Click-fraud scams on the rise

Swindlers have stepped up their effort to fleece millions from online advertisers who use lucrative marketing networks run by Google and Yahoo, according to a report released today.

The sales referrals generated by clicks on the brief advertising links popularised by the two internet powerhouses are a sham 14.1% of the time, according to information from 1,300 online marketers.

That is up from a click-fraud rate of 13.7% three months ago, according to Click Forensics, a San Antonio, California-based consulting service that compiles the index.

The statistics jibe with other data asserting advertisers are paying a significant sum to Google, Yahoo and their partner websites for phantom shoppers, even as more resources are devoted to thwarting scammers.

A recently-released survey of 407 online advertisers by market research firm Outsell estimated click fraud cost advertisers €654m last year.

Click fraud is a highly sensitive subject for Google and Yahoo because it raises doubts about the trustworthiness of the advertising model that drives their profits and stock prices.

Google, Yahoo and partner websites get paid each time someone clicks on advertising links usually displayed at the top and on the side of web pages. Advertisers pay the commission even when the click does not produce a sale – a system that inspired scam schemes.

The motives for click fraud vary. Most often, website owners repeatedly click the ads on their own sites to generate money for themselves. In other cases, advertisers target the ads of their rivals to drain their marketing budgets.

As click fraud becomes more prevalent and attracts more media attention, advertisers are becoming more aggressive about demanding refunds and better protection, said Tom Cuthbert, Click Forensics’ president.

“Advertisers aren’t satisfied with the status quo. They don’t want to keep losing sleep at night wondering how much money they are losing to click fraud.”

About 900 advertisers have joined Click Forensics’ anti-fraud network during the past three months.

Google and Yahoo are better at weeding out click fraud than smaller websites, but Click Forensics still concluded both companies were being hard hit. About 12.8% of the clicks on ads served up by Google and Yahoo are deceptive, up from 12.1% three months ago.

Google’s chief executive Eric Schmidt admitted click fraud remained an continuing headache, but disputed the notion that the problem was becoming more prevalent.

“Smart people are trying to break the law, but we have even smarter people trying to prevent it,” he said during an interview at a conference in Idaho.

Yahoo chief executive Terry Semel declined to discuss the latest data on click fraud, saying he intended to address the issue tomorrow when the company was due to release its second-quarter earnings. “We will be very pro-active about it,” he said.