Click Fraud Claims 28% Of Search Ads

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 |  Includes: AMZN, EXPE, GOOG, MSFT, NWS, TWX, YHOO
by: Daya Baran

According to Click Forensics, click fraud rates for content networks grew to 28.3% in Q4 2007. In other words, 28 cents from every dollar went to fraud. What this report is saying is 28.3% of [PPC] providers and publishers revenue/profits are attributed to fraud. I found it disturbing that the rate was so high and if concerned me that advertisers could use the information to take legal action against pay-per-click [PPC] providers and publishers to reclaim their ad spend. So I set out to clarify it.

I asked Click Forensics CEO Tom Cuthbert if he could provide me more information about the sample and ad spend size. A company spokesman responded:

Our data is derived from a statistically significant sample of live PPC campaigns from the 4,000 advertisers, agencies publishers. We do not share data on the spend size. However, our advertisers include top ten financial services, retail and travel companies as well as smaller businesses. It is representative of the search advertising industry as a whole and crosses multiple search engines and publisher networks.

"In 2007 we saw a significant jump in the industry average click fraud rate when compared with the average rate for 2006," said Tom Cuthbert, president and CEO of Click Forensics. "As the FBI and USAToday have reported, fraudsters are using more sophisticated means to perpetrate click fraud, including infiltrating mom-and-pop e-commerce sites. As a result it's more important than ever before for advertisers, publishers, ad networks and search engines to cooperate and share data in order to stem what's on target to be an even worse problem in 2008."

Some of key findings from the report include:

  • The overall industry average click fraud rate rose to 16.6 percent for Q4 2007. That's up from the 14.2 percent click fraud rate for the same quarter in 2006 and 16.2 percent for Q3 2007.
  • The average click fraud rate of PPC advertisements appearing on search engine content networks, including Google AdSense and the Yahoo Publisher Network, was 28.3 percent in Q4 2007. That's up from the 19.2 percent average click fraud rate for the same quarter in 2006 and 28.1 percent for Q3 2007.
  • The 2007 industry average click fraud rate grew by 15 percent over the industry average click fraud rate for 2006.
  • Q4 2007 click fraud traffic from botnets was 15 percent higher than click fraud traffic from botnets in Q3 2007.
  • In Q4 2007, the greatest percentage of click fraud originating from countries outside North America came from India (4.3 percent) Germany (3.9 percent) and South Korea (3.7 percent).