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In theory the pay per click networks such as Google Adwords and Yahoo! Search Marketing have had click fraud detection covered for a while by blocking the charging of multiple clicks from the same IP within short time periods – but this has never been explained, or it has to be said, believed, in its entirety. Industry reports say fraudulent clicks range from about fourteen percent to as high as twenty percent of total clicks. Now Google is revealing all and settling claims made in a class-action lawsuit from advertisers at a cost of ninety million dollars.

Broadly speaking ‘click fraud’ is the term given to advertising revenue paid out for a click on an online advert which is deliberately wasted by a ‘fraudster’. A fraudster can be defined as either a competitor wishing to use up the pay per click budget of a rival, or a webmaster who earns commission on clicks made on adverts appearing on his or her website. The latter seems more ‘fraudulent’ whereas the former does not, since there is no direct financial gain to a competitor.

Google will give advertising credits that are the equivalent of a $3.80 refund on every $1,000 spent in its advertising network during the past four and a half years. This follows an independent examination of Google’s click-fraud detection methods by a New York University computer science expert Alexander Tuzhilin. New columns of data available within the Google Adwords campaign reporting interface will show excluded fraudulent click statistics and monies saved. This to put the minds of pay per click advertisers at ease, and prove that Google really do reduce click charges on customer accounts.

I have dabbled in deliberate click fraud myself to remove a competitor from a rival keyword using Yahoo! Search Marketing, and it has worked on small campaigns. I recall one instance where an ‘amateur’ pay per click marketer had set their maximum bid amount to £10 – for all to see (a big mistake). This gave them the number one position on a series of keywords, that is, until I raised my bids to £9.99 forcing them to pay the full £10 per click. At this point I clicked on their adverts a few times and had some freelancers do the same until the budget was exhausted and the adverts were gone. After that it’s just a case of adjusting bids back down to maintain the number one slot at a more reasonable maximum cost per click without that inconvenient competitor.

Given that this click fraud technique did work, it proved to me that fraud monitoring wasn’t stopping it from being a valid method for improving online advertising exposure. It is for this reason that I have never allowed any of my clients to enter the dicey world of contextual advertising, the temptation from webmasters to click their own adverts or employ people to do that for them is too great a concern to me (because yes, I’ve done that myself too…). I’ll be interested to see if a lawsuit follows against other pay per click networks such as Yahoo! Search Marketing a network which predates Google Adwords by a couple of years under the former brands of ’GOTO’ and ‘Overture’.

MSN Money: Judge OKs $90M ‘Click Fraud’ Settlement
Google Adwords Blog - Tracking Invalid Clicks

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