Click fraud is the practice of charging pay-per-click advertisers for fraudulent clicks. Scammers repetitively click on ads or use bot programs to cause a competitor to be overcharged under the pay-per-click model.
Outsell’s survey was based on “the responses of 407 online advertisers representing a cross-section of U.S. business. Their spending ranged from several thousand dollars online annually to more than $10 million.”
In the study, advertisers say that 14.6 percent of all clicks are fraudulent, and three quarters say it has happened to them at least once. It also found that 27 percent of advertisers curtailed or stopped spending on click-based advertising. Additionally, 10 percent said they intend to limit their spending overall.
“In our opinion, it is not acceptable that advertisers fund the illicit profits of the scammers,” Chuck Richard, vice president of Outsell, said in the report. “Pay per click is a really rudimentary [form of] advertising — a baby step — and it’s destined to decline and be replaced by other advertising methods.”
Recently, companies have sued Google and Yahoo over click fraud allegations, claiming the companies haven’t done enough to combat click fraud aggressively. Yahoo escaped the fate of its rival Google, settling its class-action click fraud case for $5 million in legal fees and promising to institute a variety of anti-click fraud measures. Google settled its case by agreeing to pay $90 million.
Despite widespread findings of click fraud, Outsell’s study shows that overall Internet advertising revenues grew in the U.S. in 2005, pulling in $5.5 billion on pay-per-click ads alone.
Google and Yahoo do not disclose data about click fraud, based on the fear that if the data is made public, scammers could easily circumvent its defense. Richard said the companies should act more transparently to show advertisers they have nothing to hide.
