• by Tameka Kee , July 20, 2007

Click fraud in the second quarter averaged almost 16% industry-wide, according to Click Forensics--up one percentage point from last quarter. A more advertiser-unfriendly statistic, however, is that average click fraud rates on search engine content networks--including Google's AdSense and the Yahoo Publisher Network--reached 25.6%, making a little over a quarter of contextual ad clicks fraudulent.

"Knowledge that click fraud on contextual ads is higher will likely scare off some advertisers," said tech expert and ZDNet blogger Garett Rogers. "If I was a company who spent thousands of dollars a month on advertising, I would take a very close look at conversion ratios through the regular search engine result pages and contextual ads to determine the best course of action."

"Advertisers running campaigns on content networks are especially vulnerable," said Tom Cuthbert, president and CEO, Click Forensics, "as they are increasingly targeted by a growing pool of fraudsters, from botnets [groups of compromised computers that can be used to commit crimes like spamming and identity theft] to publishers and individual site owners that have created made-for-ad sites."

According to the Click Fraud Index report, second-quarter traffic from botnets doubled from the first quarter, contributing "significantly" to the increase in click fraud rates.

Search industry experts were not surprised. "Our clients are well aware that botnet activity is on the rise and that they're being used for a variety of online fraud activities, including click fraud," said Robert Hansen, CEO of SecTheory. The FBI recently announced crackdowns on botnet rings, after reporting that more than 1 million US computers had been hijacked by these bots.

Although neither company has specifically addressed the issue of botnets, Google and Yahoo have each made operational and technical changes in recent months, both to make their content networks more accessible and to assuage the click fraud concerns of advertisers.

Yahoo named former legal counsel and litigation expert Reggie Davis as vice president of marketplace quality, essentially creating a "click quality czar" to address click fraud and advertiser satisfaction. The Web giant has also plugged "openness" in every product announcement and press conference--giving advertisers (and developers) control over Panama's bid management.

Google, meanwhile, launched a full-scale pay-per-action advertising model for AdWords and changed its Quality Score rankings for landing pages and keywords--making it harder for link farms and parked domains to gain traffic and clicks. The search giant also recently acquired Postini--according to insiders, that Web application security firm's spam, domain, and malicious content filtering technology will gradually be integrated into Google's various ad platforms.

Still, third-party measurement firms like Click Forensics say the big pay-per-click players aren't doing enough to combat the revenue lost from fraudulent clicks. Digital marketing agencies also say they're working hard to protect their clients' pay-per-click investments. "Although the major search engines are addressing click fraud, it is more important than ever for search agencies to adopt technologies that independently detect and report fraudulent click activities," said Steve Curtin, corporate vice president of emerging services and products, DigitalGrit.