Report: Click Fraud Reaching New Heights

Advertisers waste millions of dollars on fake ad clicks, eroding the credibility of brands and throwing away budget dollars for invalid ads on Google, Microsoft and Yahoo. Click fraud for online advertisements rose to 22.3% in the third quarter, ending Sept. 30 -- up from 14.1% during the year-ago quarter, according to a report released by Click Forensics Wednesday.

The countries outside North America with significant CPC traffic producing the greatest volume of click fraud in the third quarter were Japan, the Netherlands, the Philippines and China, respectively, Click Forensics reports. But startups like Irvine-based BlueCava have begun to develop technology to identify click fraud by identifying the devices that cause the fraudulent action.

The technology begins by validating the type of device that clicks on the ad, as well as the number of times to detect click fraud. In fact, BlueCava plans to make public a test running with one client that will demonstrate how many invalid ads run on Google and on its affiliate network. "It will offer proof for advertisers that click fraud occurs," says David Norris, CEO at BlueCava, a credit bureau for devices conducting business online. "Most advertisers waste between 20% and 30% of their budget, so they should go get their money back from Google."

The idea of identifying devices is not unique, especially for enterprise-related platforms. It's a little like remotely downloading updated software to a set-top box, or a Hewlett-Packard printer that when plugged into a Sony laptop can sign on through an open Internet connection and find and download the correct printer driver.

BlueCava has begun to provide original equipment manufacturers with the device identification technology to integrate it into consumer products. This means the device would come out of the box with the ability to identify itself. The services might include security and identity protection, but it would also include the ability to match the device owner with online ads.

Rather than the device relying on a browser cookie to identify a specific audience segment, it now appears it will have a specific demographic profile of its own that Norris believes is "99.9999% accurate." If a billion devices, not people, visited a specific Web site, he says the technology would accurately identify more than 90% of them. The profile of the device could accurately serve up the appropriate ad.

Not only can BlueCava's technology identify the device, but the company has put together a data exchange where businesses can contribute information they know about a device that should make targeting ads more accurate. BlueCava plans to market the data to advertising agencies, brand marketers, ad exchanges, and media-buying companies.

And if that's not enough, the technology can identify fraudulent actions such as child predators. Sites like Disney, which shut down accounts once they find them, tend to be a Mecca for child predators. But companies like Disney must do it manually. There's a way to limit people who are not welcome on Web sites, from sites catering to children to online dating sites like Match.com.

BlueCava also has begun to develop a service that allows devices to identify malware or possibly when someone downloads a piece of software onto a machine and begins siphoning information. During the next 12 to 24 months, Norris says the company will introduce the technology in a variety of places that will "revolutionize" the industry. Norris says BlueCava plans to provide educational material that explains behavioral targeting and the opt-out and opt-in process -- and that if a consumer opts out, it doesn't mean they won't get advertising, it just means they won't get advertising that is relevant to them. The information will launch on a Web site within the next 60 days.

BlueCava continues to attract attention with this focus. The company closed a $5 million first funding round this week led by billionaire Mark Cuban and entrepreneur Tim Headington.

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3 comments about "Report: Click Fraud Reaching New Heights".
  1. Dave Kohl from First In Promotions , October 21, 2010 at 3:09 p.m.

    Hopefully click-thru advertising won't go the way of cable TV networks doing the "xxx,000 subscribers" bit years ago, acting as if thousands or millions of viewers actually chose to subscribe to their channel(s) as if consumers had a choice.

    There isn't any true way to stop click fraud. Employees of competing companies could all be clicking once or twice just to waste the competition's budget, and that would never show up in any study.

    Yes, as long as advertisers which participate are getting an acceptable response rate, they will likely continue.

  2. Chris Nielsen from Domain Incubation , October 21, 2010 at 9 p.m.

    "There isn't any true way to stop click fraud."

    Of course there is and it's called "Bid for Flat-Rate" advertising. Rather than "Pay-Per-Click", advertisers pay for placement. If that placement is effective, advertisers will bid more for it. Since advertising is for the amount of time the ads are displayed, there can be no click fraud.

    This idea is really nothing new, but to many it's like a splash of cold water. The problem is that ad networks don't want to discuss it because PPC is so lucritive for them.

    Now about that darned click fraud. If you are an advertiser, you don't need anything new to show you there's fraud. Just look at where your ads are showing, your click-through-rates, and conversion rates. If you are advertising on the content networks, it's huge depending on the topic your are advertising on. Ad clicks for less than 50 cents are not going to see much, but if your clicks are $$50 or more, you don't need a magnifying glass. To start with, look for anything coming from sites with a domain that ends in *.co.cc. Next, look for CTRs that are above 25%. Those 100% CTRs are a 5 alarm fire you can't miss.

    Remember that old idea of stealing a penny from a million people? It's reality with PPC fraud. The problem it's not just one crook, it's thousands or more.

    One big problem is that the search engines really don't tell you what they are doing to combat fraud. You see junk show up in your reports and stats, you may see credits for $0.35 or $960 show up under your billing, but you have no idea if they are catching all or just a drop of the fraud flood.

    I think it's like email spam. There are ways for everyone to have email and little or no spam. Some of the ways are simple and low-cost.

    The problem is that everyone accepts the way things are as they way things should be or have to be, and until that changes, no progress will be made.

  3. Eric Brown from Media Armor inc , October 21, 2010 at 10:29 p.m.

    What about all of the impressions that don't get clicks? Focusing on clicks is only addressing a small fraction of the issue in both performance and CPM campaigns. Standard contracts with larger ad networks allow for auditing of impressions and clicks and advertisers should use all of the tools they have at their disposal.