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Click fraud: Are you vulnerable?

Not everyone is convinced Google and Yahoo are doing enough to protect online advertisers.


Click fraud is like shoplifting—some companies don’t diligently monitor for it. But a survey by Outsell shows click fraud costs advertisers $800 million in 2005. The good news: There are ways that advertisers can reclaim those lost funds.

A “click” refers to when Web surfers click on a sponsored ad displayed on a search engine that leads them to an advertiser’s Web site. With click fraud, Internet marketers pay higher ad fees when their ads are clicked on with no intent to browse or purchase anything from their site. Culprits include competitors, who click on pay-per-click links to deplete a company’s ad funds, and search engine Web site affiliates, which generate returns for themselves by directing fake traffic to a site.

“It is not for the faint of heart,” Jonathan Lukens, vice president of franchising at Green Bay, Wis.-based Jo To Go Coffee, a coffee drive-thru franchise, says. “(Pay per click) is a program that needs to be constantly managed. What seems to be a fairly easy proposition to write a few ads, generate key words and put your credit card down with Google is really like an onion. There’s more complexity to it.”

Jo To Go, which runs weekly audits, primarily uses pay-per-click advertising to drive franchisee interest. So far, Lukens says, it appears to be working. Jo To Go currently has 14 locations, and Lukens expects to have 35 open by the end of 2006.

With pay-per-click, advertisers bid on key words that pick up their ad and place it in a prominent position among search results. Google, for example, starts a minimum bid of about 10 cents on each search word; often a word costs more—sometimes upwards of $40—depending on how popular it is among advertisers. The amount charged per click depends on the costs of the search words.

Some of the most expensive search words per click on Yahoo:
Arizona attorney—$30.36
Mortgage leads—$30.10
Personal injury lawyer—$30
Attorney Los Angeles—$30
Attorney San Francisco—$30
Florida legal malpractice—$25.01
Source: NeboWeb

Anytime Fitness, a West St. Paul, Minn.-based fitness gym with about 630 franchises, began pay-per-click advertising on Google in July 2006 and uses 10 search words for its campaign. So far, CEO Jeff Klinger says the most the concept has paid for a click is $3. As for click fraud, Klinger is not overly concerned about monitoring for it—at least, right now. “It may sound corny, but if we’re happy with the pay per click and we’re selling a lot, I guess I don’t want to know about the fraud,” he says.

Are additional measures needed?

In the wake of lawsuits filed against Yahoo and Google by advertisers alleging click fraud, the popular search engines have improved their analytics to protect against it. But some companies, such as Authenticlick Inc., a Los Angeles-based provider of audit and recovery services, claim these measures are not enough.

Authenticlick CEO Michael Leonard says it’s not uncommon for his company to still see 20 to 25 percent of a client’s click activity be fraudulent, equating to “tens of thousands and sometimes hundreds of thousands” of dollars. “We review (a client’s) traffic after it has already been filtered, and we’re still finding significant fraud,” Leonard says.

Authenticlick, which verifies pay-per-click traffic for search providers and advertisers, charges by volume ranging from 3/10 of a cent to a couple cents per click. When click fraud is identified, Authenticlick requests—and often receives—a rebate from the search engine for that traffic.

“It’s something you want to make sure you’re putting the right process in place to protect against,” says Bally Total Fitness spokesman Matt Messinger. Bally, a Chicago-based health club operator with 400 locations, hired an agency to monitor for click fraud when it launched its pay-per-click campaign in April 2006. Messinger says the company has yet to identify any fraud.

Minimum steps

Despite click fraud concerns, Brian Easter, CEO of NeboWeb, an Atlanta Internet marketing firm, sees an increased interest in pay per click because it offers easily measurable results. He also cites improved tools to identify fraud. With “geotargeting,” for example, advertisers can specify the cities, states or countries they want their ads to appear, he adds, making it easier for advertisers to identify fraud when click activity occurs outside their selected markets.

To watch for fraud, Easter encourages all clients to use Web analytics. “The most important thing for an advertiser is to understand the analytics of their campaign—what people are doing on the site, how many clicks it takes to get a call to action, what the ROI is for these campaigns,” he says. Then, when and if, the data shifts, advertisers know they have an issue.

Bark Busters, a, Englewood, Colo.-based dog training franchise with 192 U.S. offices, uses 34 geotargeted campaigns in specific markets to generate consumer leads for franchisees. Chief Operating Officer Liam Crowe says the franchise is evaluating fraud protection technologies, but adds he doesn’t think the company currently is at high risk. “As long as things are reasonably within what we anticipate we don’t think it’s a problem,” he says.

Gulliver’s Doggie Daycare of Williston, Vt., echoes this sentiment. Zachary Luby of Gulliver’s says as long as their campaign remains relatively small, they’re not inclined to pay extra to monitor for fraud. Gulliver’s, which has pay-per-click campaigns on Google and Yahoo, averages 50 to 100 clicks per day. The franchise currently has one location.

“I think click fraud is happening on a much higher level. For Gulliver’s Doggie Daycare it’s not (an issue),” he says. “Generally, we’re a little bit more friendly with our competitors in the dog day care industry. We’re all dog lovers, so it’s a little less cutthroat.”

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