Click Fraud a $1.3 Billion Problem

Verne Kopytoff reports on a new click-fraud study released by Outsell, Inc. The study interviewed 407 online advertisers and led to an estimation that more than $800 million of clicks in 2005 were fraudulent and estimates $1.3 billion of fraud this year.

What else did the study discover?

Clicks believed by advertisers to be fraudulent: 14.6 percent

Money paid by advertisers for bogus clicks: $800 million (2005)

Advertisers who said they were victims of click fraud: 75 percent

Advertisers who said they reduced click-based advertising or plan to: 37 percent

Revenue lost by Google, Yahoo and other Web sites, as a result: $500 million

Advertisers who request refunds because of fraud: 7 percent

Average refund: $9,507

Outsell appears to be a legit market research firm with no hidden agendas on click-fraud (unlike many report publishers) other than to sell you their report.

Hat-tip to Barry.

  • http://www.blogger.com/profile/11960618 Al Scillitani

    Maybe I am wrong, but this “survey” seems too biased to be true. Reasons I think this way:
    1. They surveyed 407 companies. 407 seems very low as a test sample. It also mentions that they were from a “cross-section” of businesses. The business verticles need to be listed. I would bet click fraud is found more in the mortgage industry, online gambling, credit cards, etc..
    2. 75% were victims of click fraud? Is this based on the advertiser who feels they were a victim or are these actual victims? I have been in hundreds of accounts and click fraud was found three times. Once in a 7search and miva account, which after one email was cleared up, and once when Google actually sent the client a letter stating that they found some click fraud and would reimburse them.
    3. are these companies using search marketing firms to manage their paid search or are they managing it themselves? If the advertiser is managing the accounts and bidding on terms, for example, that are too broad, I would think they are more likely to be a victim of click fraud.
    4. After reading the article by Outsell, I almost get the feeling there is another agenda behind their findings. Their statements just do not make any sense to me:
    “Pay per click is a really rudimentary advertising — a baby step — and it’s destined to decline and be replaced by other advertising methods,” Richard said.”

    “Richard said that dissatisfaction with click-based advertising is fueling the drive to a different type of online marketing that he insists is better for merchants.”

  • http://www.blogger.com/profile/9477335 Craig Danuloff

    As Danny Sullivan points out they first ask advertisers to estimate, then extrapolate everything else. Not what I would take to the bank. I’ve written another page of thoughts on it here:
    http://blogs.commerce360.com/archives/paid_search_marketing/click_fraud_is_bad_click_suicide_is_wors.html

  • http://www.blogger.com/profile/11960618 Al Scillitani

    Craig,
    Great article. I am not sure we will ever have exact click fraud numbers, but the Outsell type articles only add fuel to the fire and increase customers “feelings” that they were victims of click fraud.
    I am not sure why, but I still get a feeling that there was something else behind this article. The constant paid search bashing within the article doesn’t make sense to me.