Posted May 18, 2007 11:38 am by with 6 comments

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By Greg Howlett.

A study conducted by Fair Isaacs has concluded that 10-15% of all advertising dollars spent on PPC search engine campaigns are wasted. 

A similar study from Click Forensics in January supports the Fair Isaac conclusion.  Not surprisingly, Google does not agree, claiming that click fraud accounts for less than 2% of actual advertising billing.

As intelligent as Google may be, it is absolutely impossible for them to detect all click fraud, and there is no question in my mind that this problem is far worse than they will admit.

As an advertiser, you should be conscious of the impact of click fraud on your business, and should take steps to combat it.  However, understand that you will never eliminate it completely.

So how can you effectively deal with this issue?  The answer is in the proper management of your PPC campaigns.  You should have reports that calculate your average profit/ visitor per keyword/traffic source.  For example, you should know what visitors coming from Google searching for the term “widget” are worth in initial profit and lifetime profit.  You can then bid accordingly.  If you follow this strategy, click fraud will automatically be accounted for.

There are few off-the-shelf software packages that can provide this level of detail. Here at Vitabase, our reporting is all written in house because we know of no solution on the market that calculates the most important metric–lifetime profit per visitor.  However, to survive in a PPC environment, it is becoming increasingly important that you have sophisticated reporting that can provide you with this metric on a very detailed level.

If you see the lifetime profit per visitor dropping, it could be an indication of click fraud, or it could be any number of other factors.  Good reporting will at least tip you off that a problem exists.

So, click fraud is a cost of doing business that you will never eliminate.  However if you focus on the bigger picture–maximizing your profit per visitor–you may find that your efforts are better spent in other areas such as site conversion or ways to make your customers purchase more often.

About Greg Howlett

Having launched two multi-million dollar online companies, Greg Howlett has been working in the trenches of internet marketing for over eight years.  He currently is the President/CEO of Vitabase, a leading health supplement company, selling hundreds of products under the Vitabase label.

  • PPC giants should control PPC, but not let us do this. That’s for what “Anti Fraud/Clicks” management getting paid for.

    Some of them allow small % of fraud, as long as advertisers don’t complain much.

  • When advertisers are bidding $35+ for a single click you have to expect a certain amount of click-fraud.

    I can’t imagine there being a lot of click fraud for the cheap ($0.10 and under) keywords because you would have to do so many fraudulent clicks that you would get caught in no time.

  • Steve,

    Click fraud doesn’t work like only competitors clicks on ads, or something like this.

    For example, you open PPC site, get XML feed (take listings) from some 2nd/3rd tier PPC’s and start sending bots traffic, even if bot clicks on low keywords, like 10c per click as you said, you get 1000 clicks daily, 0.1 * 1000 = 100 USD per day, that’s about 3000 USD per month for nothing.

    The fact, that they need to clear their networks.

  • I just would like to add that new bot systems clicks many times, ip’s are differenet, even contries are different (but there are some ways to catch them) and it does look like real traffic.

    If I would be head of the (let’s say Adsense anti fraud management), I would study all that stuff more carefully, as I think even I have such a chance with my system, can’t be that big guys don’t have very powerfull clicks management systems.

  • With all that bot activity doesn’t Google notice when a site starts generating large income from AdSense with a high CTR? I know from my own experience with AdSense that my CTR is always low, very low, often below 1%.

    Google must flag accounts for review when they hit a certain income or CTR level.

  • Google do offer special offers for high traffic sites (domain parking).

    From there you get XML feed which you integrate in your site. Then flood it with lots of searches (which is easy), you join few XML feeds, as clicks won’t go to one site only. After other stuff and affiliate it looks like natural.

    100 000 searches/views, 1k clicks to each feed let’s say. CTR becomes very low…