Click Fraud: Media Myth or Marketing Menace?

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If you are a novice Internet marketer and read the wrong news article, you are likely to be scared away from spending any time or money on pay-per-click (PPC) advertising. Who wouldn't be scared upon reading that up to 40 percent of paid-for clicks may be fraudulent?

If you somehow miss the many scary articles, however, and listen only to the search engines themselves, you are likely to dive right in. PPC is perhaps the fastest growing form of advertising and search engine representatives say fraud losses are small.

Not surprisingly, for the majority of direct marketers, the reality is somewhere between the two extremes. In other words, click fraud is a real possibility and something a responsible direct marketer will work to minimize but no reason to fear PPC advertising.

Broadly speaking, click fraud occurs when an individual (or piece of code) purposely clicks on a paid advertisement with no intent to purchase the advertised product or service and in order to cause the advertiser to incur a PPC fee.

There are a couple of different types of click fraud of concern to the direct marketer: affiliate and competitor fraud.

Affiliate fraud is perpetrated by affiliates (publishers) in a marketer's advertising network who fall prey to the temptation to increase revenues by causing worthless clicks on the links/ads their sites display. The advertiser pays for the clicks but receives no meaningful traffic or sales in return, while the affiliate increases revenue - at least in the short term.

Competitor fraud is perpetrated by companies who hope to drive their competitors down or out of the rankings for sponsored ads or links related to coveted search terms. By generating false clicks,

the fraudster causes competing advertisers to spend their ad budgets (without return) or to conclude that the search term is not profitable and drop out of the bidding.

Avoiding losses to either type of fraud requires the same sort of discipline. You or your marketing services provider should be constantly monitoring the performance of individual ads, search terms and affiliate sites.

The good news is that any smart direct marketer is already conducting this sort of analysis, or should seriously consider alternative employment. You should be looking specifically at the following metrics.

• Spend

• Clicks

• Conversion

• Return on investment (ROI)

• Source Internet Protocol addresses

• Ranking

Any affiliate site generating relatively low, dramatically declining or negative ROI should be questioned and likely dropped. Sudden increases in clicks with corresponding decreases in conversion and ROI warrants immediate further investigation.

If the search term/ad/site was previously performing well, did something change in your offering or landing page? If not, you have cause to suspect click fraud. If meaningful clicks came from the same IP address, especially in rapid succession, or from IP addresses outside the countries in which you advertise, you almost certainly are paying for fraudulent clicks.

In either case, you or your marketing services provider should document your case and contact the PPC engine immediately. In our experience with clients, click fraud is relatively rare and the major search engines are quite willing to work with advertisers to identify and refund fraudulent clicks. And as usual, solid direct marketing practices will minimize your risk and maximize your returns.

Kevin H. Johnson is San Francisco-based president of Acxiom Digital. E-mail kevin.johnson@acxiom.com.

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