With the geometric growth in the popularity of the Internet all over the world, commerce has taken a new form. Ads posted on websites have always been meant to generate income for the site owner – whether they are ads for their own products or ads by sponsors who pay for the ad space. When that did not seem to take off as expected, search engines had the brilliant idea of making ads relevant to those who use their sites.



That gave life to the phenomenon of the “pay-per-click” ad or the PPC. This generated good income for those who opened their sites for such ads. It has grown so much that it has become an industry in itself only in the recent years.

Advertising in this manner has reached unprecedented heights in the recent years. Industry sources say keyword advertising amounted to just about half of Yahoo's estimated $3.7 billion revenue for 2005.

How does it work? Simple. There are two ways: results page ads, and ads in other sites.

When key words are searched using a search engine, the results page will display links to pages that are relevant to those words. These links are placed there through a partnership program between the search engine and the advertiser. Each time a visitor clicks on the link, the advertiser is billed.

For websites, a second kind of affiliate program is entered into. The search engine places ads on the pages of a website based on the topic on that page. If a blog entry talks on cars, the ads on that particular entry will focus on various automobiles, makers and dealers. Every time a visitor clicks on the ads, the advertiser is billed and search engine splits this revenue with the site-owner.

Ideally, this should make all parties concerned happy. But, lo, people find ways to change this scenario and turn it to their own advantage – to avoid having to pay advertising fees and to make competitors pay more for ineffective service.

Then Fraud Comes In

People will find ways of getting around the payment scheme. Others will target competitor sites, just to leverage their own. With these incentives in mind, fraudulent clicks on ads have already cost tens of thousands of dollars, and all it needs is someone to want to mess up the “pay-per-click” (PPC) system.

The simplest way to do this is to have someone click on your competitor's ad so many times. Nothing comes off that clicking frenzy but a hefty bill for your competitor.

A little more complex than that is a competitor clicking off a little at a time on the ads of various companies. This raises little enough suspicion but still does the work, slowly but surely.

If a company puts a cap on its advertising budget – which is the case for most – this means that the ads will have a short exposure time, thereby lessening the possibility of more hits from better sources.

This method of click fraud is so simple it can only come from a very unsophisticated party. But, the others are getting more and more creative.

There are “bots” that will click and ensure that the source IP addresses are varied enough and harder to trace back. Some of these bots can even generate IP addresses that lead nowhere like error 404 messages or simply to addresses that don't exist.

Some companies have resorted to developing websites filled with gibberish along with the key words used by the competitor, hence the ad appears in a site that will not generate hits. This serves to lower the performance of the ads until the site degenerates to the later pages of the search engine until it is finally dropped. Taking off from this is the idea of the “splog” or the spam blog. This site creates content taken from popular sites to generate “active” content. This then solicits ads of “relevant” sites and helps lower the performance of those ads.

Yahoo and Partners unite

Advertisers are feeling the brunt of this problem. Some have even reported experiencing as much as 40% wastage of advertising budgets due to the fraudulent clickers.

As a gesture of goodwill and partnership, Yahoo! has encouraged the use of third party developers to help pull down this statistic drastically. When the words “click fraud” are used in the Yahoo search engine, it will generate a list of companies like Authenticlick, Click Defense, ClickAssurance, Clicklab, Clickrisk, VeriClix, WhosClickingWho who have created tools to analyze clicks on ads and detect suspicious activity.

Armed with relevant information from these analysts – like ad campaign name, IP addresses, keywords used for the searched, referring or origin pages, geographic origin of the clicks, the number and times of the clicks, and other relevant data – an advertiser can then use the information to lodge a legal complaint against the erring party. Of course, this will prove a little more difficult with the more sophisticated forms of click fraud, but it's a start.

Yahoo! is also looking into making the click-through process more sophisticated, in response. For example, they can limit the payment for ads that were followed-through with another action the destination site, e.g. a registration page. But this will translate to lesser revenues for the affiliated sites that show the ads.

As a result of this campaign, hundreds of individuals were sued by advertisers in 2005. Some have been punished and more cases are still pending. This makes the scenario less grim. Still there is a long way to go before solutions to this problem can totally address the problem, if that is possible.

Industry pundits are proclaiming the impending doom of the industry, saying new means of income generation for ads will be discovered and used in lieu of the existing problematic situation.

But there is still hope. If fraud-mongers are creative, so are the industry professionals. For now, advertisers can guard against fraud by using whatever tools are available. Rest assured, more tools will address this problems in a more effective way. It may just be a matter of time.