Technology

Click Fraud: Google Comes Clean, Sort Of


Google, the search engine known for helping users find information on just about everything, is finally providing some long sought-after data about itself. The company unveiled a feature July 25 that sheds light on its efforts to protect advertisers against fraud.

The new tool, designed for Google's pay-per-click AdWords feature, lets advertisers track the number and percentage of clicks that are unintentional or the potential result of attempts to drive up advertising costs. It's aimed at keeping closer tabs on what's known as click fraud, where third parties deliberately inflate the number of clicks received by an ad.

Web-page owners receive a portion of revenue from pay-per-click ads hosted on their sites, providing an incentive to defraud advertisers by repeatedly clicking on paid links. Competitors also stand to benefit by increasing the advertising expenses of rivals (see BusinessWeek.com, 2/27/06, "Click Fraud Gets Smarter").

TAKING ACTION. Google (GOOG) hopes the feature will quell complaints that it's too vague about its antifraud initiatives. "The issue of click fraud has received a lot more attention in the course of the last year and we have been repeatedly asked for greater transparency on this issue, and over the course of the past several months we have provided that," says Shuman Ghosemajumder, Google's business product manager for trust and safety.

Before the new feature, Google's attempts at transparency were rather opaque. The company released an independent report commissioned in response to a $90 million click fraud lawsuit settlement that asserted it was making "reasonable" efforts to combat click fraud. However, the report gave little detail about how the company determined the validity of clicks.

Report author Alexander Tuzhilin, a professor of information systems at New York University's Stern Business School, says both he and Google were wary of revealing too much about Google's methodologies for fear scam artists would use the information to refine techniques and defraud more advertisers. "This is really a tradeoff between advertisers' right to know for what they have been charged and Google's right to protect their proprietary technologies from unethical users," says Tuzhilin. "Google simply can't provide this information because they would open themselves up to massive click fraud."

The new program, which can provide click data on a daily basis, is a compromise between advertisers and Google, Tuzhilin says. "This is obviously a welcome step and it makes the whole thing more transparent," he says, adding that Google's main competitors—Yahoo! (YHOO) and Microsoft's (MSFT) MSN—will have to follow suit to show they are also combating click fraud. "My feeling is that for some advertisers it will be enough."

NO GUARANTEES. Will it really be enough? Many advertisers and consultants sing praises for the effort, but say it's far short of the transparency they want. Shawn Khorrami, a lawyer who represents companies suing Google over click fraud, says his clients won't be satisfied until Google ensures advertisers are not billed at all for invalid clicks (see BusinessWeek.com, 7/25/06, "Compensating Click Fraud's Victims"). "I guess any type of information would be a step in the right direction for Google, since giving information is something that they don't like to do. But does it help stop click fraud? No," Khorrami says. "As I understand it, they are just disclosing that there are X number of clicks that they haven't charged you for because they think they are fraudulent. It sounds like they are just trying to make the advertiser feel better."

Google's new system shows the company is catching invalid activity, but it doesn't guarantee advertisers won't be billed for some false clicks. Google encourages advertisers to report clicks they believe to be invalid and improperly included in bills. If Google agrees, it will provide a credit for future advertising and possible reimbursement, Ghosemajumder says. To catch errors, companies could have to analyze clicks with their own software or with the help of a third party, making policing Google's system a potentially expensive undertaking, Khorrami says.

What he'd prefer is another advertising model altogether. One suggestion: a so-called pay-per-action model, which can insure against invalid clicks by requiring users to take an action that demonstrates their intentions, such as signing up for a newsletter. Ghosemajumder says Google is exploring such a system to run in conjunction with—but not as a replacement for—AdWords. "Google is making a lot of money from people and what they need to do is have an ads system that stops fraud…they need to accept that burden and they need to have a system that works," says Khorrami.

INDEPENDENT VERIFICATION? Some advertising consultants and marketers advocate a third-party auditing system. They maintain that any system run by a company that stands to benefit from overcharging for clicks,which in their view includes Google, will never be fully trusted. "Let's be honest, Google is never going to produce numbers greater than or equal to the reported numbers," says Chuck Richard, vice-president and lead analyst at Outsell, a Burlingame (Calif.) consultancy that examines the click-fraud issue. "There will always be disagreement."

In Google's AdSense blog, Ghosemajumder has argued that consultants have inflated the frequency of click fraud in order to step in as a third-party service. On average, consultants estimate that between 14% and 15% of clicks are fraudulent. Though Google refuses to release numbers on the subject, it argues its click-fraud percentage is much lower than the prevailing data because that data does not take into account the company's anti-click fraud efforts (see BusinessWeek.com, 7/07/06, "Counting up Click Fraud's Toll").

Whatever the true percentages, advertisers have a strong interest in ensuring they're not overcharged for ads placed on or through search engines, particularly given the rising proportion of ad dollars devoted to the Internet. Jeffrey K. Rohrs, president of the Cleveland interactive marketing firm Optiem, says he won't be satisfied until the results can be independently verified. "At the end of the day, Google could get everything perfect from their perspective, and there would still be a need for third-party services to audit and certify the number of clicks."


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