Is Click Fraud Eating Your Profits?

I wrote in Click Fraud 101 that click fraud – when someone clicks on your ads to either generate an income for themselves or to drain your advertising account – is a major concern within the search engine marketing industry.

The Click Fraud Debate
The San Francisco Chronicle reports the findings of market researcher Outsell Inc that internet advertisers paid $800 million for bogus clicks last year, report that 14.6% of all clicks are bogus, and claim three-quarters of advertisers had been victims of click fraud at one time.

The study was based on the responses of 407 online marketers who control over $1 billion in pay per click budgets. Yet even with so many claiming “click fraud”, only 27% decided to cut their budgets and 10% were considering – that means 63% aren’t doing anything about it.

Search engine guru Danny Sullivan of the SearchEngineWatch Blog provides an elaborate commentary on the report. He says

The report also reports on the rate people ask for refunds — 5.4 percent have asked Google; 2.9 percent asked Yahoo and MSN comes next at 1.5 percent. The vast majority of advertisers — 92.9 percent — haven’t ask for refunds. The report notes this big discrepancy between those who say they’ve cut budgets because of click fraud (27 percent) or those who have estimated click fraud to be 14.6 percent of spend. It’s an important point, because if this much money really is believed to be fraudulently billed by advertisers, why aren’t they pushing in larger numbers for repayment? And how come half of them report they do no systematic analysis of click logs. How can estimates of click fraud from this half even be included to make an industry stat, if they’ve done no analysis of their own?

That said, the click fraud debate has been well documented. Mark Cuban wrote a lengthy commentary on why he thinks click fraud is a big problem. And Google and Yahoo just settled their own click fraud lawsuits for around $100 million.

Personally, I’ve experienced click fraud back when Looksmart.com was doing pay per click advertising and recently with some of my law firm clients. It seems that the legal profession is prone to bogus clicks because the cost of keywords is so high. That translates to a hefty profit of a few bucks per click (most ad clicks result between $.05-$.30 in my experience) for advertisers.

How Can Reduce Click Fraud In Your Campaigns?

Monitor Your Stats – Where are your clicks coming from? Hopefully you have set up landing pages for each ad campaign you’re running, so that all clicks are filtered to a specific page. You should also have some type of web stats program that keeps track of where visitors are coming from – awstats is pretty good for a free program.

Monitor Contextual Ads – Google allows you to advertise on their site (search ads) and on their partners’ websites (contextual ads). Unfortunately, spammers set up a bunch of bogus sites, run Google advertising on their sites, and pocket the money. Google has been fighting back, but since there are so many new sites popping up every second, it’s a tough battle. If you find that a large number of clicks are coming from sites with little to no content, you should consider blocking that site from your Adwords account. In the legal industry, for instance, these sites tend to be law firm directories made up exclusively of sponsored listings.

Turn off Contextual Ads – If you find you’re getting too many suspicious clicks through contextual ads, you might consider turning that feature off completely. Personally, I find that there are a number of Google partner sites with great, relevant content that make showing ads on their sites a good fit, but if you’re not willing to monitor your traffic every day to weed out the bad, turning off contextual ads might be your best option.

Report Fraudulent Clicks – Learn more about how Google is dealing with click fraud here and here. Report click fraud here. See what Yahoo is doing here and here.

Use a Third Party Fraud Detection Service – For a list of third party providers, visit SearchEngineWatch Forums.

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