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FEATURE FOCUS: Estimating the Real Click Fraud Rate

by Nick Guastella, March 15, 2007

The controversy surrounding click fraud comes up every year, but it reached a fever pitch during December's Search Engine Strategies conference in Chicago when participants voiced concerns over experiencing fraudulent click rates ranging from 20 to 40 percent, threatening the entire paid search industry.

At the time, Google's Business Product Manager for Trust and Safety Shuman Ghosemajumder tried to calm advertisers' fears explaining that Google was currently "...examining ways to make its fraud-fighting efforts more transparent without revealing crucial information that might help swindlers elude detection." Ghosemajumder did, however, express concerns over revealing too much information, fearful it would give away algorithm secrets to competitors.

Paid Search Revenues Continue to Rise

While the major search providers have always insisted the click fraud rate is a gross overestimation, a 2005 Outsell survey found that click fraud was a $1.3 billion problem for publishers. At the time, many advertiser respondents (27 percent) said they planned to cut back and/or eliminate paid search campaigns in 2006.

Outsell respondents may have intended to cut down on paid search, but they certainly didn't follow through. SEMPO's year-end search marketing report showed that North American advertisers spent $8 billion on paid placement programs in 2006, amounting to 86 percent of 2006's total search spend ($9.4 billion). Seventy-one percent of SEMPO respondents said they used paid search campaigns, illustrating that there were not many defectors.

Despite advertiser's insistent claims that the search engines don't do enough to eliminate click fraud, paid search revenues continue to fill the coffers of Google, Yahoo, Microsoft and many second and third tier search engines Additionally, there is a huge gap in the professed prevalence of click fraud between the search providers and the advertisers and click fraud advocates.

Google Click Fraud Estimate

The rate of click fraud changes depending on who's numbers you believe. Click fraud detection agencies put the click fraud rate hovering around 14 percent, while others believe at least 20 percent of all clicks are fraudulent.

Late last month, Google issues a statement on the Inside AdWords blog that insisted invalid clicks consistently remain under 10, typically in the single-digits, and that virtually all malicious activity is found by Google's filter. Ghosemajumder claimed the percentage of clicks found by advertiser-initiated investigations account for just .02 percent of clicks. All other accounts, he said, are grossly overestimated.

Alchemist Media President Jessie Stricchiola takes issue with Google's assertion that it refunds advertisers promptly for fraudulent clicks, stating that "Google has been the most stubborn and the least willing to cooperate with advertisers".

Google Click Fraud Filters

In February, Google outlined the three-layer filtration process it uses to combat and eliminate click fraud. They described the system which uses both proactive and reactive filters as follows:

  1. Proactive Filters: Automated algorithms analyze and filter out invalid clicks in real-time without billing advertisers for these false clicks. This accounts for the vast majority of invalid click detection.

  2. Proactive Offline Analysis: Post billing, Google uses automated and manual analysis to identify fraudulent clicks that somehow made it through the first layer of filtration. Special attention is paid to clicks occurring on the AdSense network. This is done pro-actively and without any involvement from advertisers. When false clicks are found, advertisers' accounts are immediately credited via Click Quality Adjustments.

  3. Reactive Investigations: Investigations take place when an advertiser approaches Google concerned about suspicious activity on their account. Each complaint is investigated, though Google says refunds are relatively rare. Google claims that the vast majority of fraudulent clicks, more than 99 percent, are found and thrown out within the first two stages of filtration. The third stage only includes the .02 percent of clicks where advertisers are affected by undetected cases of click fraud.

Click Fraud Detection Agency Estimates

In April 2006, The Click Fraud Index reported an industry-wide average click fraud rate of 13.7 percent. The click fraud rate was broken down as follows:

  • Tier 1 search providers -- 12.1 percent
  • Tier 2 search providers -- 21.3 percent
  • Tier 3 search providers -- 29.8 percent

Some of the newer click fraud prevention firms like Click Assurance and ClickLab offer algorithm-based programs to limit bad clicks. These programs estimate the statistical likelihood of a click being fraudulent based on behavioral variables and IP address.

Gap in Prevalence of Click Fraud

As noted above, Google admits to a < 10 percent click fraud rate, while advertisers and click fraud detection agencies believe it is more like 14 to 20 percent. Ghosemajumder explained this gap saying that many advertisers and click fraud detection agencies are looking at the wrong signals, mistakenly classifying valid clicks as fraudulent. Additionally, he believes many advertisers request refunds for clicks already thrown out during the first two layers of the filtration system.

For example, misclassification might occur when counting reloads of an advertiser's landing page. Say the customer clicks through to the landing page, views a product page, and then hits the back button, returning to the same landing page. Without proper tagging, that one click and five page re-loads could be misclassified as 6 clicks from the same visitor. Google argues that there are hundreds of different signals that must be monitored to detect click fraud, signals that are a closely guarded company secret and known only to the Google click quality team.

A Solution for Click Fraud

Like other experts, we believe the only solution to click fraud is to for independent auditors to evaluate the system using accurate data provided by the search engines and advertisers themselves. It is the only way to get a neutral calculation -- the current click fraud detection agencies may not be entirely neutral, and certainly the search providers are not neutral. We need an independent agency that has no incentive to increase or decrease the click fraud rate. One solution could be to use a technology firm like Fair Isaac, which is currently conducting click fraud research for SEMPO.

One thing is certain, until advertisers are willing to provide campaign info, and the search engines are willing to share click fraud data, we'll never know the actual prevalence of click fraud or how much advertisers are losing as a result.


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