Bogus clicks undermine online advertising

The curse of the phantom shoppers

More than one in ten clicks on internet ads are fraudulent, according to new data released on Monday.

The health of internet search engines' lucrative ad-based business models has been questioned with the release of a survey by Click Forensics. Based on responses from 1,300 online marketing experts, 14.1 per cent of recorded mouse clicks on ads are bogus.

The survey has ramifications for internet search engines such as Google and Yahoo, who charge advertisers on a pay-per-click basis. It means advertisers who shell out for prominently placed top-of-the-screen banner ads or skinny "skyscraper" ads alongside popular search terms may be paying over the odds.

These false click-through statistics, which up the price of advertisements, are created by simple programs, or even by individuals paid to increase the number of hits on ads. The scammers work by either repeatedly clicking ads hosted on their own websites in order to generate revenue, or targeting the search terms purchased by competitors with the aim of draining their marketing budgets. The more popular a search term is, the more it costs to advertise on the relevant results page.

The latest estimate that more than 14 per cent of click-throughs are "phantom shoppers" shows an increase on the estimated figure of 13.7 per cent three months ago.

A recent survey of 407 online advertisers the US by market research firm Outsell estimated advertisers may have spent €637m on bogus clicks last year.

Nearly all search engines have policies for not charging or for refunding advertisers who can prove click fraud. Still, the major worry for search engine executives is that much of their companies' revenue comes from advertising spend, and the high number of bogus click-throughs could reduce demand for ads from online marketers.

The major search engines have tools that weed out click fraud, but a large proportion still gets through the net. Click Forensics estimated that 12.8 per cent of clicks on ads published on Google and Yahoo were false - up from 12.1 per cent last quarter. These figures rise to 20.3 per cent and 27.1 per cent for second and third-tier search providers.

Click Forensics chief executive Tom Cuthbert said the study shows that organisations purchasing higher-priced search terms are significantly more vulnerable to click fraud.

The study indicated that the highest percentage of click fraud - more than 88 per cent - originated from within the US and Canada. Outside North America, click fraud was most prevalent in India, increasing 26 per cent in the second quarter.

Google has admitted that click fraud is a problem. The company's chief executive, Eric Schmidt, said recently that the issue is being addressed by the company. Yahoo chief executive officer Terry Semel reportedly declined to discuss the latest click-fraud data, saying he would address the issue when the company releases its second quarter earnings on 18 July.

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