Click fraud roils search advertisers

Skewing sponsored-search listings is a "billion-dollar problem"--and some companies at SES are fighting back.

Stefanie Olsen Staff writer, CNET News
Stefanie Olsen covers technology and science.
Stefanie Olsen
3 min read
NEW YORK--Tammy Harrison, president of a medical billing software company, says she's a victim of click fraud and needs support.

Harrison had detected a rival company repeatedly clicking on her sponsored listings in Google and Yahoo search results--a tactic meant to deflate her ad budget and boost the competitor's ranking on the page. After sending the corroborating data to the two search engines--which maintain policies against fraud--she managed to get some refunds and the rival bumped from one service.

"I've spent more than 200 hours tracking this person down, and I've lost at least $100,000 in sales. I've gotten my money back--not all, but most," Harrison of 2KMedicalBilling.com said during a panel on click fraud at the Search Engine Strategies conference here.

Another audience member chimed in that his company had lost nearly $300,000 to fraudulent clicks. "This fraud is part of doing business, because if you start suing these search engines, they'll cut off your traffic," he complained.

"Maybe we should start Advertisers Anonymous," joked Jeffrey Rohrs, president of Optiem and host of the panel.

Click fraud is a reality of the pay-for-performance search industry, an estimated $4 billion to $5 billion market this year. Search has turned online advertising into a cash cow for businesses such as Google and Yahoo because of its efficiency at bringing customers and products together at the point of interest. But where there's profit, there's often pilfering.

Fraudsters take advantage of the fact that marketers must pay a fee to the search engine with each click of a sponsored link. For example, it costs an advertiser an estimated $8 per click to appear in search resutls for the term "medical billing software." In some cases, those fees are shared with third-party Web publishers that play host to the ads. And in industries where the ads are more expensive--for example, medical, financial or legal--fake sites will crop up for the sole purpose of collecting a check from Google or another ad network.

It's anyone's guess as to the financial liability it holds over the search engines; Google, Yahoo and others do not break out numbers on the amount of fraud detected and refunded. But anecdotally, people estimate that it could comprise between 5 percent and 20 percent of industry sales.

"It's a billion-dollar problem," said Tom McGovern, president of Snap.com, a relatively new search engine backed by Idealab, founder of commercial search pioneer Overture Services.

For advertisers, click fraud is a particular headache because they must regularly scrutinize their Web traffic and ad campaigns to sniff out thieves, then request refunds from the search engines with which they advertise. The fraud is often perpetrated by online robots, or "bots," programmed to click on advertisers' links, so it can be difficult to detect. The clicks can also come from employees of rivals.

As a result, many companies attending SES are promoting solutions to the problem.

Snap.com, for example, rolled out a new advertising system this week that lets marketers pay for search-related advertising only when people take an action as a result of the promotion, or what's called "cost per action" advertising. The service will let marketers bid for placement in Snap.com's search results but pay only if a customer buys something, in one example.

Other analytics companies, including Clicklab and ClickDefense.com, have introduced specialized tools for monitoring fraud.

Panelists at the click fraud session suggested legal recourse for advertisers and search engines.

Google, for example, filed a lawsuit against an alleged fraudster last fall. The suit charges Auction Experts International with abusing its ad network for monetary benefit. The lawsuit is pending in a Santa Clara, Calif., court.

Jessie Stricchiola, founder of Alchemist Media and click fraud specialist, said that oftentimes, sending a cease-and-desist letter to the party responsible for the fraud will scare people off the practice. For 2KMedical's Harrison, such a letter could get the attention of the second search engine to have it ban her rival as well, panelists said.

"For advertisers, as search advertising gets saturated and more competitive, tactics for click fraud are getting more interesting and aggressive," Stricchiola said .