Posted March 18, 2008 5:21 pm by with 3 comments

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Yesterday at SES NY, Yahoo! partnered with Click Forensics to combat click fraud. Click Forensics will provide additional advertiser feedback to Yahoo! to help improve traffic quality for advertisers.

This is significant because both Yahoo and Google hold a precarious position – wanting to please their advertisers by providing quality traffic – and their shareholders – by selling more ads. Both have argued that click fraud data is a lot less than Click Forensics has claimed. Now they’re taking a bold step in letting Click Forensics play the intermediary.

According to an article in Forbes, Click Forensics recently put the overall click-fraud rate for the online advertising industry at 16.6% in the last quarter of 2007, up from 14.2% for the same period a year earlier. For contextual advertising the rates were even higher – with an estimated 28.3% of clicks being fraudulent, up from 19.2% for last quarter of 2006. Both Yahoo and Google argue that the number is lower.

There is click fraud when people accidentally or click on ads to cost the advertiser money, but there are more malicious types of click fraud. Those are machine-made clicks – when millions of PCs get downloaded with software that creates clicks.

Here are some key points of the Yahoo/Click Forensics Partnership:

  1. Advertisers will be able to use Click Forensics to anonymously share information that could help reduce click fraud.
  2. Yahoo! says they’re the first search engine to use a third-party to help reduce click fraud and help advertisers get a better return on investment.
  3. Click Forensics will be a click auditor and help advertisers better understand their click data.

Click Forensics recently announced they raised $10 million in a Series B funding round. The venture capital firm Sierra Ventures was the lead investor and existing investors Austin Ventures and Shasta Ventures also participated.

Click Forensics publishes the Click Fraud Index based on click data from some 4,000 companies. They also allow advertisers to block clicks from sites that send low quality traffic. No doubt they’ll also use the money to accommodate the new partnership announced just days after.

Update: Here’s Google’s approach to fighting click fraud.