Google Fraud Raising Eyebrows

Internet marketers facing higher advertising fees on Google are becoming increasingly concerned about a form of online fraud that was thought to have been contained years ago.

(PRWEB) August 7, 2004 -- The practice, known as "click fraud," began in the early days of the Internet's mainstream popularity with programs that automatically surfed Web sites to increase traffic figures. This led companies to develop policing technologies touted as antidotes to the problem. But some marketing executives estimate that up to 40 percent of fees in certain advertising categories continue to be based on non-existent consumers in today's search industry.

In one recent example of the problem, law enforcement officials say a California man created a software program that he claimed could let spammers bilk Google out of millions of dollars in fraudulent clicks. Authorities said he was arrested while trying to blackmail Google for US$150,000 to hand over the program. He was indicted by a California jury in June.

Matt Parrella, chief of the San Jose branch of the US Attorney's Office in Northern California, said that case was "not unique." The problem "is certainly not shrinking, and we're ready to prosecute people," said Parrella, whose office handled the Google case.

Click fraud is perpetrated in both automated and human ways. The most common method is the use of online robots, or "bots," programmed to click on advertisers' links that are displayed on Web sites or listed in search queries. A growing alternative employs low-cost workers who are hired in China, India and other countries to click on text links and other ads. The current trend seems to be the use of anonymous proxies by publishers who abuse systems like Google Adsense with fraudulent clicks.

Although the extent of click fraud is impossible to measure with any certainty, its persistence has exposed a fundamental weakness in the promising business of Internet search marketing. Google's pending initial public offering has been widely anticipated as a barometer of online advertising and the post-apocalyptic dot-com climate in general.

"It's hard to tell how big the problem is, but people are looking at it closer and closer as the cost of search advertising goes up," said John Squire, vice president of business development of Coremetrics, a Web analytics firm. "Click fraud is a fin sticking out of the water: You're not sure if it's a great white shark or a dolphin."

Unlike advertising in traditional media such as billboards and print publications, "cost per click" Internet ads displayed with specific keyword searches have been promoted as a definitive way for companies to gauge their exposure to potential customers. As a result, US sales from advertiser-paid search results are expected to grow 25 percent this year to $3.2 billion, up from $2.5 billion in 2003, according to research firm eMarketer. From 2002 to 2003, the market rose by 175 percent.

As more advertisers have competed for desirable keywords in their industries, the cost for clicks has risen too. On average, advertisers are paying 45 cents per click this year, according to financial analysts, up from 40 cents in 2003 and 30 cents in the second quarter of 2002. In certain sectors, such as travel, legal advice and gaming, the cost can reach several dollars per click.

But marketing executives say click fraud is pervasive among affiliates of search leaders Google, Yahoo-owned Overture Services and FindWhat.com. In a typical affiliation, any Web publisher can become a partner of these large networks by displaying their paid links on a Web page or within its own search results and then share in the profits with every click.

"There's a fatal flaw in the cost-per-click model because a ton of marketing dollars can be depleted in a fraction of a second," said Jessie Stricchiola, president of Alchemist Media, a search-engine marketing firm based in Los Angeles that specialises in fraud protection. "Technology is continuing to be developed that can exploit this pricing model at incredibly high volumes."

Clixster.com, a Google adsense alternative website, claims to have a working solution. "Different types of undetectable attacks can be carried out against internet companies that bill advertising clients using logfile statistics." said Dana Goodman, CEO of Clixster.com. "These attacks usually rely on IP masking, IP masquerading and fake referrals. IP masking is accomplished by having a web robot accessing web pages through several hundreds of anonymous proxy servers." She goes on to add, "In another scenario, trojans are uploaded on popular shareware sites. Once downloaded by a user, these trojans perform the useful tasks they are supposed to do (e.g. hard drive cleaning, virus scanning etc.) but in addition, they randomly "click" on target links, writing fake information in target logfiles using web robot technology... Clixster's Fraud-Free technology (http://www.clixster.com/technology.htm)is immune to such attacks and uses random gatway pages which which require an additional manual click."

Clixster claims to have the highest ROI because of this and other companies are quickly catching on.

Google declined an interview for this report, citing the mandatory "quiet period" before its initial public offering, which is expected to raise $2.7 billion."

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