2006 Prediction #3: Click-fraud Goes Mainstream

Click-fraud — competitors and fraudsters using programs to click on online ads — will finally go mainstream this year. There are multiple class action suits seeking certification in the area, and at least one of them will obtain certification in 2006, bringing a whole new level of attention to the very big problem for Google (and others).

With some estimating that in certain categories click-fraud accounts for as much as 20% of fees, this is a stock-schwacking issue, one that threatens the core of Google’s advertising business.

The coming year will be the one when companies are forced to come public about how they are taking the issue seriously. There will be much mainstream chatter about mob tactics, protection rackets, and offshore click farms — and huge threatened penalties to search-ad companies that don’t police themselves more effectively than they have to date. Heck, you might even see 60 Minutes on the case.

[Update] And it’s happening already. Wired magazine just went live on its site with a sobering Charles Mann feature piece about click-fraud. It contains stories about categories in which click-fraud is alleged to be as high as 40-percent.

Here’s Mann on the consequences of rampant click-fraud:

If [click-fraud continues to grow], the consequences will be felt throughout the Net. By splitting revenue with the sites that host the ads, search engines have become, in effect, the Internet’s venture capitalists, funding the content that attracts people to the computer screen. Unlike the VCs who backed the boom-era Internet, search engines now provide revenue to thousands of wildly diverse sites at little up-front cost to them - PPC advertising is one of the few income sources available to bloggers, for instance. If rampant click fraud overwhelms the system, it will muffle the Internet’s fabulous cacophony of voices.

Related posts:

  1. Click-Fraud and the Economics of Anonymity
  2. 2006 Prediction #1: The Revenge of Jayson Blair
  3. Pickens Stock Fraud Fax
  4. Web Analytics as Free-Fire Zone
  5. Spy vs. Spy: Detecting E-Commerce Fraud

Comments

  1. Hashim says:

    what’s the difference between a bot clicking an ad, and a person who’s slighty interested but doesn’t buy anything?
    There is no difference. You have to adjust your bid to account for ANY click-throughs that don’t equal a buy.
    And that’s still a better deal than traditional advertising, where you just throw your stuff out there and hope it converts a few buyers.
    So, what’s the “very big problem”?

  2. Paul K. says:

    Hashim — Are you really equating the innocent actions of a curious shopper with someone consciously manipulating clicks to defraud an advertiser? Granted, both require an implict discount to come up with the real click-through number, but getting to that real number is highly problematic when you can’t tell one from the other.

  3. grumpY! says:

    fraud is going to be a major issue, because it is so rampant. but thats just one surprise for relevance text ads. once yahoo and microsoft enter this market, prices are going to drop and competitors will make bold claims about being fraud resistant, which will only serve to raise public awareness of click fraud, which will impact the entire market.
    will it directly impact share prices in 2006? tough to say, but both google and yahoo have topped for now.

  4. It is absolutely disgusting how Google has consciously chosen to sidestep the issue of click fraud.
    Aside from the courts not (yet?) recognising that click fraud is actually fraud, it is unethical to, say the least, that Google is quite OK with up to 30% of it’s revenues coming in as a result of their customers buying fake sales leads.
    Alas, I am still waiting for the decision that will finally outlaw click fraud.
    If I were smarter, I would have started something like clickdetective.com a year ago.

  5. fhl says:

    Agree with the first poster. Advertisers should simply adjust their bids to reflect how much real business they will get. While this is all a painful nuisance, and will result in some p/e’s being downsized, it will not destroy ad market or companies.

  6. Geektronica says:

    Great prediction – I was disgusted when I heard that some lawyer-friendly keywords were over $100 a click – you know click fraud is on the way when those kind of rates start appearing.
    N.B.: In Firefox, the letterspacing on this site is narrow enough that “click fraud” looks like “dick fraud,” as the C and the L run together and look like a d. Just wanted to point that out.

  7. “as much as 20% of fees”
    “which click-fraud is alleged to be as high as 40-percent”
    No real facts. Just hearsay, speculation and double talk. I’m going to predict you are wrong on this one.

  8. “as much as 20% of fees”
    “which click-fraud is alleged to be as high as 40-percent”
    No real facts. Just hearsay, speculation and double talk. I’m going to predict you are wrong on this one.

  9. Nudecybot says:

    As the Wired magazine duly notes, one reason why click fraud is so popular is the cost per click is almost nil but the impact can be significant. To really deal with this problem we need a way to instrument the actual purchases so that only the expensive kinds of clicks (those resulting in sales are used). It is very hard to see how such a system might work (since not all sites are e-commerce shopping carts) but I hope some folks are looking at this!
    I agree that click fraud is only going to get FAR worse this year since the mainstream is starting to catch on, its kind of like the early days of spam. There is a potential for unchecked growth and the mechanisms to combat click fraud don’t seem as sophiticated as many of the schemes I am reading about.

  10. Mark Ryder says:

    One of the biggest issues Overture/Yahoo must address quickly is that they do not allow you to block suspicious sites.
    We recently obtained a large refund on one campaign after tracking clicks and demonstrating that 80% of traffic was coming from one directory site and that clicks were coming through open proxys – yet the site concerned is still a search partner, and they offer no way of blocking it. I wonder if the other advertisers on the terms realise they are probably being ripped off?

  11. bill says:

    click fraud is still alvie and well.
    Just check out what this site is doing.
    http://autohits.dk/earn.asp?UserID=1099518447