Over the past two years we have been trying to bring attention to the real danger of click fraud. It is a real problem that is getting worse not better. Since we began reporting our Click Fraud Index, the overall rate has climbed over 20%. This problem has been highlighted in mainstream publications including Business Week, USA Today and the Wall St. Journal. No one today denies that click fraud is a problem and that it is having a negative effect on the growth of the online industry.

What may be less obvious is that click fraud is only the tip of the iceberg. The bigger issue for our industry is the overall decline of traffic quality. Advertisers want to get what they pay for and know that the traffic they buy has value. Problems including: the growth of botnets, out of country traffic and other low quality traffic sources like made-for-ad sites and parked domains are hurting ROI. Advertisers know this and have been demanding action from ad providers. One recent example is the poor quality traffic that comes from social network sites like MySpace. Google surprised Wall St by missing Q4 earnings due, in part, to their inability to monetize MySpace traffic. Social network sites are notorious for having very low sitescores.

So what is happening? Smart ad providers are taking matters into their own hands. They can’t afford to lose business and they are listening to their customers. By using real time tools to detect invalid traffic, publishers can block it, redirect it or re-price it. This is the way the industry is moving and we are working hard to lead the way. It is encouraging to see ad providers like Yahoo see the dangers ahead and help their clients steer clear. On the other hand, it is concerning others are on a collision course.

A couple of weeks ago at Search Engine Strategies in New York, Click Fraud made big news. Yahoo announced a partnership with Click Forensics that changes the tone of the ongoing “Click Fraud Debate”. Since late 2005 there has been denial, litigation, finger pointing, 17 page reports and lots and lots of media coverage around the topic of click fraud. In March of 2006 I wrote that, “It will take a community approach to solve the problem”. Since then the community of advertisers, agencies, third parties, publishers, ad networks, industry organizations and search providers has grown. We have all been drawn closer together to help solve the problem; not deny its existence. A visible result of that progress was the Yahoo announcement.

It was just over a year ago that I first met Reggie Davis. Yahoo was the first search engine to name a Vice President over Marketplace Quality. Reggie’s approach has been refreshing. He listened carefully and
took notes to what advertisers were saying. He worked with his team to implement solutions that helped improve transparency. And now, less than a year later, Yahoo is the first search engine to work with a third-party to fight click fraud.

This is real progress and a sign of things to come. For quite some time we have been drawing the distinction between traditional media (TV and Radio) and online. Advertisers are used to having standards, auditable invoices and notarized affidavit’s confirming they get what they paid for. It’s especially important because as pay-per-click industry expert, Dr. Tuzhilin, has noted: third-parties have access to data search engines don’t have. And that information is helpful for identifying quality issues such as click fraud. Yahoo! understands this and we’re now able to share this information to help Yahoo! help its advertisers.

This blog has been bringing you a series of posts which cover the basics of click fraud. This series is continued with an article on click farms.

What is a click farm? Basically a click farm is a loosely couple group of people who are paid to click on ads. Click farms are often called pay to surf schemes and can be camouflaged behind market research, usability test and other nefarious devices to hide the real reason click farms exist; to make money fraudulently.

To break down how the activity is accomplished, the click farmer will broadcast a series of keywords or links he or she wished to be attacked, the farm laborer will then precede to search for these keywords and click on the ad which is targeted. They will then browse the site, clicking on a number of links. The farm labourer may even request newsletters via an e-mail sign up; in short, they act like a real user. This is repeated many times, the farm labourer will then receive a micro payment per ad clicked.

Click farms are used by people committing both Competitor Click Fraud and Publisher Click Fraud. The publisher, to generate revenue, the competitor to remove competition for keywords and get clicks at a reduced cost.

As mentioned, click farms generate traffic which resembles the profile of a real visitor this makes it very hard for the search engine’s invalid click filters to spot this type of activity. How do you develop a filter to spot invalid activity which looks exactly like the traffic which generates conversions?

Click farms are loosely coupled groups of people usually working under the banner of a get rich quick, pay while you surf scheme. The out payments (if they are ever made) are usually very low. Increasingly people in the developing world are used to provide the farm labour where a few cents per click multiplied over a days work can accumulate to a decent amount of money.

A click farm is made profitable via some simple rules of economics. In the case of publisher click fraud, as long as the out payment from the ad provider is more than the cost per click from a farm laborers, there is money to be made, multiply this up by a number of laborers and there is big money to be made.

The keyword competitors make click farm fraud viable in less tangible method. High value items costing thousands of dollars make a few hundred dollars of click farm time viable. The illicit clicking can then be factored into the cost of client acquisition so a profit can be realized.

Click farms represent a real threat to your campaigns, geo-targeting your ads outside of developing countries which present a high risk of click farm activity is one solution along with the click farm detection functionality of Click Forensics.

The next article in this series will discuss what the search engines are doing about click fraud.