July 17, 2006 1:25 PM PDT

Click fraud increasing, study finds

The rate of fraudulent clicks on search-related online ads rose to 14.1 percent last quarter, up from 13.7 percent for the first quarter, according to a study released Monday.

The click fraud industry average for high-priced terms--those costing the advertiser more than $2 per click--was 20.2 percent, while the click fraud rate at big search sites like Google and Yahoo was 12.8 percent, up from 12.1 percent in the first quarter, Click Forensics found in its study, which included a survey of more than 1,300 online marketers.

Click fraud occurs when ads are intentionally clicked on by either an advertiser's competitor or a Web site that gets a share of the revenue for each click. Search sites say they have the problem under control.

A different survey, focusing on slightly more than 400 advertisers and released several weeks ago from advisory firm Outsell, put the click fraud rate at 14.6 percent and the resulting lost revenue at $800 million a year.

Shuman Ghosemajumder, business product manager for trust and safety at Google, said the methodology of many click fraud reports, including that of the Click Forensics report, is flawed. For example, the survey does not take into account whether advertisers were charged for those fraudulent clicks, he said.

Another problem with such reports is that what looks like fraud as indicated by many clicks from a single Internet Protocol address is often due instead to the fact that large ISPs like AOL lump many users into one single IP address, and refreshing Web pages on a site can make it look like an additional click from an IP address, he said.

"The vast majority (of fraudulent clicks) are detected in real time and filtered out before they affect advertiser accounts," Ghosemajumder said.

Yahoo spokeswoman Gaude Paez said that it was difficult to comment on the validity of the study without knowing more about the methodology.

"One of the most pressing issues our industry faces right now is the lack of common standards and definitions around click fraud--advertisers are faced with numerous conflicting estimates and definitions, often promoted by companies that have a vested interest in selling click fraud solutions," Paez said.

"For this reason, Yahoo has committed to working with a reputable third party toward building industrywide efforts to combat click fraud, including development of industrywide definitions of click fraud and a comprehensive list of identified bots," she added.

A Microsoft spokesman said its AdCenter ad-serving platform analyzes search patterns to check for invalid clicks, among other measures. "Microsoft recognizes that invalid clicks, which include clicks sometimes referred to as 'click fraud,' are a serious issue for pay-per-click advertising," the spokesman said in a statement.

Last month, a federal judge gave preliminary approval to a click fraud settlement under which Yahoo would pay about $5 million in legal fees to advertisers.

Earlier this year, Google announced that it would pay $90 million in advertising credits and attorneys fees to settle a class action lawsuit over click fraud. A lawsuit designed to block the settlement has been filed by advertisers who claim Google is getting off too cheaply. A hearing in that case is set for July 24.

San Antonio-based consulting firm Click Forensics compiles its survey data into its Click Fraud Index, which is intended to help identify overall click fraud trends.

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