Click Fraud: Sideshow vs. Reality

by Andrew Goodman

If you've owned a website for any length of time, you've probably received one of those spam e-mails offering you some scam search engine optimization service. The most recent twist on this kind of spam is: "Triple Your Google AdWords Results (By Reporting Click Fraud)".

This latter claims that advertisers are suffering "exponential losses of profit," and that if you submit a "periodic report to provider," the search engines "must comply promptly to your reports." Inane prose and poor grammar aside, what these claims are, most of all, is nonsense. They're designed to sell you a report on apparently invalid clicks. As background information, the right kind of reporting can be useful. From a scam provider, expect the report to be less valuable to you than your own intelligent, common-sense analysis of your traffic quality, and less useful again than your detailed efforts to put together a sound campaign in the first place.

Advertisers that have been implementing paid search correctly since day one (following principles such as organizing your campaign into appropriate keyword groupings, extensive keyword research, etc.) have a lower incidence of click fraud in the first place.

Amazingly, Google seems to have caused controversy recently by increasing its level of transparency. It released some click fraud stats and information about its detection procedures. In releasing the information, Google triggered a wave of negative responses claiming that believing Google's stats is like hiring the fox to guard the hen house.

There's no question that progress in this matter will require ongoing attention at an industry level. It's not not a problem. Still, does it justify the level of paranoia that some exhibit?

More recently, Google followed up with a second round of statistics, and held more informal conversations with industry analysts and practitioners such as Gord Hotchkiss and myself going into more detail about fraud detection procedures.

It's now widely acknowledged that Google proactively filters 10% of clicks across its whole network every year, forgoing upwards of $1 billion in annual revenue. Moreover, only 0.02% (that's 1 in 5,000 or less) of all clicks wind up being refunded based on further investigations triggered by advertiser complaints. So if you're an average advertiser, you aren't being charged -- in any given ad group -- for anywhere from 5% to 50% of clicks, without you doing anything. If you were to file a specific complaint, on a $5,000 ad spend, Google would refund you $1 (but often, $0). At the market, that'll buy you a honking bunch of broccoli, but not much else.

Do I believe Google's numbers? Sure. As the search market share leader with so much to lose and such a healthy cash cushion, I don't see much motive for Google to make this stuff up. I also see solid results in many client campaigns that wouldn't be there if they were getting charged for a lot of fake clicks.

Here's what I would do if I were a business owner with limited time to devote to minimizing the problem:

Set up your campaign so that you carefully divide your keywords into appropriate categories.

Don't rely overly on "core words." Focus on a broad distribution of keywords.

Be cautious with distribution.

Actively manage content targeting.

Bid to ROI related metrics.

Use a quality analytics package like ClickTracks or Google Analytics.

Look for indicators of low quality traffic, such as a high rate of very short visits (over 70%).

Comb through raw referral data in server logs or conversion tracker, but recognize that some low-quality traffic might not have been billed to you.

Stick to the top three paid search providers (Google, Yahoo, Microsoft) at first.

Finally, be proactive, not reactive. Patient implementation based on a solid campaign plan will put you in charge of your destiny, and less at the mercy of the "invalid click gremlins."