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Click Fraud: A Legal Look

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Click fraud is a growing concern among search engine marketers, but who ultimately is to blame? Perhaps more importantly, what's being done to address this increasingly contentious issue?

A special report from the Search Engine Strategies 2005 Conference, February 28 - March 3, 2005, New York, NY.

A longer version of this story for Search Engine Watch members describes the legal options available to advertisers who suspect that they've been the victim of click fraud, and the steps required to gather evidence and supporting information to take action against it. Click here to learn more about becoming a member.

Questions swirl around the click fraud issue. Do the search engines need to police more? Is it the search marketer's responsibility to audit closely? Are those doing bogus clicking likely to face penalties? In this session, experts offered an overview of what's going on and examination of the legal issues with click fraud.

The flavors of click fraud

"Click fraud has gained a lot of notoriety in the last six months, certainly in the popular press," said Jeffrey Rohrs, President of Optiem LLC. "People understand the motivations that might be leading to fraudulent clicks, or as we termed in our panel back in Chicago, the non-converting clicks."

Some of the motivations of click fraud include financial gain, competitive advantage, revenge and blackmail. Jessie Stricchiola, founder of Alchemist Media, began by describing the financial gain click fraud "flavor."

"Google's AdSense program, generally speaking, allows the owner/webmaster of any web site—large, small, legitimate, or fluff—to become an AdSense partner," said Stricchiola. "The incentive to become an AdSense affiliate lies in the revenue received from Google based on the percentage of the per-click revenue for the traffic that AdSense affiliates sends to the AdWords ads published on their site(s)."

"Because approval and management of the AdSense program is primarily algorithmic and not human-edited as in Overture," she further explained, "there has been much room for abuse—basically webmasters setting up shop with web sites purely to host content for the delivery of AdWords. These webmasters create their own artificially-generated traffic by automated means—namely hitbots."

Therefore, in this instance of financial gain, opportunities exist to use the Google AdSense program to generate direct revenue for the fraudster.

Lori Weiman, Director at KeywordMax, described the competitive advantage click fraud "flavor."

"For example, suppose one search engine advertiser's ad is in a top position, a hot spot," she said, "and obviously others would like to be in that spot. One way to get the top bidder out of the hot spot is to stop using their keywords (on your ads) and run up your competitor's bill. The hope is that your competitor will walk away and the pricing on the first couple of ads starts to drop."

"We are not just talking about competitors clicking on your ad from curiosity nor a one-time click for information about your site," she said, "but rather about competitive click behavior that happens over a period of time—purposely to get try and get you to stop bidding."

Rohrs described the revenge motivation. "In an instance where a very highly targeted word relating to liability litigation had been bid at $10 a click, for example, somebody came in and had the audacity to bid on Overture for $99, thereby maxing out," he said. "If you understand the Overture system, it can resolve the next ad to down to the a penny below their competitor."

"One of the things that has always been inherent in the system is that if my ad is in the #2 position, and I see someone doing that type of bidding," Rohrs continued, "to pimp them, I can raise my bid up to $98.99, costing them $99 a click. But I will now resolve my ad down to a penny below the third bidder."

"The fourth click fraud 'flavor' is blackmail," he said. "This was the first instance where click fraud hit the national radar because someone who had a clickbot had the sense to send an email, stating that he could solve Google's problem if Google helped him out a bit."

Click fraud techniques

There are two primary methods of generating invalid, fraudulent clicks: manual clicking (by humans) and automated clicking (by software). "Additionally, the two primary initiators of click fraud are advertising competitors and CPC engine affiliates/traffic partners," Stricchiola explained. "What is important to understand is that both competitors and affiliates/traffic partners can and do use both click generation methods to varying degrees."

"For example, an advertiser can identify a single IP address associated with one of his competitors," she further explained. "And the advertiser can inform the CPC engine about traffic from that IP, which the CPC engines are perfectly willing to filter. However, that does not mean that additional traffic isn't coming from the same competitor from a different IP address in a different region—IP addresses which change dynamically and are not very identifiable as far as being able to tie them directly to a single static source. Quite often, there will be more than one advertiser that experiences competitor fraud. When two competitors contact each other and compare notes, these kinds of activities are discovered."

Search engine efforts

"Overture has historically been more willing to disclose traffic data to the advertiser during the refund negotiation process, which has helped resolve some click fraud issues more quickly," said Stricchiola. "Either by refund alone, or by refunding and modifying that advertiser's campaign filters."

"Google, on the other hand, has been very consistently resistant to providing advertisers with specific traffic data associated with refund clicks," she continued, "which is certainly cause for concern when advertisers are being issued arbitrary refunds and not being given any details about how they can better protect their campaigns. Often these refunds are of large amounts on credit cards long after the interest on that amount has been factored into the advertiser's credit card statement."

Weiman added that the second-tier PPC engines (Findwhat, Kanoodle, etc.) are not very proactive about issuing refunds. "But they seem to be very reactive in following the data you supply them," she said. "We showed them X number of clicks and the frequency was ten times that of the normal amount during a certain time period. If we had not stepped in, the advertiser could have been paying ten times what they should have."

From Raymond's perspective, a class action lawsuit is possible against the search engines. "Although there are a lot of impediments, one of them being the contract that everybody signs with the engines," he said. "Google is responsible for this. Advertisers have all signed contracts saying that Google is not responsible for fraudulent clicks. However, if Google does know in fact that this is ongoing and does nothing about it, they could very well end up liable, and advertisers can take action."

Grant Crowell is the CEO and Creative Director at Grantastic Designs, Inc. He has over 15 combined years of experience in the fields of print and online design, newspaper journalism, public relations, and publications.

Want to discuss or comment on this story? Join the Click Fraud Suit Filed Against Search Engines discussion in the Search Engine Watch forums.

A longer version of this story for Search Engine Watch members describes the legal options available to advertisers who suspect that they've been the victim of click fraud, and the steps required to gather evidence and supporting information to take action against it. Click here to learn more about becoming a member.

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