Experts Say Issue of Click Fraud Not Improving

Companies like Google and Yahoo that control major online advertising networks have not met their pledge to aggressively ferret-out click fraud among their affiliate partners, driving growth of the problem across the entire Web industry, according to new research estimates.

Click Forensics — an independent click fraud monitoring and reporting service that markets itself as an online version of the TV industry’s Nielsen ratings system — released its latest statistics tracking Internet advertising trends on Friday, and the group reported that the issue of fraudulent ad traffic continues thrive on the Web.

According to the company, roughly 16.2 percent of all online ad clicks were derived via click fraud during the third quarter of 2007 compared to a rate of 13.8 percent for the same period during 2006 and up from 15.8 percent of all traffic during the second quarter of this year.

Even more concerning, Click Forensics leaders said, is the report’s finding that the average rate of click fraud — most often carried out by software programs designed to mimic legitimate traffic — continues to rise on major search engine networks, including Google’s AdSense and the Yahoo Publisher Network.

Fraudulent traffic accounted for 28.1 percent of all ad hits on such networks during the third quarter of 2007 compared to 25.6 percent for the second quarter of this year and 21.9 percent for the first three months of the calendar, Click Forensics contends.

The research company also reported that more than 60 percent of all ad traffic coming from so-called parked domains — typically used solely to funnel traffic to advertisers — was observed as being fraudulent during the third quarter of 2007.

Tom Cuthbert, chief executive of Click Forensics, said that as a result of the negative impact that click fraud is having on Web advertising as a whole — in that it undermines the legitimacy of all Internet ad traffic — both publishers and advertisers are feeling a pinch.

Ad publishers are seeing a diminishing of their network traffic quality, said Cuthbert, while advertisers are seeing their conversion rates “drop significantly” on content networks and are pulling back some of their spending as a result, he said.

“The issue of click fraud on these major networks is becoming a real problem for advertisers, and increasingly, they are choosing to stay away and look into other alternatives,” Cuthbert said. “The big guys are not doing a better job of policing themselves; both Google and Yahoo have tools for advertisers to opt-out of suspected click fraud sites, but the vast majority of advertisers are not doing so, and the tools are too hard to use.”

Cuthbert said that the major network providers have promised to cooperate with efforts to drive down automated ad clicks and other forms of fraud but have not followed through on their promises.

“We’ve asked the search engines to work with us to improve the situation, and they’ve said yes, but here we are 18 months later, and we’ve seen no movement in that area, which is frustrating for us and for advertisers as a whole,” said Cuthbert. “So far, we’ve had a great process of discussion, but we’re really hoping to see them act on those ideas.”

Ideally, Click Forensics — which claims to derive its figures from statistics provided by 4,000 advertisers and agencies participating in its Click Fraud Network consortium — would like to serve as an objective third party that is used as a clearinghouse for identifying online ad fraud, much as Nielsen provides rating figures for the TV industry.

Without such an entity, the ad networks continue to hold most of the cards, leaving advertisers at a disadvantage, he said.

“There needs to be better communication and sharing of data. We have information about traffic that these guys don’t have, such as conversion data and other things from the actual advertisers, that they’re very skeptical to give to Google or Yahoo,” said Cuthbert. “Ultimately, we believe that the first provider to embrace this third-party model we’re proposing will have a significant advantage over its rivals.”

Google disputes Click Forensics’ figures

Yahoo representatives didn’t immediately return calls seeking comment on the Click Forensics report, but Google officials countered that Click Forensics’ estimates don’t accurately represent the company’s own click fraud statistics.

While Click Forensics has its 4,000 partners, the search giant claims to view a far broader and detailed swath of ad traffic, giving it a more comprehensive perspective. Google has consistently questioned the legitimacy of Click Forensics’ figures since the company began issuing its reports in 2006.

“These estimates have never reflected the invalid click rates we see at Google; Click Forensics has consistently been one of the highest estimates our there with numerous serious methodology problems, and, as such, we rarely get asked about them these day,” said Shuman Ghosemajumder, business product manager for the Trust & Safety group at Google.

Ghosemajumder said that Google offers “significantly more transparency” into its click fraud efforts and provides more traffic quality tools for advertisers than any of its rivals.

“We plan to do even more in the future,” he said.

Among the measures that Google has employed to help advertisers thwart click fraud were the launch of new IP exclusion and Placement Performance Reports in June, tools that Ghosemajumder labeled as unique features in the industry.

The IP exclusion tool is meant to allow advertisers to specify IP addresses they want to avoid with their ads and builds on the site exclusion feature the company introduced in 2005, which allows advertisers to prohibit specific URLs from showing their content.

The Placement Performance Reports are designed to give advertisers the ability to view which sites are performing the best among those displaying their content, which specifically arms the companies with the opportunity to use the site exclusion and site targeting tools drive out any apparent fraud, Google said.

In August, the search giant also launched an Ad Traffic Quality Resource Center, which is meant to offer a single place where advertisers can access all of Google’s click fraud resources.

Some smaller search providers believe that they can begin winning advertisers’ business away from their larger rivals by providing stronger methods of fighting click fraud.

Daniel Yomtobian, chief executive of ABCSearch, said that his company has begun luring large, well-known advertisers like VeriSign away from other venues with a tool dubbed ClickShield, which promises to profile advertising affiliate behavior to give its customers better insight into just how their content is being distributed.

Yomtobian points out that Click Defense, an online marketing firm that offers independent click fraud detection services, recently charted his company’s traffic as having less than 5 percent fraudulent ad hits.

“As an industry we can’t burden the advertisers and can’t burden the users, as ad networks we all need to do a better job and police affiliates to drive down fraud,” he said. “A lot of our competitors talk about their technologies to fight this problem, but a lot of that work is merely basic click fraud-blocking; by going above and beyond, we feel that we can grow our business based on delivery of a lower rate of unwanted traffic.”

By Matt Hines, InfoWorld (US)