Click fraud scams on the increase

The amount of click fraud taking place on search giants such as Yahoo and Google has increased since the beginning of the year, despite efforts to curb the practice, according to research published on Monday.

Click fraud happens in pay-per-click online advertising when people or computer programs click on an advert and imitate legitimate users. This generates a fraudulent charge per click to the advertiser. Click-fraud scams can be perpetrated either by competitors trying to deplete rival marketing budgets, or by the advertisers themselves wishing to push their adverts up the search rankings.

According to a report published by click-fraud reporting service Click Forensics, the click fraud rate for tier one search providers, including Google and Yahoo, rose from 12.1 percent in the first quarter of the year to 12.8 percent in the second quarter.

For high-priced search terms — those that generate over $2 (£1.10) per click, and which often make up the majority of an advertiser's total spend — the click-fraud rate over the industry was 20.2 percent, according to the Click Forensics survey of over 1,300 advertisers and agencies.

"For the first time, we have industry data that clearly shows what many have expected — organisations purchasing higher-priced search terms are significantly more vulnerable to click fraud," said Tom Cuthbert, president and chief executive of Click Forensics, in a statement.

The overall industry average for click fraud rose to 14.1 percent in the second quarter, from 13.7 percent in the first quarter. The greatest percentage of click fraud, over 88 percent, originated from North America. Unwanted click activity originating from India increased by 26 percent between April and June 2006.

Google said in March that from an economic viewpoint it was logical to "let it happen", as reported by ZDNet.com's Donna Bogatin.

"Eventually the price that the advertiser is willing to pay for the conversion will decline because the advertiser will realise that these are bad clicks," said Eric Schmidt, Google chief executive officer, at a Stanford University event.

"In other words, the value of the ad declines. So, over some amount of time, the system is, in fact, self-correcting. In fact, there is a perfect economic solution, which is to let it happen," Schmidt added.

But, in practice, it is not in Google's interests to allow what advertisers currently pay decline, as a lot of its revenue is generated by advertising spend.

"The fact is that Google strives to detect every invalid click that passes through its system, and to prevent those clicks from ever reaching an advertiser's account," said Shuman Ghosemajumder, business product manager for trust and safety, in Google's blog.

In March this year, Google agreed a $90m (£50m) settlement of a class-action lawsuit over alleged click fraud. Some plaintiffs, though, are fighting this settlement.