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Click Fraud: Detection, Analytics and Advocacy
Jim Hedger, StepForth News Editor,
StepForth Placement Inc (c) 2005

Click-Fraud is the greatest threat to the rapid growth of the
paid-search marketing sector. Speaking about click-fraud to an
investor conference in December, Google CFO George Reyes stated,
"I think something has to be done about this really, really
quickly, because I think, potentially, it threatens our business
model." Accounting for an estimated 5 – 15 percent of all PPC
clicks (estimates differ by sector), click-fraud is assumed to
cost advertisers tens or even hundreds of millions of dollars
per year. The problem has become so pervasive the April 7
edition of Wall Street Journal ran a front-page center column
story titled, "In click-fraud, Web Outfits Have A Costly Problem".

What is click-fraud and what makes it so dangerous to the
stability of the major search engines' business models?

The pay-per-click or PPC business model generates a lot of money
for search engines and webmasters who allow paid advertising to
be displayed on their sites. A search conducted on Google, Yahoo
or MSN will show several advertisements running down the right
hand side of the organic search results and sometimes across the
top of a search engine results page. Every time a search-user
clicks on one of these ads, the advertiser pays the search
engine for that click. Advertisers bid for placement under
associated keywords and phrases in a virtual auction format.
Generally the advertiser with the highest bids, or in Google's
case, the one that generates the most revenues through a
combination of high bids and stronger click-through rates, wins
the highest placement in the list.

For over three years paid-search has been the primary revenue
generator in the search engine industry. Promising front-page
placement and massive contextual distribution across associated
network websites, paid-search delivers rapid exposure to an
audience that pre-selects itself based on keywords entered in
their search query or found on a document. As a means of
reaching a market too massive for TV, paid-search and contextual
distribution is an obviously winning idea. Unlike organic SEO,
paid-search marketers can make guarantees and back them up with
quantifiable (and easily understood) data.

For major search firms such as Google, Yahoo and Ask,
paid-search is to one degree or another a fundamental
cornerstone of their increasingly bountiful bottom lines.
Actually in Google's case, paid-search represents about 95% of
annual revenues. Built on the power of paid search, the major
search engines are reporting record revenues quarter after
quarter. Paid-search marketing, for the most part, is much
easier for an agency or advertiser to facilitate. It is also one
of the easiest ways to scam money or damage one's competitors.
In this often-unscrupulous Internet age, there are a lot of very
talented people stealing other people's money in one way or
another. The provision of paid-search advertising which
experiences double and triple digit growth from quarter to
quarter is a tempting place to practice their larcenous skills.

Savvy webmasters and advertisers, along with a growing number of
forensic click-analysts are getting better at detecting simple
fraudulent click activity. The growing specter of click-fraud
has given rise to an industry that detects fraud and works to
find ways to combat it and help clients seek refunds.

Jesse Stricchiola, the founder of Alchemist Media
(http://www.alchemistmedia.com/Click_Fraud_Auditing.htm), has
emerged as one of the leading experts on click-fraud detection
among SEM practitioners. She was one of the first SEMs to
approach the major search engines with highly detailed forensics
and is now recognized as a credible advocate for advertisers who
feel they have fallen victim to click-fraud. In a presentation
at the recent Toronto Search Engine Strategies Conference session
"Auditing Paid Listings and click-fraud Issues", she outlined
the two basic forms of click-fraud.

The first and likely most pervasive is generally known as
"competitor clicks". In this scenario, a business works to drive
their competition into financial distress by wasting their
paid-advertising budget. Every time an ad is clicked, the cash
register dings at the search firm providing that ad space. While
keyword bids might be as low as $.015 per click, they can reach
into tens and in some extreme cases hundreds of dollars per
click. Through simple and often stupid means or highly elaborate
robot driven campaigns, one clicks away on their competitors'
ads. This form of click-fraud is increasingly easy to detect and
deal with, however the onus is on the advertiser or their agent
to diligently inspect and analyze their web-logs. Jesse noted
two case studies in which one business worked to burn the budget
of competitors. One case involved having staff members click on
paid-ads from their workstations. The other involved the use of
a specialized "hitbot" commissioned to spend as much of a
particular competitor's money as possible. After tracking
several identifiable signatures such as IP address and
repetition, click-times and the succession of clicks on an ad,
she was able to help both clients get their money refunded.

The second basic form of click-fraud is called Affiliate Fraud.
Stemming from the vast networks of small affiliate partners who
display paid ads generated by the major search engines on their
websites, this type of click-fraud is more difficult to detect
and manage. When looking at a typical website, users are
increasingly noticing paid advertising discretely appearing
somewhere on the page. These ads usually relate to the topic of
the page and are delivered by the search engines based on
keywords found on the page or through a specific choice by the
webmaster. Every time one of these ads is clicked, the search
engine bills the advertiser and gives 50% to the webmaster of
the site the click came from. The dozens of ways to scam this
sort of system are obvious and as click-fraud becomes a bigger
concern for advertisers and search engines, people with a
propensity for illicit gain are jumping on the short-term
bandwagon.

