Click Fraud Hits 14.8% For 1Q 2007: Click Forensics

The industry average click fraud rate was 14.8% for the first three months of 2007, according to investigative search firm Click Forensics. And though it's the highest reported rate since the firm began tracking click fraud a year ago, the numbers are consistent with what many in the search industry have come to expect.

"Click fraud seems to be following a similar path as other online fraud schemes such as spam and phishing -- the problem is growing as fraudsters fine-tune their methods," said Click Forensics president and CEO Tom Cuthbert.

Figures from the Click Fraud Index also reveal that the click fraud rate for high-priced search terms (over $2 per click) was a little more than 20%, a problem because high-priced terms often make up the majority of an advertiser's total spend.

"Click fraud is one of the reasons we try to wean our clients off of the pay-per-click model," said Ed Kundahl, president of Alliance Internet Marketing, an SEM firm based in New York. "It becomes a tremendous waste of resources, and smaller companies can't afford that."

Although the two major search engines have historically refused to disclose just how big the click fraud problem is, both Yahoo! and Google recently made very public efforts to combat the issue. Yahoo! appointed a 'click fraud czar,' former staff attorney Reggie Davis, while Google published a white paper called "The Anatomy of Clickbot.A," detailing the workings of a large scale, automated click fraud attempt.

While it could be argued that these actions are only delayed responses to multimillion-dollar lawsuits, both Google and Yahoo! may face an issue that can't be solved by handing over $90 million and $5 million in respective settlements.

Acoording to SEM insiders, the popularity of pay-per-click ad models has already begun to suffer. "We're advising our clients to move toward more pay-per-inclusion or organic listing campaigns," said Kundahl, "and it makes sense because Internet users are gravitating toward those types of search results."