The Cost Of Click Fraud

One of the biggest threats to the continued growth of Search Advertising is the increasing plague of click fraud. Although there are varying forms of click fraud, most people define it as any click generated, and paid for, where the intent is to drain the advertiser's budget. Advertisers know some clicks are more qualified than others, and not every visitor from their PPC campaigns will convert to a customer. But, they have a right to expect that the traffic they are paying for is coming from people at least marginally interested in their products or services.

What Motivates Click Fraud?

Why does click fraud exist? What motivates people to deceive the system by sending PPC advertisers bogus traffic? The short answer (as usual) is money.

Many Pay Per Click Advertising networks are partially, (or in some cases totally), dependent on affiliate sites to generate traffic for their advertisers. These networks syndicate their customer's ads so they will appear on the sites of their affiliates. Every time someone clicks on an ad the PPC Network and the affiliate site share the revenue. The more clicks the affiliate site generates, the more money it makes. While the vast majority of affiliates are legitimate trustworthy sites, others are in the business of exploiting loopholes in the system to line their pockets with real money by generating fake clicks. Often times the weapon of choice used by these rogue sites to cheat the system is a software script that automatically clicks on PPC ads.

Another variation of click fraud uses a more personal touch to steal advertiser's money. In the hyper-competitive world of Pay Per Click Advertising the battle for premium positioning at an affordable cost can cause companies to use less than ethical techniques to gain an edge. Companies can drive up their competitor's marketing costs by clicking on their Pay Per Click ads. If their competitor's marketing costs get too high they may lower the bids on their keywords, or stop bidding on the word altogether. Either way, the cost for the word goes down, giving the fraudulent company an opportunity to increase their ranking on the page at a lower cost.

The Search Engine's Response To Click Fraud.

All the Pay Per Click Search engines have systems in place to detect click fraud, and screen questionable clicks. One example of how they do this is by keying in on the IP address where the click originated from. If they see too many clicks coming form the same IP in a short period of time they will often screen the traffic.

The Search Engines are in a unique position when it comes to Click Fraud. On the one hand they benefit from it. The amount of revenue attributed to Click Fraud varies depending on who you ask, but everyone agrees that if illegitimate clicks were completely eliminated, all the major Search Engines would suffer a significant hit to their revenues and stock prices. However, the Search Engines also realize that the long term health of the industry depends on establishing trust with their advertiser base. Going forward we can expect to see Search Engines deploy increasingly sophisticated methods to eliminate fraud, and corresponding responses from the dark side of the Search Advertising industry.

Decreasing The Amount OF Click Fraud For Your Campaigns.

While it's impossible to completely eliminate fraudulent traffic, there are some things you can do to increase the percentage of good traffic from your investment in Pay per Click Advertising.

As a rule of thumb, the more a Pay Per Click Ad network depends on affiliates for its traffic, the more susceptible it will be to fraud. The reason why the overall traffic quality is better on Google, Yahoo and Lycos is that each of these sites has their own branded destination where consumers go to search. If you advertise on these sites you know where your ads will appear (although even these bigger sites use affiliates to varying degrees). Once you venture into the second tier Pay Per Click networks however you'll find that almost all of their traffic is generated through partner sites. Companies like Kanoodle, Enhance etc?don't own sites where people go to search the web. Nearly all their traffic is generated through their affiliates which makes it more difficult to control fraud.

Conclusion:

Unfortunately, click fraud is a necessary evil of Pay Per Click Advertising, at least for now. However, as with most aspects of PPC Advertising everything eventually boils down to conversions and profits. If your campaigns are generating enough quality traffic to meet your conversion metrics you should continue to invest in the campaign, even if some of the clicks are fake. If your traffic is riddled with too many automated clicks it will eventually become obvious in your conversion numbers, and you should stop the campaign and put your money into pay Per Click networks that control more of their own traffic.

Stan Hauser is a leading expert on effective Pay Per Click Advertising strategies, and the creator of http://www.pay-per-click-advertising-guide.com

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