Click Fraud is a Huge Problem

From the SF Chronicle:

Internet advertisers paid $800 million for bogus clicks on their marketing messages last year, shaking confidence in the industry and prompting many to reduce spending with Google, Yahoo and other Web sites, according to a study to be released today.

The survey, by Outsell Inc., a market researcher in Burlingame, is one of the most detailed looks at the nagging, high-profile problem known as click fraud. Advertisers have long complained that major Internet sites don't do enough to combat the practice or, at least, disclose the extent of it.

Internet advertisers pay companies like Google and Yahoo every time someone clicks on their ads. The advertisers also share revenue with Internet companies based on how many advertising clicks their Web sites generate. Click fraud occurs when scammers repeatedly click on ads to cause a rival company to be overcharged. In another incarnation, fraudsters place the ads on their own Web sites and then click on the links to get a piece of the shared revenue they've agreed to with Google or Yahoo.

In today's report, advertisers say that 14.6 percent of all clicks are bogus. Moreover, three-quarters of advertisers said they had been victims at least once.

The perception of pervasive fraud has prompted many advertisers to change their spending. Many are asking why they should fork over money - significant amounts, in some cases -- for phantom shoppers.

The study found that 27 percent of advertisers reduced or stopped spending on click-based advertising. An additional 10 percent said they intend to curtail spending.

It's interesting that Google did not respond to requests for them to comment. Their business depends on continued growth in online advertising. As Cringely pointed out a few weeks ago, they need to get some AdSense:

... Customer service isn't a program to be optimized or a function where one genius can do the work of 20. Customer service scales linearly, and any attempt to alter that usually is accompanied by a degradation in service. So Google has customer service reps madly cutting and pasting boilerplate e-mails, but I can tell you the boilerplate often doesn't cover the required material in a useful way, and beyond that boilerplate there is nothing -- well, at least nothing we are allowed to know about. It turns out that there ARE ways to escalate through Google customer service, but you pretty much have to know where you are going because they won't tell you.