Yahoo appoints click fraud tsar

Yahoo has promoted one of its staff attorneys to an executive-level position that is akin to being click fraud tsar at the second largest web search provider.

For seven years, Reggie Davis helped the web search company defend itself against lawsuits by advertisers who claimed they were overcharged for pay-per-click ads that resulted from click fraud. Click fraud occurs when clicks are generated by people paid to click ads over and over or by automated software programs, usually for the purpose of boosting revenue for the website the ads appear on.

Now, Davis is the company's first vice president of marketplace quality, responsible for reducing the amount of click fraud and making sure advertisers and publishers are happy with the company's display and search listings.

"The mandate I've received... is to increase advertiser trust," he said in an interview on Wednesday, preceding the company's announcement planned for Thursday. "The goal is to develop the highest quality [advertising] network in reality, and in perception."

Click fraud has long been a thorn in the side of the major search engines, which historically have refused to disclose how big a problem it is. But Google and Yahoo have been slowly lifting the veil and providing more tools for advertisers to help prevent click fraud. Neither company will disclose their click fraud rates.

However, Davis said the "discard rate", or percentage of clicks that for some reason or another were problematic (and thus the advertiser is not billed), averaged between 12 percent and 15 percent at Yahoo. The rate of fraudulent clicks, those designed only to run up charges to the advertiser, is a "subset" of that total discard rate, he said.

Google claims that its discard rate is less than 10 percent and that its click fraud rate is in the single digits, or 9 percent or less. Click Forensics, which provides click fraud services and operates a Click Fraud Index survey of advertisers and agencies, pegs the click fraud rate for the top tier search engines at just under 12 percent.

Tom Cuthbert, president of Click Forensics, said the fact that Yahoo was creating a vice president position devoted to advertising system quality signals that the company is taking the issue of click fraud seriously.

"We believe Yahoo is taking a more honest approach than the others in talking about the scale of the problem," he said. "Advertisers can draw a conclusion by looking at the tracking to their site and looking at invoices. But there is still a big disparity between clicks that are bad and should not be paid for, and what advertisers are paying."

Last month, Google said it would give advertisers more information on how much they are saving by filtering out fraudulent clicks, and allow them to block specific IP addresses from receiving the ads. That move is designed to stop rivals from using click fraud to eat through a competitor's advertising budget and to prevent them from bidding on the ad's keyword for the purpose of using it in their own ads.

Both Google and Yahoo have settled click fraud class-action lawsuits and they are working with the Interactive Advertising Bureau and others to establish guidelines for quantifying click fraud. A hearing on a challenge to the settlement in Yahoo's click fraud lawsuit is scheduled for Monday, Davis said. The judge has already given preliminary approval to the settlement and Yahoo expects it will be granted final approval.

Reducing click fraud will boost Yahoo's efforts at marketing its new advertising system, dubbed Panama, which went live in October. The system offers features that are designed to make it more competitive with Google's more popular AdWords system. One major change, which mirrors AdWords, is that Panama determines the order of ads on factors such as relevancy and clickability, and not just the advertiser's bid price.