Advertising "Click Fraud" Rampant Online?

"Pay-per-click," by far the most popular form of online
advertising, recently came under fire as charges of rampant
"click fraud" gather steam on the Web.

Google and Yahoo! earn the majority of their money through
sales of advertising to tens-of-thousands of online
merchants, companies, and professional.

In fact, some estimate that 99% of all Google's revenue
comes from advertising sales. Unfortunately, allegations of
click fraud may well rain on Google's otherwise sunny
parade and cause a whole scale revamping of current online
advertising practices.

Pay-per-click advertising does exactly what it sounds:
advertisers pay for each click on their ad, usually mixed
in among search engine results or displayed on relevant
websites.

"Click fraud" occurs when, for whatever reason, an ad gets
clicked by someone or something (usually an automated "bot"
that simulates clicks) with no intention of ever buying
anything from the advertiser.

The sole intention of click fraud is to simply drain an
advertiser's budget and leave them with nothing to show but
an empty wallet.

Who commits click fraud?

Usually an unscrupulous competitor who wants to break a
rival's bank, online "vandals" who get their kicks causing
other people grief, or search engine advertising affiliates
who want to earn fat commissions by racking up piles of
bogus clicks.

Regardless of who does it or why, click fraud appears to be
a growing problem search engines hope stays under their
advertising clients' radar.

This problem isn't exactly news to the search engine
giants.

In fact, on page 60 of their 3rd quarter Report for 2004,
Google admits that they have "regularly refunded revenue"
to advertisers that was "attributed to click-through
fraud."

Google further states that if they don't find a way to deal
with this problem "these types of fraudulent activities
could hurt our brand."

Bottom line for Google and Yahoo! (which owns Overture, the
Web's largest pay-per-click search engine): as word of
click fraud spreads across the Web, they must act quickly
to calm the nerves of advertisers who could well abandon
them over doubts about the veracity of their advertising
charges.

The search engines all claim to carry measures that
identify and detect click fraud, but details about how they
do it and to what extent remain sketchy.

They claim revealing details about security would
compromise their efforts and give the perpetrators a leg up
on circumventing their defenses.

This sounds good, but affords little comfort to advertisers
who feel caught between losing out on their best traffic
sources and paying for advertising that won't result in
revenue.

One way to protect your business against click fraud is to
closely monitor your website statistics.

Look for an unusually high number or regular pattern of
clicks from the same IP address.

If you need help, enlist the aid of your hosting provider
to aid you in spotting suspicious trends in your website
traffic.

Also, a number of services such as ClickSentinel.com have
sprung up online to help advertisers spot and quickly
analyze and compile the data necessary to effectively
dispute fraudulent click charges with the search engines.

I have had serious problems with clickfraud and still do. When I activate my campaign, the clicking starts immediately. I have so far been able to determine that a tool of some kind is being used and that it has to be a competitor, who is trying to drain our advertising budget.

I was lucky enough to recognize the malicious activity right away since I am no stranger to analyzing logfiles, but I imagine that this kind of activity must go on all the time and thousands (perhaps millions) of dollars are being wasted on nothing by unaware advertisers, who trust Google to filter out invalid clicks.

In my investigations, I have been able to determine how the tools used by these criminals work, and I see no way how Google should be able to stop this. The tools aren't rocket science and any programmer would probably be able to create one in a matter of hours, but from Googles point of view the clicks seem legit and they have no way of knowing that fraudulent activity is going on unless the advertiser is willing to use/waste hours analyzing his logs for suspicious referals to his or her website coming from the ad. The tools used of course don't reveal the referer address, so you'd have no way of knowing that a click came from your ad.

One has to stay alert if Google AdWords is used as the prefered advertising medium. The very foundation of it is flawed and I really do not understand how it has been able to support this giant structure that Google has become. What it needs is a small earthquake and it will come tumbling down.