• by Mikhail Ledvich , April 21, 2006

Recently, Google's stand on click fraud went from "it does not exist" to "we have settled a class-action lawsuit for $90 million," to "Believe us, as computer scientists, we have the ability to detect the invalid clicks before they reach advertisers," (as the company's CEO was quoted in a recent Bloomberg article.)

Unfortunately for advertisers and publishers, Google has tried to minimize the click fraud problem instead of solving it.

How can advertisers trust Google's CEO if the company flip-flopped its position from "there is no fraud" to giving back $90 million to advertisers? In that same Bloomberg piece, Google's CEO downplayed fraud's reach, while others estimate the problem to be 20 or 30 percent of all paid clicks. But think about this: if Google settled with fraud-affected advertisers for $90 million, that number was probably lower than whatever litigation may have uncovered within Google's network.

Yahoo, which has been more stoic in its defense of its own pay-per-click system, has maintained the party line when it comes to filtering fraudulent clicks. Also named as a defendant in the same lawsuit as Google, Yahoo refused to settle, claiming it sufficiently protects its advertisers from fraud.

However, a Harvard researcher just penned a report which details how Yahoo's Pay Per Click (PPC) affiliate network is being gamed by unscrupulous affiliates who use spyware and adware to commit click fraud. Andrew Beckman, President of SearchAdnetwork, confirms that various companies have approached him to syndicate his Yahoo Search Feed, pitching the fact that "they get a better revenue share due to the large click volume they can produce." He now worries that "Yahoo could not be monitoring all of these actions, and the repercussions are starting to take shape." Previously Yahoo had suspended guilty affiliates' accounts, and, with this research out in the open, hopefully Yahoo will terminate these accounts as well.

While all advertising networks should devote a greater effort to eliminating fraud, the problem exists at a level deep enough to make it difficult to combat the problem. None of the major advertising networks release any kind of information that can help advertisers. There is zero transparency and accountability in regard to the performance of their affiliate networks. In short, advertisers simply do not know where their ads are being shown. Many don't care so long as the ROI is good, but those worried about brand image wouldn't want their ads to appear on pages with questionable content, and even fewer advertisers want to be associated with adware, spyware and pop-ups.

It's surprising that advertisers have not banded together to demand more information from the networks.

Imagine if the networks provided a full disclosure statistics page? It might take the shape of an advertising 'dashboard' that details the exact amount of clicks the advertiser received--say 100, of which 20 were questionable. The dashboard would let the advertiser know it was only being charged for 80 clicks. This would show a good-faith effort on behalf of the network in combating the click fraud problem. This isn't to say the networks aren't trying to crush fraud now, but without admitting the problem, it will be hard for them to announce that they have found a solution.

If Yahoo and Google continue to keep their most profitable customers in the dark, they'll risk losing ads from the affiliate networks and high-paying clients will only advertise on search, where there is less incentive for fraud. That would significantly impact Google, Yahoo and the other major advertising network platforms.

Advertisers are not the only ones harmed by click fraud; publishers lose out as well. As advertisers begin to scale back their Google and Yahoo campaigns from affiliate networks, publishers who rely on Google's AdSense and Yahoo's upcoming YPN network to monetize their traffic will see a drop in well targeted, high paying ads. Fewer ads lead to lower per-click prices and less-relevantly targeted ads. And, just as advertisers lose money, publishers find themselves no longer able to command premium prices for their inventory. Unlike advertisers who can pull, edit and otherwise control their ads individually, publishers suffer as a whole; a collective punishment of sorts.

As long as there remains a financial incentive for people to commit fraud, the click fraud problem will not fully disappear. But, full disclosure by adverting networks can alleviate advertiser and publisher angst as well as allow others to help Yahoo and Google combat the quickly escalating fraud problem. How much data should the advertising networks provide without disclosing trade secrets, their "secret sauce"? That's an important question, but these secrets may soon lead to not having much performance data to hide.

By giving advertisers more data, advertisers will be more than happy to help networks stamp out fraud. But right now, everyone is operating in the dark.