There are a lot of highly talented programmers looking for work
around the world. While all of us live in a time of legal
transition in relation to cyber-crime, some people live in
nations with relatively weak legal systems and abysmal
cyber-investigative infrastructures. Faced with huge brains and
tiny employment prospects, several turn to cyber-shenanigans for
fun and profit. By exploiting fake IP addresses, using clever
algorithms to determine click behaviours and finding ways to
destroy identifying references, a fraud artist can stretch their
gains over several months or even years without getting
detected. There have been stories of click-for-pay positions
offered to web users in Europe, South East Asia and Oceana in
which surfers are paid to click on paid-ads on one of their
employer's thousands of websites. If done properly, it can be
next to impossible for the major search engines to keep up.

Lori Wieman from KeywordMax (http://www.keywordmax.com/index.html)
noted this issue in the same session. KeywordMax provides PPC
analytic software for SEMs and advertisers. While the search
firms must bear responsibility for dealing with legitimate
refund requests and work to limit click-fraud, it is unrealistic
to expect them to take a firm stand on the issue. Lori stressed
that the onus for detecting click-fraud remains on the
advertisers themselves. In her presentation, Lori outlined a
number of specific things advertisers should look for in their
web-logs and if found, record using a spreadsheet program like
Excel which allows easy comparison of several points of data.

Lori stressed that advertisers (or their agents) should capture
IP numbers of those who visit their sites. Every visitor has an
IP address and your server will record it. If you record the IP
of all visits to your site, you can eventually see how often a
specific IP visits the site and how the user got there. If the
same IP appears day after day after day (and hour after hour
after hour) and it comes from one of your paid ads, you are
almost certainly the victim of click-fraud. While recording
visitor IP addresses, Lori also recommends tracking competitor
IP addresses to see if they show up in your web logs. Every
visit from an affiliate partner site generates a unique
reference number. Lori suggests recording those numbers whenever
possible. Visitors can also be tracked geographically and
advertisers are advised to check where visits originate from to
see if any odd or unexplainable patterns emerge.

Ultimately, Lori notes the responsibility for auditing billings
and listings falls to the advertiser. The search engines are
improving their ability to track fraudulent clicks but the
volumes of clicks they work with make specific-campaign
analytics a lower priority. The search firms could help
advertisers by offering more detailed billing, creating fraud
investigation departments and becoming more communicative and
responsive to advertisers' complaints.

At the same time, it is up to the consumer to diligently pursue
their complaints. If you think you are a victim of click-fraud,
Lori urges you to file a detailed report within 60-days of the
fraud and to provide as much documentation as possible.

Backing Lori's call for consumer diligence was Danielle Leitch
from MoreVisibility (http://morevisibility.com/services_ppmp.html),
a Florida based SEM. Danielle urged the audience to audit their
own server logs as well as use analytic software noting that
some things might be missed by software but obvious for human
eyes. Danielle also pointed out that if you do receive a refund
from one of the search firms due to click-fraud, you need to
manually adjust your stats as the report activity generated by
the search engines will not be changed. Keeping track of campaign
metrics is the key to detecting and dealing with click-fraud.

Danielle used a number of PowerPoint slides to show a forensic
audit she conducted for a client. She found a number of
click-fraud signatures including similar IP addresses, tell-tale
timing and geographic patterning. By compiling very detailed
notes and developing both verbal and written contact with the
search engines, Danielle was able to get her case-study client a
substantial refund.

As an issue, click-fraud can be managed and perhaps even
eventually tamed but that will require a high degree of
cooperation between the search firms that sell the ads and the
advertisers or their agents who purchase them. It is in the best
interest of the major search firms to work with advertisers and
their SEM agents to protect the integrity of the
paid-advertising systems. Facing a number of paid-ad focused
lawsuits, one of which is threatening to be granted class action
status the search engines are being forced to be more open to
the concerns of their consumers. With the advent of click
forensic analytics and advocacy as a professional segment of the
Search Marketing industry, a strong foundation for such
cooperation is being built. While click-fraud remains the most
frightening issue on the paid-advertising front, increasing
sophistication of consumers, advertisers and search media and a
willingness to collaborate presents a strong and responsive
defense.

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Jim Hedger is a writer, speaker and search engine marketing
expert based in Victoria, BC. Jim writes and edits full-time for
StepForth. He has worked as an SEO for over 5 years and
welcomes the opportunity to share his experience through
interviews, articles and speaking engagements. He can be
reached at jimhedger@stepforth.com
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