Click Fraud: Google versus Auctions Expert International

Edward H Freeman. Information Systems Security. Volume 14, Issue 5. Nov/Dec 2005.

“There is no such thing as a free lunch.” According to the Columbia World of Quotations, the root of this quotation is as follows:

An axiom from economics popular in the 1960s, the words have no known source, though have been dated to the 1840s, when they were used in saloons where snacks were offered to customers. Ascribed to an Italian immigrant outside Grand Central Station, New York, in Alistair Cooke’s America (epilogue, 1973), the expression appears in Robert A. Heinlein’s The Moon Is a Harsh Mistress, ch. 11 (1966), but has become most closely associated with economist Milton Friedman, who made it the title of a book in 1975.

To research this expression, I did not have to go to the public library or find a copy of the Columbia World of Quotations. Rather, I typed in the quote at Google.com. Google searched more than 8 billion Web pages to find the source of the quotation and led me to this description. The entire procedure took less than one minute. Google did not charge me for the use of their database.

Google’s income and profits come from advertisers, who pay Google each time a user clicks on their advertisement. Click fraud refers to the practice of purposefully clicking on sponsored listings in order to increase the fees paid by advertisers. Competitors and unhappy employees may be responsible for such actions. There is little hard data, but it is estimated that 25 percent of all clicks are fraudulent.

This article deals with click fraud and industry attempts to control the practice. It concentrates on Google’s pending litigation against Auctions Expert International, in which Google accuses the firm of purposefully clicking on ads to earn more revenue.

Google

In its corporate profile, Google describes itself as:

A global technology leader focused on improving the ways people connect with information. Our innovations in web search and advertising have made our website a top Internet destination and our brand one of the most recognized in the world. We maintain the world’s largest online index of websites and other content, and we make this information freely available to anyone with an Internet connection. Our automated search technology helps people obtain nearly instant access to relevant information from our vast online index.

The firm generated $ 1 billion in revenue during the last three months of 2004, both from ads that appeared alongside Google results when people searched for specific keywords and from ads it placed on other companies’ Web sites based on the context.

Through AdWords, companies can create their own advertisements. Advertisers select keywords that will trigger their ads, the “sponsored links,” to appeal” on the top and side of the Google results page when a searcher uses the words. The advertiser pays Google only when a user actually clicks on its advertisement and moves to the advertiser’s Web site. As an example, when I typed the words “free lunch” in Google, several links appeared on the side of my screen, including one offering a free $100 gift card at a local restaurant.

Advertisers have no guarantee that theirs will be the top ad in this service. As explained by Google, the more an advertiser is willing to pay per click, and the higher the “clickthrough” rate, the higher the ad placement. On average, advertisers paid 45 cents per click in 2004. In some sectors, such as travel, legal advice, and gaming, the cost can reach several dollars per click. The word “refinance” was recently purchased for $12 per click. The top price for “mesothelioma,” a form of cancer that led to hundreds of lawsuits when the illness was associated with asbestos exposure, recently stood at $51 per click.

Google’s AdSense allows Web masters to earn extra income for their sites. Web sites that meet Google’s standards can share advertising income with Google. When a user clicks on the Web site, Google displays relevant advertisements, often with the heading “Ads by Google.” Google pays the Web page owner, based on the number of clicks to the Web site. “It’s found money for many bloggers, small e-tailers and huge businesses – from small personal sites, to those of big-time corporations such as Amazon.com, the New York Times and About.com.” AdSense users may receive from a few dollars a month to $50,000 or more a year, although high-dollar paydays are rare.

When an organization reaches an agreement with Google, it can have a major effect on stock prices. In March 2005, GuruNet Corporation, a leading provider of integrated online reference information, announced that it has signed an agreement with Google Inc. to include AdSense advertising on its information pages. Stock prices rose 25 percent in one day on the news (although they quickly fell again).

Click Fraud

Black’s Law Dictionary defines fraud as, “All multifarious means which human ingenuity can devise, and which are resorted to by one individual to get an advantage over another by false suggestions or suppression of the truth. It includes all surprises, tricks, cunning or dissembling, and any unfair way which another is cheated.” Click fraud occurs when people or software packages click on a pay-per-click advertising link even though they are not interested in the product, service, or content being offered.

Two major sources for click fraud exist. Affiliate fraud occurs when an AdSense affiliate seeks to increase the number of clicks on paid listings and so increase the revenue they earn. They do this by manually clicking on the links, paying other people to do this for them, or using automated software to click on links.

Competitive click fraud arises when a competitor clicks on a business’s online ad with the intent of charging the business rather than trying to obtain information. A company may hire people or write automated computer software, called clickbots, to click on its competitor’s ads to mess up its marketing budget. An article in the India Times reported that a growing number of housewives, college graduates, and even working professionals across metropolitan cities are rushing to click paid Internet ads to make $100 to $200 per month. In still another form, employees of companies click on rivals’ ads to deplete their marketing budgets and skew search results.

Martin Fleischmann of MostChoice.com, an Atlanta insurance business, claims that competitors have been clicking on their ads, sometimes through third-party Web sites, in an effort to waste MostChoice’s advertising budget. “Since MostChoice relies heavily on Internet traffic for customers, Fleischmann says he must continue advertising online, but he also expresses anger about the growing number of worthless clicks.”

Designed to allow advertisers to display consumer-targeted ads on Web sites with relevant content in return for the payment of a fee to Google each time an Internet user clicks on one of the ads, the AdSensesystem appears to be open to abuse by Web site owners seeking to increase the fees paid to them by Google. In an attempt to deal with this potential loophole, Google’s AdSense program policy states:

Any method that artificially and/or fraudulently generates clicks is strictly prohibited. These prohibited methods include but are not limited to repeated manual clicks, incentives to click, using robots, automated clicking tools, or other deceptive software. Please note that clicking on your own ads for any reason is prohibited to avoid potential inflation of advertiser costs.

