Click Fraud and the Emperor’s New Clothes

I am going to start this click fraud article the way I wish all other click fraud articles would start, by stating it is based on my opinion. Yes, I may show some stats, yes I may show some quotes, yes I may sound very confident in my words, but they are my opinion and are subjective. I think if all click fraud articles and surveys started this way, the perception of click fraud would be a lot different.

Click Fraud, An Interview With Myself:

Is click fraud real?
Yes, click fraud is real and it is happening, I have seen it myself.

Is click fraud out of control?
No. I do believe it is happening, but mostly to the more competitive “cut throat” industries. I would also guess it is happening more to industries that have affiliate programs. The affiliate programs increase competition for your terms. I would be surprised if it was heavily impacting more than 10% of all companies using paid search.

Should we hire someone to check our web logs and monitor for click fraud?
Probably not. My advice would be to look at your logs, or hire someone to do it, one time. Cover several days/weeks as needed. If you do not see mass amounts click fraud, then your answer is no. Maybe just complete a review quarterly if needed. If you do see suspicious activity, then yes, maybe you do need to have someone review your logs daily/weekly. Remember, if you see a lot of clicks coming from the same IP, it may be AOL, Earthlink, or some other internet service provider. Clicks coming from people using these services may show up as one IP.

Why in the above answer did you write “then maybe you do need to have someone review your logs?”
Great question! Here is an example of why I wrote this. Let’s say you are the store manager of Walmart. Completing an audit, you realize someone is stealing a $1 pack of gum everyday. This upsets you, but you have 2 choices: 1. buy more security cameras for thousands of dollars and hire an hourly security guard for $50/hour or 2. Say to yourself, this is part of doing business and spending thousands of dollars every week to save $7 a week is ridiculous.
No I do not approve of stealing, but it is reality. Brick and mortar stores have to deal with it, why not online stores? I am not saying you should not do anything about it, I am saying you need to evaluate the problem: does it exist for you and, if so, is it worth the money and time to find, try to prevent, and request a refunds.

Is click fraud 100% preventable?
I do not think so. You can reduce your chances of becoming a victim or reduce the amount of click fraud to your account, but not 100% prevent it. Few ways to help:

Bid on the correct terms for your account. If you sell “green 3×5 index cards” only, do not bid on the term “paper.”

Use phrase and exact match as often as possible

The top 3 positions are the most competitive and would increase your chances of click fraud. Sometimes, being in the top 3 is not always best (besides the click fraud aspect of it). Check your ROI (revenue/ad costx100). You may find these positions are costing more than they are bringing in.

Is your “content match” or “site-targeted campaigns” on? Test the account with them off.

The press click fraud is getting and exaggerated stories/surveys are inflating the issue. If everyone keeps hearing about what a problem it is, next thing you know, it is a big problem.
I feel click fraud is a part of business and you can put prevention measures in place just like your local store can “reduce” their theft with theft prevention measures, but it is not as big of a problem that most perceive it to be.

  • http://www.acorg.com MikeOK

    Al, Andy and I had a difference of opinion on the use of a “shrinkage” analogy here a while back. In the case of Walmart, it COSTS them money for the shrinkage. They are the only ones effected and if they choose to let the $7 a week as “part of doing business”, that is their decision. The face of click fraud is different in that the ad seller BENEFITS from the “shrinkage”. That leaves very little incentive for them to do anything or admit to anything. If it were the same thing, Walmart would be asking people with trucks to come around back and load up while “we’re not looking”.
    I do agree that best thing a business can do is make sure their ROI is within an acceptable range. All other factors are just red herrings. The business owner is launching the campaign in hopes to attract new customers. If that happens, everyone should be happy regardless of the percentage of click fraud. (BTW, which I believe is getting higher by the month)

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

    Mikeok, Thank you for the comment. As far as loading up trucks…
    Of course they do not want to loose the $7, but they have to compare the cost of prevention to the actual cost lost. As mentioned in my article, it doesn’t make much sense to spend $1000 to get back $7.
    As far as the ad seller benefiting from this. I agree with you. The engines are not doing enough to protect their customers, but that can be an entirely different article :)

  • Funk

    What would the engines do to stop this? nothing. The money does not come out of their pockets. I think proper bidding strategies is the key to combating this. Just look at the morons who bid jam back and forth on Yahoo! You know the number 2 guy is clicking that first ad and costing the #1 guy $10.like Al has said…sit in the 3/4-8 spots…bid smart and you won’t have problems…

  • Anonymous

    ROI ( [Revenue - Cost]/Cost)

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