Click Fraud Concerns Hound Google

[Reprobate]

John Thys still hasn't figured out how much his company has paid Google Inc. for bogus sales referrals caused by "click fraud" — a sham aimed at a perceived weakness in the Internet search leader's lucrative advertising network.

But Thys says he has uncovered enough of it to conclude that Google is trying to shortchange his company and thousands of other advertisers by offering refunds totaling $60 million to settle a lawsuit.

"It's almost like an insult that they expect us to take this token money," said Thys, director of Internet marketing for Radiator.com.

Google also expects to pay $30 million to the lawyers who settled the case on behalf of advertisers, raising the settlement's total value to as high as $90 million. Still, that's a fraction of the more than $10 billion in cash held by the Mountain View, Calif.-based search company.

An Arkansas judge is expected to consider the proposed class-action settlement in late July.

The refunds, which will be provided in the form of advertising credits, are meant to compensate Google's customers for undetected click fraud, which contributed to the $13.3 billion in ad revenue that has poured into the company since 2001.

Google's offer works out to a $4.50 refund on every $1,000 spent in its vast advertising network over the past 4 1/4 years.

Meanwhile, independent studies assert that anywhere from $100 to $400 of every $1,000 stems from click fraud. If those estimates prove correct, Google might be on the hook for $1 billion to $5 billion in advertising refunds.

Click fraud takes different shapes, but the end result is usually the same: Merchants are billed for fruitless traffic generated by scam artists and mischief makers who repeatedly click on an advertiser's Web link with no intention of buying anything.

Based on a monthlong analysis of the traffic that Google ads referred to Radiators.com, Thys suspects click fraud may have accounted for 35 percent of the Web site's $20,000 ad bill.

After reviewing Thys' evidence, Google said its internal safeguards had spotted the suspicious activity as it occurred and never billed Radiators.com for fraudulent clicks. But Thys said the search engine didn't provide him with any data to back up its findings in an e-mail signed simply by "Ray" from Google's click quality team.

Google maintains its class-action settlement represents a fair offer that underscores how well it has shielded advertisers from the costs of click fraud.

The class-action settlement of the Arkansas lawsuit will likely test advertisers' faith in Google. The company is supposed to send out notices of the settlement later this month, giving advertisers until late June to reject or protest the refund offer. Radiators.com already has decided to reject the offer.

If the entire deal is rejected, lawyers then go back to the negotiating table; individual advertisers can also declare they won't participate, freeing them to file their own lawsuits seeking better deals or join a separate one pending in California.

Miller County Circuit Court Judge Joe Griffin is scheduled to decide whether to approve the settlement in a two-day hearing beginning July 24.

Meanwhile, Yahoo Inc. owner of the Internet's second-largest advertising network — continues to fight similar click fraud allegations in the same Arkansas court as well as a federal court in California. A click-fraud lawsuit filed against Google in that same federal court has been suspended while its Arkansas settlement is reviewed.

The Google settlement, announced in early March, already has focused more attention on click fraud.

The shady activity produces revenue for Google, Yahoo and a long list of Web sites that display the ads because the clicks trigger sales commissions even if a referral doesn't produce a sale.

Suspected motives vary. Sometimes Web merchants try to deplete a rival's advertising budget. In other instances, the owners of small Web sites participating in the marketing networks run by Google and Yahoo are believed to click on ads to generate more commissions for themselves.

Complicating the click fraud issue even further, search engine advertising isn't subjected to independent auditing like the advertising done in newspapers, magazines and broadcast media.

In search advertising, Web site owners sign contracts obligating them to pay for all valid clicks — and the search engine has discretion over what is valid.

Google is examining ways to make its fraud-fighting efforts more transparent without revealing crucial information that might help swindlers elude detection, said Shuman Ghosemajumder, the company's product manager for trust and safety.

Outside help also may be on the way.

The class-action settlement requires a report from a yet-undisclosed independent expert to verify that Google has made reasonable efforts to weed out click fraud.

Separately, Minneapolis-based Fair Isaac Co. is studying the issue, drawing on its years of helping lenders fight fraud.

San Antonio-based Click Forensics Inc. recently set up a free service that intends to issue quarterly reports on the frequency of click fraud, compiling information from more than 1,000 advertisers.

The index's initial findings, released in late April, estimated Google and Yahoo suffered a click fraud rate of 12 percent, translating to more than $1.5 billion of Google's ad revenue.

Given those findings, the settlement amount in the Arkansas class action "was very surprising to us," said Tom Cuthbert, Click Forensics' chief executive. "If I were an advertiser, I would take great care in studying that settlement."

Attorneys suing Google in the California case say they will do everything possible to persuade advertisers to reject the Arkansas settlement.

"Google's motto is 'do no evil,' but it's not following its own advice by entering into this kind of settlement," lawyer Brian Kabateck said.

If enough advertisers balk, it might derail the deal. Google has the right to nullify the settlement if advertisers that supplied more than 5 percent of its revenue since 2001 reject the agreement.

