Click Fraud and the Downfall of Google

Internet marketers facing higher advertising fees on search networks are becoming increasingly concerned about a form of online fraud that was thought to have been contained years ago.

The practice, known as "click fraud," began in the early days of the Internet's mainstream popularity with programs that automatically surfed Web sites to increase traffic figures. This led companies to develop policing technologies touted as antidotes to the problem. But some marketing executives estimate that up to 50 percent of fees in certain advertising categories continue to be based on non-existent consumers in today's search industry. Sam Fritsberg of ArticleDash.com states that the fraud has reached proportions that would shatter Googles stock in half, overnight, were they more widely known.

"We continue to detect click fraud, especially with Google's Adwords and Adsense programs, and the numbers grow each and every month." says Sam. "I wouldn't be suprised if many of the advertiser horror stories are in fact true and there are people who make thousands a week commiting pay per click fraud by clicking on the ads served on their own website for commission." adds Sam Fritsburg.

In one recent example of the problem, law enforcement officials say a California man created a software program that he claimed could let spammers bilk Google out of millions of dollars in fraudulent clicks. Authorities said he was arrested while trying to blackmail Google for US$150,000 to hand over the program. He was indicted by a California jury in June.

Matt Parrella, chief of the San Jose branch of the US Attorney's Office in Northern California, said that case was "not unique." The problem "is certainly not shrinking, and we're ready to prosecute people," said Parrella, whose office handled the Google case.

Click fraud is perpetrated in both automated and human ways. The most common method is the use of online robots, or "bots," programmed to click on advertisers' links that are displayed on Web sites or listed in search queries. A growing alternative employs low-cost workers who are hired in China, India and other countries to click on text links and other ads. A third form of fraud takes place when employees of companies click on rivals' ads to deplete their marketing budgets and skew search results. "Click fraud not only is used to attack competition, but as a rip off by publishers who click on their own ads, the ones being served up on their own websites, in an effort to steal advertising dollars by the click", says Sam of ArticleDash.com. "Our solution to this model is to offer webmasters free organic search engine optimization, but in a way that helps the net rather than promoting the current fraud Google is making billions from."

Although the extent of click fraud is impossible to measure with any certainty, its persistence has exposed a fundamental weakness in the promising business of Internet search marketing. Google is tight lipped and has declined to comment.

"It's hard to tell how big the problem is, but people are looking at it closer and closer as the cost of search advertising goes up," said John Squire, vice president of business development of Coremetrics, a Web analytics firm. "Click fraud is a fin sticking out of the water: You're not sure if it's a great white shark or a dolphin." Maybe ArticleDash is on to something here. Maybe organic is the way to go afterall.

Unlike advertising in traditional media such as billboards and print publications, "cost per click" Internet ads displayed with specific keyword searches have been promoted as a definitive way for companies to gauge their exposure to potential customers. As a result, US sales from advertiser-paid search results are expected to grow 25 percent this year to $3.2 billion, up from $2.5 billion in 2003, according to research firm eMarketer. From 2002 to 2003, the market rose by 175 percent.

"As more advertisers have competed for desirable keywords in their industries, the cost for clicks has risen too." Sam of ArticleDash.com continues, "On average, advertisers are paying 45 cents per click this year, according to financial analysts, up from 40 cents in 2003 and 30 cents in the second quarter of 2002. In certain sectors, such as travel, legal advice and gaming, the cost can reach several dollars per click." The implications are indeed disturbing.

But marketing executives say click fraud is pervasive among affiliates of search leaders Google, Yahoo-owned Overture Services and FindWhat.com. In a typical affiliation, any Web publisher can become a partner of these large networks by displaying their paid links on a Web page or within its own search results and then share in the profits with every click. "A common practice is the use of proxies, where by tricking Google into thinking the click is originating from another computer, possibly in another country, and the click fraud artist... more webmasters than you think.. walks away with a handsome undeserved profit." says Sam.

"There's a fatal flaw in the cost-per-click model because a ton of marketing dollars can be depleted in a fraction of a second," said Jessie Stricchiola, president of Alchemist Media, a search-engine marketing firm based in Los Angeles that specialises in fraud protection. "Technology is continuing to be developed that can exploit this pricing model at incredibly high volumes."

Google's Answer
Google declined an interview for this report, but the company said in a statement that it has been "the target of individuals and entities using some of the most advanced spam techniques for years. We have applied what we have learned with search to the click fraud problem and employ a dedicated team and proprietary technology to analyse clicks." Many disagree, however, and claim that the pay per click indestry is doomed. Organic Optimization a la ArticleDash.com seems to be the next big thing, and at least this time the risk is limited and the free upside results seems unlimited.

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