Click Fraud Is On The Rise

A day after Professor Kagan discussed the relative significance of click fraud as a "dark side" of the PPC ad revenue model, the New York Times published an article heralding the increase in click fraud as the global economy has entered a tough recession. Although click fraud is broken into two categories -- bad clicks to make money and bad clicks to raise a competitors marketing expense -- the latter is most likely an insignificant portion of the total problem. The real issue is criminal organizations -- often foreign -- that create websites (aka link farms), join the Google Content Network (aka AdSense), place "relevant" text ads on their sites and then hire low cost workers to click on those ads. As a participant in the AdSense program, each click gives part of the PPC to Google (about 25%) and the remainder to the website publisher.

While Google historically promotes itself as a champion of click-fraud detection its most prominent detractor is Click Forensics, a click fraud detection business which asserts that the problem has increased dramatically. The company has concluded that 17% of all online ad clicks were fraudulent in 4Q08 and according to Outsell Inc., an information industry research group, 13% of total online ad clicks were fraudulent in 2008. That assessment is in stark contrast to Google's claim that "fraudulent clicks account for just .02% of all online activity."

Bottom line is that there are many ways in which the magnitude of click fraud can be manipulated. If you're Google you want to massage the figures to demonstrate its insignificance and if you're Click Forensics you want to hype up the idea that companies need to hire you to reduce their fraudulently spent marketing dollars. In the end it is incumbent on advertisers to carefully monitor how their ads are being placed within the AdSense network and make changes to their program criteria based on the data. If Click Forensics can help, then that may just be another cost of doing business.