Google spokesman Barry Schnitt said Kabateck and his colleagues are trying to rally opposition to the Arkansas settlement so they can revive the California lawsuit in an attempt to drum up more fees for themselves.

Stephen Malouf, a Dallas lawyer who negotiated the Arkansas settlement, doubts advertisers can get a better deal than what Google has offered. "It's easy to take cheap shots now, but what is the alternative and what are the chances of success?"

Source (http://news.yahoo.com/s/ap/20060508/ap_on_hi_te/google_click_fraud_2)

[Sbabb]

Hmmm. It's an Associated Press but you gotta love the way Yahoo spins it on their site by posting "related stories" links below it to articles on how great the Yahoo PPC program is.

[Chris]

This is the achilles heal of the contextual advertising world or any PPC advertising online - click fraud. I don't know what the solution will be over the coming years but it is probably the one thing that could really stop Adsense and YPN if it gets out of control.

[Reprobate]

The fact of the matter is, if there's a way to make money, there will always be someone trying to exploit it.

[Sbabb]

I don't know what the situation is outside the U.S. but our media here seems to be obsessed with demonizing the internet. Perhaps they see it as competition to their entrenched monopolies. You can hardly go a day without hearing about internet identity theft, internet stalkers, etc. on the news. Never mind that most of the stories they're reporting are about things that happen more commonly OFF-line than they do on-line, they just love to do stories about how evil the internet is.

My point is, click fraud is bad, no doubt. But it appears to be a tiny fraction of the total AdSense picture. Is the click fraud rate as big as the rate of bad things that happen in off-line advertising? Nobody seems to care. It's an "internet" thing, so it gets sensationalized. There's not as much buzz in a story about mail carriers throwing away thousands of bulk mail advertisement letters at the local dumpster, just to make their load lighter. That sounds a bit like some kind of click hijacking fraud to me!

And nobody seems too worried about the incredibly high percentage of people who order your free (to them anyway, but costly to you) product literature package but never buy anything. Wouldn't that be the same thing as the evil "curiosity clicks?"

The internet makes things faster and easier, both for the "good guys" and for the "bad guys." People need to get over the idea that the internet is going to be some kind of utopia where bad stuff never happens. It's just like the real world. There will be click fraud, just like there will be people who staple their competeing ads over the ones you posted yesterday in the real world. It's a people thing, not an internet thing.

[Reprobate]

The fact of the matter is, if there's a way to make money, there will always be someone trying to exploit it.
But that's not to say it's good or a necessary evil.

The more that Google works towards eliminating it the better for their adwords advertising clients and ultimately us, the Adsense Advertisters who do the right thing, because ultimately doing the right thing is the easiest thing to do over the long haul.

[Aderemi Ojikutu]

...Google's offer works out to a $4.50 refund on every $1,000 spent in its vast advertising network over the past 4 1/4 years.

...Meanwhile, independent studies assert that anywhere from $100 to $400 of
The Google settlement, announced in early March, already has focused more attention on click fraud.

...San Antonio-based Click Forensics Inc. recently set up a free service that intends to issue quarterly reports on the frequency of click fraud, compiling information from more than 1,000 advertisers.

...The index's initial findings, released in late April, estimated Google and Yahoo suffered a click fraud rate of 12 percent, translating to more than $1.5 billion of Google's ad revenue.


...If enough advertisers balk, it might derail the deal. Google has the right to nullify the settlement if advertisers that supplied more than 5 percent of its revenue since 2001 reject the agreement.



I am afraid if the proportion of fraud clicks is as much as the speculated 35% by the agrieved advertisers, then our confidence as legitimate and budding adsense entrepreneurs would have been shattered beyond redemption.

Need we remind ouselves that we are in the age of innovation? With such world-record-breaking revenue figures by Google and Yahoo in the last five years, can't a significant portion be devoted to research to beat the click-fraudsters in their illicit game?

This challenge must not be allowed to go un-answered. We cry for sanity and pray for solutions to terminate this shame programmed against our dear calling and career!

[Chris]

Need we remind ouselves that we are in the age of innovation? With such world-record-breaking revenue figures by Google and Yahoo in the last five years, can't a significant portion be devoted to research to beat the click-fraudsters in their illicit game?I think you will find, minus lawsuits like the above - fraudulent clicks aren't the world's greatest concern to Google because they get paid either way. It's the advertiser's that really lose out, so Google is really only preventing click fraud to keep the program considered a "quality" program and continue to entice advertisers to sign up rather than overlook it because it is a sham. So is there a reason for Google to eliminate click fraud completely, I'd argue no there isn't, and investing millions into finding a solution might not be worth their ROI, when they can implement much more cost effective strategies to remove the "bulk" of click fraud rather than ALL - and like I said they still get paid at the end of the day.

Please note this doesn't mean I support click fraud, I can just appreciate that from Google's perspective they'd probably looking to maintain it and keep it to a minimum rather than undertake a HUGE development program to eliminate it completely.