Page II: Google and others are under scrutiny as advertisers fret about phony clicks.
In recent documents filed with the Securities and Exchange Commission, the company also acknowledged the problem as a threat to its revenue, of which 95 percent is derived from advertising. Google and other search networks provide refunds to advertisers when click fraud has been discovered.
"If we are unable to stop this fraudulent activity, these refunds may increase," Google said in its SEC filing. "If we find new evidence of past fraudulent clicks we may have to issue refunds retroactively of amounts previously paid to our Google Network members."
Google and Overture employ "fraud squads," or teams of people dedicated to fighting click schemes. But at least two marketing executives say such countermeasures are missing fraudulent clicks that are responsible for between 5 percent and 20 percent of advertising fees paid to all search networks.
Overture spokeswoman Jennifer Stephens refutes that estimate, saying that the numbers likely represent acts of fraud that are ultimately caught. She added that Overture filters most fraudulent clicks with the best anti-fraud system in the industry, which combines technology and human analysis.
"We take this very seriously; it's the foundation of what we do," Stephens said. "If an advertiser has a question about it, we look into all matters."
Cost-per-click advertising comes in many forms, but it essentially lets marketers gain exposure on a Web site and pay only when people click on their ads. Google and Overture let advertisers bid for placement of paid links, which appear when certain keyword searches are conducted on the networks' sites or those of third parties that partner with them. Keyword ads can also be distributed according to the content of partners' sites and displayed on non-search pages. (CNET Networks, ZDNet Australia's parent company, partners with Google for shared advertising revenue.)
Most advertisers are aware of the click-fraud issue but have not delved into it because of the technical complexities involved. Others are concerned that they could jeopardise their relationships with the powerful search networks if they complain too loudly.
"It is a bigger problem, but folks just don't want to take the time to track it down because it's a complex problem," Coremetrics' Squire said. Given that some of the largest marketers manage up to 1 million keywords in a campaign, he added, the data can be difficult to crunch.
Danny Sullivan, who runs a quarterly search-industry conference, said many advertisers do not raise their concerns with the ad networks because "they're afraid that if they complain, it will hurt their free listings."
Still, more fraud-detection technologies are emerging to help advertisers analyse their campaigns and traffic. Some advertisers and search-engine marketing companies say they are compiling lists of sites that generate a high number of clicks but not sales.
Coremetrics, Urchin and Whosclickingwho.com are just a few that sell technology to examine click rates and sales that result from paid searches. Alchemist Media, which charges flat fees for its consulting services, has detected fraud while acting as an intermediary between search networks and marketers.
In general, Alchemist's Stricchiola estimates that 10 percent of all search ad clicks could be fraudulent. But she said the rate can reach 20 percent in particular businesses that have been targeted for click fraud.
Roy de Souza, CEO of advertising technology firm Zedo, said his company's geotracking systems have traced Internet Protocol addresses to detect click operations in China. In describing one common scheme, he said a legitimate site is duplicated under another name, complete with text ads from a search network. A bot would then be trained to click on the ad links that appear on the bogus site, said de Souza, who estimated that click fraud affects 10 percent to 20 percent of today's search network ads.
Many policing technologies can counter click fraud by analysing Web traffic logs or surfing behavior. If a page is turned every 1.8 seconds over a period of time, for example, fraud-detecting systems will flag the traffic as suspiciously uniform.
Covert clicks
Human operations can be more difficult to detect because a wide network of people can click on ads from different computers across many regions, without a steady pattern. According to a report in the India Times, residents are being hired to click paid links from home, with the hopes of making between $100 to $200 per month.
In other instances, the source of bogus clicks can be much closer to home.
Joe, the chief executive of an Internet marketing company, enjoys clicking on his rivals' text ads on Google and Yahoo because his competitor must pay as much as $15 each time he does it. Eventually, such phantom clicks can add up and drain a rival's budget.
"It's an entertainment," said the executive, who asked to keep his name and company anonymous. "Why do you run into a store without dropping a quarter in the meter? You know it's wrong, but you do it."
Kevin Lee, chief executive of search marketing firm Did-It, estimates that fraud from such "drive-by" competitive clicks and affiliate scams makes up about 5 percent of the industry's total sales. Lee concedes that he can only guess at the number, but he does know one thing for sure:
If it gets much higher, he said, "then we should all be getting worried."
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Who is paying who for the clicks?
If Google gets paid by the advertiser, who is paying the people making the fraudulent clicks?