The last quarter of 2010 saw a decrease in the incidence of online click fraud, which targets the most popular online ad form, cost-per-click, or pay-per-click, advertising. Still, while decline from the third quarter’s record high of 22.3 percent is certainly welcome, fraud still affects one in five online PPC ads, rendering them useless – and expensive – for the advertisers who are paying for them. Year after year, click fraud has grown from 15.3 percent in the fourth quarter of 2009 to 19.1 in the fourth quarter of 2010, according to research and analysis firm, Click Forensics.
The quality of ads is a major concern to any legitimate advertiser who buys the ads, as well as any legitimate distributor and publisher who sells them – and there are a lot of them. Between 45 and 50 percent of all online ad spending goes to PPC ads; in the first two quarters of 2010, US marketers alone spent $5.7 billion on PPC ads. Click Forensic’s CEO, Paul Pellman, says, “While the overall click fraud rate dropped last quarter for CPC [cost per click] advertising, we saw the emergence of new schemes focused on display advertisements. We are investigating the malware-driven attacks in more detail, but early evidence points to an impression inflation scheme.”
PPC ads work when advertisers buy from the sellers, who share the commissions with the publishers that allow the ads on their sites. The advertisers only pay when their ads are clicked on: in this way, accidentally clicking on a pay-per-click ad is not “fraud,” but it does cost the advertiser. Fraud works on a whole other level. The ads are clicked maliciously by rogue web publishers who want to increase their commissions. How successful are they?
According to a 2010 study from Information Warfare Monitor, the operators of Koobface, a program that installed malicious software to participate in click fraud, made over $2 million in just over a year. It is obviously profitable, but it dilutes the efficacy of PPC ad campaigns and cost collective online advertisers untold millions.