Humans and automated techniques can perpetrate click fraud. The most common method is the use of online robots that are programmed to click on advertisers’ links displayed on Web sites. One such product, openly advertised on its Web site for under $100, claims that:All the traffic sent by our fake traffic PHP script is unique and shows up as unique in your website and server stats. It uses as minimal server resources as possible and can be configured to run for as long as you wish (sic). It can even send fake traffic to multiple websites specified by you, the webmaster. Our fake hits script will make YOUR stats look great!At a December, 1994 investor conference, Google’s CFO George Reyes, openly broadcasted that click fraud is a significant threat to their business model. Reyes stated, “I think something has to be done about this really, really quickly, because I think, potentially, it threatens our business model.”

Google v. Auctions Expert International

On November 15, 2004, Google Inc. filed a lawsuit in a California Superior Court, against one of its AdSense clients, claiming the company defrauded Google by clicking on its own ads multiple times. The case alleges that Houston, Texas-based Auctions Expert International (AEI) was in breach of its contract with Google for intentionally manipulating the advertising program. Specifically, the founders of AEI paid up to 50 unidentified individuals to click on AdSense ads on the Auctions Expert site.

AdSense allows for “unobtrusive and context-sensitive advertising,” according to Google, by linking a Web user’s queries with similar advertising. “The advertiser pays Google for the user’s click and Google, in turn, pays the majority of the money it receives back to the website author,” Google said in its legal filing.

The AdSense agreements, though, expressly bar any company from clicking on its own sites or paying other people to click on the company’s sites in order to create ad revenue. “[Auctions Expert] flagrantly abused the AdSense Online service by artificially and/or fraudulently generating ad clicks,” the complaint stated. “These clicks were worthless to advertisers because they generated significant and unjust revenue for the defendants, who were paid by Google as if the clicks were legitimate.” Google is seeking compensatory and punitive damages, a return of all money paid to AEI through its AdSense participation, and court costs.

When Google discovered the abuse, it terminated AEI’s AdSense account and credited advertisers for every click generated from AEI’s site. The site has shut down and Google won a default judgment against the owner, although it is unlikely that Google will ever collect damages.

How to Deal with Click Fraud

To date, the Federal Trade Commission (FTC) has taken no action to combat click fraud. Although Eileen Harrington, director of marketing practices for the FTC, says the agency is always interested in the integrity of advertising, click fraud “isn’t the most direct form of consumer fraud,” because “consumers aren’t directly affected.”

Any organization using Google as part of its advertising budget should keep close tabs on its online advertising expenses, even if there is no reason to suspect click fraud.

Technically trained personnel may suspect that the organization has been the victim of click fraud if online advertising expenses have risen substantially without a similar increase in sales. The first step is to gather all relevant information. Expert employees and consultants should analyze the Web server log files to determine whether the same IP addresses are clicking on various ads on different ad networks. If it appears that a specific competitor is responsible for the increased clicking, it may be useful to contact other competitors to see if they are experiencing similar problems.

An increase in click traffic may not be the result of a planned click fraud attack. Legitimate users may click on your ad more than one time when comparison shopping or returning to your site for more information. Clicks may also vary due to seasonal promotions and special sales or if a product has been in the news. All of these scenarios represent legitimate users accessing your advertisement. If sales have not increased, it may be the result of a poor marketing plan rather than an orchestrated effort at click fraud.

Google’s policy page states that it “constantly monitors for, and strictly prohibits, invalid click activity. We work hard to maintain the integrity of our advertising program and make sure you’re only being billed for legitimate clicks. If we discover that you’ve been charged for invalid clicks, we’ll apply credits to your account.”

If the problem is not resolved, the next alternative may be to establish appropriate Web metrics and conduct a thorough statistical analysis of Web traffic originating from each source and keyword. Several software packages are available to help detect click fraud.

The software employs a statistical algorithm to detect and document click fraud. Whenever a user clicks on the advertisement, the session is subjected to a series of tests to detect fraudulent signatures. If an ad is accessed every 1.8 seconds for several hours, that traffic is flagged for further evaluation. The algorithm and other measurements generate a click inflation index that advertisers can use to gauge the quality of traffic coming from each paid source and keyword. Other factors might include the physical location of the clicking party and the time of day.

The software also creates custom messages that are automatically displayed to Web site visitors when the package detects fraudulent behavior. The messages can be set at a polite level initially and increase in severity if the fraudulent behavior continues. The software also supplies Google and other providers statistical evidence of click fraud activity. It is also important that the human experts examine the data for trends that may not be ascertained by the software.

The software can also help you see what visitors are doing once they arrive at the Web site. If the software indicates that visitors are arriving and leaving quickly without going anywhere else, this is another good indicator of click fraud.

John Carreras, president of the trade show product firm Impact Displays, suggests that a message be sent to a user who has clicked on an advertisement more than five times. The message is cordial and makes the point that there is a better (less expensive) way to access the site.

Companies providing click fraud services include Clicklab, DoubleClick, Onestat.com, and Urchin Software.

Conclusion

Most experts would say that Google and other service providers have made an effort to control click fraud. The AEI litigation shows that Google will go after clients who abuse AdSense.

A certain level of click fraud is to be expected. Many Web surfers will click on any link that looks interesting even if they have no interest in the product being sold. If the cost of AdSense service seems too high for the amount of new business brought in, it may be a sign that organized click fraud is involved. Online advertisers have the responsibility to check their bills to see that they are making a fair return on their advertising dollars.