The rise of ‘pay-per-click’ advertising frauds

Over the last year, a substantial number of clicks on NewCars.com ads (based in Santa Monica, California) have come from Bulgaria, Indonesia and the Czech Republic, countries where the company is not even doing any business.

NewCars.com is a subsidiary of Cars.com and during the time of economic slowdown, this is the last thing it needs – a very costly pay-per-click advertising fraud.

Looking at this problem of fraudulent clicks, Isabel Sopoglian, VP, Online Marketing for Cars.com says:

“Click fraud is a serious problem, and we’re aggressively trying to fight it… In this tough time, it’s important for advertisers to not waste dollars.”

This is not just the sorry tale of NewCars.com, but also the story of a lot of other marketers online who are facing similar problems.

For those of you who are wondering what ‘pay-per-click’ advertising is all about, then let me explain:

Pay-per-click advertising

1. The person or company that advertises pay the search engine every time an internet surfer clicks on their links (ads)
2. Pay-per-click fraud refers to the clicks made deliberately simply to make money for the sites that carry the links or to damage a competitor.
3. This form of advertising accounted for 57 % of Internet advertising in 2008, up from 52 percent in 2007.

Latest reports from Click Forensics

It is being seen that many marketers are wasting a lot of money because of the troubled economy.

Click Forensics, based in Austin, Texas, the company that maintains the Click Fraud Index, a network that monitors and reports on data gathered from more than 3,500 online advertisers and their agencies, has released its most recent quarterly report on click fraud. They say that in the fourth quarter of 2008, 17 % of all online ad clicks were fraudulent.

Click frauds on Google & Yahoo

Google and Yahoo are the two biggest pay-per-click ad networks. The average click fraud rate of pay-per-click ads on search engine content networks, like Google AdSense and the Yahoo Publisher Network, was 28.3 % in the fourth quarter of last year, the most recent report says.

Google has not agreed to those figures, saying that Click Forensics’ methodology is faulty. Instead, Google says its click fraud rate is just 0.02% of the total clicks, while Yahoo claims its rate is a subset of the 12 % to 15 % of the clicks on its network that it does not bill customers for.

Regardless of what the actual click fraud rate is, the problem is large enough to have instigated class action lawsuits, which Yahoo and Google have settled.

Jeff Chester, executive director for the Center for Digital Democracy adds:

“Click fraud should be at the top of the priority list with Obama and the F.T.C. The F.T.C. has seriously lagged in coming to grips with the problems surrounding the online ad market, specifically click fraud. It’s extremely important to address the problem because it ultimately affects the consumers, meaning what they end up paying.”

Fighting the fraud

Click Forensics say that on an average, its technology cuts a client’s click fraud by more than 60 %  in a month and saves its customers more than 10 % of their total online ad spending.

Click Forensics believes click fraud may be mirroring other kinds of online fraud, such as spam and phishing. As companies step up efforts to fight fraud, so do fraudsters especially when there’s lots of money to be made.