Behind the Numbers: Click Fraud

by Jack Loechner, Apr 28, 2005, 3:23 PM

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A recent article summarized the popularity of search listings by noting that 80 percent of people start by word searching when they need to find specific information online. According to the study, consumers are 20 times more likely to click on search listings, seven times more likely to view them, and five times more likely to purchase from them.

Even though studies find that banners are most effective in creating brand opportunities, ad money seems to be flowing to keyword search. Recent findings by the Interactive Advertising Bureau (IAB) indicate that 40 percent of online advertising is spent on search ads, and one Web analytics firm reports that as much as much as 50 percent of pay-per-click (PPC) advertising fees in more competitive categories may be attributable to click fraud.

While dot-com companies established to protect against the growing stigma of "PPC fraud" hype the highest estimated losses, and the search engine marketers (SEMs) are more conservative in their estimates, at least two search engine marketing executives believe that missed fraudulent clicks could be responsible for between 5 and 20 percent of ad fees paid to all search networks.

PPC fraud is not a new phenomenon, but as recently as March, experts at a search engine conference in New York acknowledged the crime as significant. Only one fourth of search engine advertisers, though, are paying attention, one quarter don't see it as a problem, and the balance are concerned but not tracking!

Because of the tremendous opportunity for fraud, independent Web sites that run a search engine's ads by agreement and share in the revenue generated by clicks, can develop automated response methods or hire "clickers," neither with the interest of the advertisers message at heart.

The Federal Trade Commission isn't taking a significant proactive stance since the advertiser, not the consumer, is most directly affected. Matt McMahon, executive vice president of Fathom Online, notes wisely that search engines have the greatest incentive to eliminate click fraud. He says, "...if click fraud gets out of hand, search engines will see their entire business models become devalued."

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