.

"It's hard to tell how big the problem is, but people are looking at it closer and closer as the cost of search advertising goes up," said John Squire, vice president of business development of Coremetrics, a Web analytics firm. "Click fraud is a fin sticking out of the water: You're not sure if it's a great white shark or a dolphin."

Unlike advertising in traditional media such as billboards and print publications, "cost per click" Internet ads displayed with specific keyword searches have been promoted as a definitive way for companies to gauge their exposure to potential customers. As a result, U.S. sales from advertiser-paid search results are expected to grow 25 percent this year to $3.2 billion, up from $2.5 billion in 2003, according to research firm eMarketer. From 2002 to 2003, the market rose by 175 percent.

As more advertisers have competed for desirable keywords in their industries, the cost for clicks has risen too. On average, advertisers are paying 45 cents per click this year, according to financial analysts, up from 40 cents in 2003 and 30 cents in the second quarter of 2002. In certain sectors, such as travel, legal advice and gaming, the cost can reach several dollars per click.

But marketing executives say click fraud is pervasive among affiliates of search leaders Google, Yahoo-owned Overture Services and FindWhat.com. In a typical affiliation, any Web publisher can become a partner of these large networks by displaying their paid links on a Web page or within its own search results and then share in the profits with every click.

"There's a fatal flaw in the cost-per-click model because a ton of marketing dollars can be depleted in a fraction of a second," said Jessie Stricchiola, president of Alchemist Media, a search-engine marketing firm based in Los Angeles that specializes in fraud protection. "Technology is continuing to be developed that can exploit this pricing model at incredibly high volumes."

Google's fraud squad

Google declined an interview for this report, citing the mandatory "quiet period" before its initial public offering, which is expected to raise $2.7 billion. But the company said in a statement that it has been "the target of individuals and entities using some of the most advanced spam techniques for years. We have applied what we have learned with search to the click fraud problem and employ a dedicated team and proprietary technology to analyze clicks."

In recent documents filed with the Securities and Exchange Commission, the company also acknowledged the problem as a threat to its revenue, of which 95 percent is derived from advertising. Google and other search networks provide refunds to advertisers when click fraud has been discovered.

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