E-commerce Insights: All You Should Know About Click Fraud

Catalogers and other search advertisers are justly concerned about click fraud. Click fraud is when a person (or computer) imitates a legitimate user clicking on a pay-per-click ad, without actual interest in the ad’s target.

Like Justice Potter Stewart’s definition of pornography — “I know it when I see it” — click fraud escapes precise definition. To know when a click is fraudulent, one needs to know the clicker’s internal motivation for clicking or be able to prove the clicker was an automated ’bot. Most experts agree that few individual clicks are “good” or “bad.” Instead, investigators assign quality scores that indicate the probability that a click is legit.

Rare or Rampant?

Specialized companies have sprung up to help retailers track click fraud. Such firms have reason to overestimate click fraud prevalence. Last August, Google analyzed some third-party click fraud reports and found serious errors. (See How Fictitious Clicks Occur in Third-Party Click Fraud Audit Reports, at www.google.com/adwords/ReportonThird-PartyClickFraudAuditing.pdf.)

“It’s unclear how exaggerated click fraud estimates are developed, but they very likely reflect self-interest to hype the problem,” Google spokesperson Barry Schnitt tells me. “The reports often include clicks we’ve already filtered and aren’t charged to advertisers.”

Conversely, search engines have motivation to underestimate the problem. Google CFO George Reyes recently labeled click fraud “the biggest threat” faced by the Internet economy. What’s more, Google’s 2006 annual report warns, “If we fail to detect click fraud or other invalid clicks, we could lose the confidence of our advertisers, thereby causing our business to suffer.”

The key issue is advertiser confidence. Since advertisers can’t audit how engines actually charge for clicks, maintaining advertiser trust is essential.

Strategic Detection

Click fraud detection companies employ different strategies. For example, ClickForensics.com, a research firm created to develop an industry solution to click fraud, stresses the importance of pooling data. Authenticlick.net relies on data-mining techniques. And the Web analytics firm ClickTracks.com opts for human investigation of unusual cases.