How Click Fraud is Affecting the Online Advertising Industry
with Jon Waterman

  Recorded Live September 15, 2006

What is click fraud and why is it happening?

In the pay-per-click (PPC) business model, online advertisers pay the web site publishers that display their ads, for every click their ads receive. Click fraud is defined as illicit clicks on these display ads.

How is click fraud affecting the online advertising industry?

This problem has the potential to destroy the trust between online advertisers and the publisher networks and advertisers are losing big money.

What is the industry doing to fight this problem?

The large publisher networks are not forth coming with how the system is flawed, so it is up to vendors like Findology to protect the online advertisers and provide them with the tools to fight the problem.

Introducing Jon Waterman, Click Fraud Expert

In the 15th September, 2006 edition of the eMarketing talk show Cindy, Todd and Brooke interviewed Jon Waterman, the CEO of Findology Interactive Media and a pioneer in interactive search technology. As a recognized expert in identifying click fraud Jon was questioned about what click fraud is, why it is happening and what can be done to combat it.

What is click fraud and why is it happening?

In the first segment Jon explained that when you are offering publishers, distribution partner’s etc., advertisements to be paid for, there will be people out there who will try and benefit from it even more than they should.

He warned listeners that there are people out there who commit click fraud by building programs to perform a search and click on the ads.

Click fraud is usually carried out by using one or more of the following:
• Bots
• Spiders
• Automated programs
• Clicking on listings that will be paid for
• Competitor clicking

Jon felt that apart from these programs, bots and spiders another big problem is competitor clicking. He informed users that Findology had just put out a product called “Fraud ID” which is essentially a third party application that allows advertisers across all networks who are running different campaigns through different search engines to send out e mails and track their competitors’ IP addresses. Then these advertisers can make sure that the search engine that they are buying traffic from is not charging them for the traffic that is coming from these IP addresses and the providers in turn will not charge the advertiser for these clicks. Findology’s products can also block, stop, report and track these bots and spiders and track and report all the clicks coming through from all the search engines.

Jon added that if advertisers want to ensure that they get refunds for such fraudulent activity from their search engines they will have to provide high quality reports to them – e.g. reports on your IP address, keywords and the time stamp. All these details are very necessary and you can get them using Fraud ID and similar products available in the market.

How is click fraud affecting the online advertising industry?

The click fraud problem has a very negative impact on the trust between the advertisers and the publisher networks with the advertisers losing a lot of money. Jon stated, “Click fraud is simply making advertisers more aware and waking them up to recognize the need to track their conversions and traffic and to determine what type of traffic they are getting so that they are able to combat problems like click fraud while maintaining good conversion ratios for their products or services.”

When Cindy asked if click fraud is causing advertisers to prefer contextual advertising e.g. Google ad sense, Jon informed listeners that search based advertising is superior to contextual advertising because when a user performs an actual search and is shown a number of listings that are available for that search, he/she actually reads those listings and clicks on an ad and this makes the process more interactive, improves the quality and results in better bid prices.

Jon added that click fraud has led to a loss of trust between advertisers and publishers but that time will heal this as publishers make the necessary adjustments and create barriers for companies that are trying to cheat their advertisers. Advertisers are dependant on google publishers to generate traffic. Google and other search engines also have a role to play in controlling click fraud by not accepting downstream partners and having tools in place to stop fraudulent traffic from coming to their advertisers.

What Is The Industry Doing To Fight This Problem?

In this last segment, Cindy concluded that since the large publisher networks are not forthcoming about how the system is flawed, it is up to vendors like Findology to protect online advertisers and provide them with the tools to fight this problem.

Jon suggests that advertisers must monitor all the traffic sources that ads are being displayed on and if they don’t have visibility into these sources or can’t afford an in depth analysis, they must track the conversions because all advertisers know what their margins are more than anybody else. A little software and a little technology is essential to prove fraud and advertisers should either develop it themselves i.e. in house or buy it from a third party that has more experience.

Jon explained that the reports that Findology provides tracks the IP addresses of competitors by sending them customized e mails and then tracks all the traffic coming from these IP addresses. Apart from dealing with the menace of Competitor clicking, the Fraud ID reports show exactly what percentage of the traffic Findology believes to be automated bot traffic and provides users with a downloadable application that shows exactly what will be needed in the report that the advertiser must pass on to his/her traffic provider. Fraud ID can also track foreign traffic and this software can be used by advertisers across all the networks they are working on. Jon went on to add that each search engine wants to use its own metric and does not want to disclose what they do to determine click fraud.

In conclusion, Jon encouraged users to attend the conferences where advertisers can speak directly to people they are buying traffic from and inform them of these concerns.