Here Comes The Click Fraud Underground Network

Click fraud is getting worse--and advertiser confidence in providers of search-engine advertising, namely Google and Yahoo, might be slipping. The widespread problem, like so many instances of fraud on the Web, is becoming more sophisticated. There's actually a thriving click-fraud underground teeming with small-time players operating large "paid to read" rings that have hundreds of thousands of members each.

Apparently, most click-fraud academics and consultants estimate that 10 percent to 15 percent of clicks are fake, or roughly $1 billion in annual billings. Search engines, of course, then divide these proceeds with any players involved--meaning that some $300 million to $500 million could be headed directly to the click-fraud industry, which would make it about as big as the online video advertising market.
Now customers - large and small are begginning to wise up, labelling click fraud The dark side of online advertising .

Google and Yahoo say they filter out most questionable clicks and either don't charge for them or reimburse advertisers that have been wrongly billed. Determined to prevent a backlash, the Internet ad titans say the extent of click chicanery has been exaggerated, and they stress that they combat the problem vigorously. I think they face a key challenge because they rely on revenue from contextual search features - which is the vehicle through which most click fraud is initiated.

Google and Yahoo are grabbing billions of dollars once collected by traditional print and broadcast outlets, based partly on the assumption that clicks are a reliable, quantifiable measure of consumer interest that the older media simply can't match. But the huge influx of cash for online ads has attracted armies of con artists whose activities are eroding that crucial assumption and could eat into the optimistic expectations for online advertising. (Advertisers generally don't grumble about fraudulent clicks coming from the Web sites of traditional media outlets. But there are growing concerns about these media sites exaggerating how many visitors they have -- the online version of inflating circulation.

I've heard estimates that 10% to 15% of ad clicks are fake, representing roughly $1 billion in annual billings. Usually the search engines divide these proceeds with several players: First, there are intermediaries known as "domain parking" companies, to which the search engines redistribute their ads. Domain parkers host "parked" Web sites, many of which are those dummy sites containing only ads. Cheats who own parked sites obtain search-engine ads from the domain parkers and arrange for the ads to be clicked on, triggering bills to advertisers. In all, $300 million to $500 million a year could be flowing to the click-fraud industry.

Personally, I don't think the numbers are that high, but this is becoming a serious problem and Search Engines need to come together and develop a decisive strategy for dealing with it. Perhaps more stringent conditions have to be put in place to make sure that only legitimate sites are allowed to participate in adSense and other contextual search programs. Of course, this could severely impact overall Search Revenue - but them if even 10% of that revenue is fraudulent, then perhaps such moves are justifiable.