One of the major worries for a potential paid search advertiser when investigating pay-per-click advertising is the threat of click fraud. Click fraud occurs when a person or a computer programme clicks on adverts with the intention of charging the advertiser for a click, with no interest in the target of the link. This type of computer fraud is illegal under the Computer Misuse Act in the UK, but is notoriously difficult to prove.
The problem of click fraud has led to criticism of PPC networks - the search engines, like Yahoo! and Google, which display the advertisements. If advertisers on paid search networks are paying for fraudulent clicks that have no chance of converting into positive actions, advertisers will clearly be put off PPC advertising and demand improvements be made to the system.
In June 2006, Checkmate Strategic Group Inc filed a class action suit against popular search engine Yahoo! as a result of click fraud. The terms of the settlement stated that Yahoo! had to improve the service that it offered to the advertisers on its network. The changes that Yahoo! have had to implement provide greater transparency regarding the mechanics of Yahoo!'s PPC system. These include a programme through which at least three advertisers a year will be invited to Yahoo! to learn about how PPC works, as well as an online resource centre containing FAQs, advice and information on the quality of the traffic that the Yahoo! PPC campaign is driving to a specific advertiser's website.
Posting on her blog, Digital Markets, online media expert Donna Bogatin suggests that Yahoo!'s implementation of the terms of the settlement is going smoothly, and that the public should expect announcements from the search engine regarding these new developments by April 30th 2007. Yahoo! is clearly honouring its legal commitment to improving the service it provides - but do these reforms go far enough?
Essentially, it is crucial to the search engine's interest to do as much as possible to minimise click fraud, in order to bolster advertiser confidence in the paid search system. The methods that search engines use to achieve this include implementing advanced filtering techniques, looking for patterns in the origin and timing of clicks, and dedicating special teams to investigate potential click fraud. Understandably, the precise methods have to be kept secret so that click fraudsters can't find ways round the controls.
By making the aforementioned modifications, search engines can help minimise click fraud considerably. However, the reality is that it may prove impossible to eliminate click fraud completely. Due to the high volumes of traffic involved, as well as increasingly advanced fraud techniques, it is difficult to separate fraudulent clicks from conventional user behaviour. The vast majority of fraudulent clicks can be identified, and advertisers will not be charged for them. But if click fraud continues to worry any particular PPC advertiser, it is possible to identify fraudulent clicks through forensic analysis of web server logs and the user of third party tracking software, and so receive a refund from advertiser networks.
For the moment, it seems that the reforms implemented by Yahoo! provide a good compromise between the search engine and their advertisers. They may not completely eliminate click fraud, but they certainly reduce the magnitude of click fraud as a problem for the paid search industry.
