We’re constantly hard at work here at Click Forensics to continuously improve our ability to accurately predict overall traffic quality for our clients.  And, every now and then, we’re able to bundle a number of these enhancements into the tangible release.  We did just that last week; announcing an upgraded version of our Yahoo! TQ Forecast feature.  We’ve been testing these features with a handful of clients, with strong results so far – namely, much better predictive accuracy so that clients can be sure they’re sending high quality/high paying traffic into Yahoo.  And, we’re excited to now be rolling this out to all our clients.  Specific features include:

• YTQ Forecast Report – provides a summary of the likely Yahoo! TQ scores particular traffic sources will receive when they’re sent to Yahoo!;
• Dynamic Adjustments - continuously monitors and adjusts to changes in the YTQ score rankings so that clients can appropriately tune and filter traffic sources;
• Preemptive Traffic Source Blocking – enables publishers and ad networks to quickly identify and block certain online advertising traffic sources that are likely to deliver low Yahoo! TQ scores; and
• Enhanced Botnet Detection – delivers better detection of non-human clicks, both malicious and benign, while serving as an early warning system for advanced sources of fraud.

We also got some nice coverage in AdExchanger about the problems some of our CPC and performance-based ad network clients face and how these new enhancement will help solve these challenges.

Congratulations to the newlyweds… after a long, long courtship Microsoft and Yahoo finally managed to get together (the prenuptials are still being sorted out!).  I have been in favor of this union for sometime now.  Google owns a ridiculous share of the pay per click advertising market and desperately needs a competitor.  Microsoft + Yahoo = Competition.  As I have said for the last several years, the lens we look through at Click Forensics is that of the advertiser.  Competition is always good for the advertiser.  

The growth of online advertising, in particular pay per click advertising, has been meteoric. It is a great model and one that has proven hugely successful for hundreds of thousands of advertisers large and small.  It is a model that will continue to grow as large advertisers shift more dollars from unmeasureable and less effective traditional media.  It will grow because it uses context, targeting and relevancy to the highest level.  Yahoo’s audience enhanced by Microsoft’s technology will mean innovation and efficiency.  There is no doubt; Google will continue to have success.  But the new partnership will make the online world even more attractive for advertisers.

Today there are standards in place to help hold the search providers accountable.  There are better reporting, campaign management and keyword tools to add to the efficiency.  I see a world in the near future where display advertising will begin to make significant gains from the data that exists in search. Context, targeting and relevance can improve every medium and this partnership will leverage that data to a much higher level than before.

So congrats to you both for a new start.  The entire advertising community is pulling for you and expecting big things. I do need to warn you… expectations are high and the honeymoon is short.  

Over the past week four major players in the online media space have announced accreditation to the Interactive Advertising Bureau’s Click Measurement Guidelines.  This list includes Yahoo!, Google, Microsoft and Business.com.  I wanted to take a moment and explore why you should care about this development and what accreditation means for advertisers.

The IAB is a publisher-focused organization that has led the process to develop click measurement guidelines.  The task force is made up of thirty or so companies representing the online advertising community.  Click Forensics has been a member since day one and participated in every step of the process.

There are three main benefits for advertisers and conversely, three concerns advertisers need to keep in mind associated with the entire process.  First, the benefits;

IAB Accreditation Represents a Commitment
The process to become accredited to the IAB guidelines is time consuming and certainly not free.  At Click Forensics, we have first hand knowledge of this and can assure you that any company that takes time and spends the money to become accredited is committed to their customers.  The level of detail the auditors go into is amazing.  Our community is fortunate to have auditors that have demonstrated a deep commitment to both the development of the process and the implementation of the guidelines.

IAB Accreditation Demonstrates Leadership
The IAB established a gating period to allow member companies and others to become accredited to the guidelines.  The companies mentioned above were the first to announce compliance.  This is important because it represents a sense of urgency among these four that enhances the urgency for others.  As an advertiser, you should reward these leaders with business.  They were first out of the gate and in my book that demonstrates leadership.

IAB Accreditation Means Better Quality Traffic
The IAB Guidelines are a lengthy narrative of “best practices” and rules in delivering quality traffic to advertisers.  While it is not intended to be a complete list, it serves as a firm foundation and includes practical steps to help ensure advertisers get what they pay for.  By working with an accredited ad provider, advertisers will be assured that the clicks they are buying have met the guidelines established by the industry.  This is a good thing and an excellent first step.

While we applaud the efforts of the IAB, Media Rating Council and member companies who participated in this process, there are things advertisers need to keep in mind.  There was a great deal of discussion and debate during the nearly three years of meetings it took to develop these guidelines.  In that process, there were a lot of valuable and important items that fell to the floor.  This is a good start, not a perfect process.  Keep in mind the following;

IAB Accreditation is a “Moment in Time” Process
The process for an ad provider to become accredited is a long one.  The auditor is invited in for a pre-assessment then the actual audit begins.  At the end of the process accreditation is awarded.  The problem is there is no mechanism for ongoing compliance.  When we buy gas at the gas station there is a meter that is routinely calibrated to ensure that when we fill our tank with 20 gallons of gasoline, we get 20 gallons.  This approach is not taken nor addressed in the guidelines.  While an annual audit is suggested in the guidelines, it is still important for advertisers to be monitoring their campaigns and holding the ad providers feet to the fire for every click.

IAB Accreditation Does Not Cover Everything
The 27 page Guideline document is quite comprehensive.  Our task force worked hard to ensure that both the guidelines are made clear and that the standard for measurement is defined.  However, when you consider that the dominant constituency in this process was multibillion-dollar ad providers, you might imagine not everything met their liking.  A few examples of chaff that hit the threshing room floor included:

Click ID – Each click should have a unique identifier so investigations can be “apples to apples”
Persistent Cookie – It’s important that ad providers can identify unique visitors to ensure they are billed for only once.
Standards for Investigation – Advertisers deserve to feel confident that they get what they pay for.  By setting an investigation format and agreeing to a timeline, ad providers can build trust with customers.

IAB Accreditation is a Roadmap
There is a Japanese proverb that says, “Beginning is easy and continuing is hard”.  There is truth in this as it relates to the guidelines.  We have begun the process.  We have released guidelines that will make the world of online advertising a better place.  Now we should look to leadership to take the next step and continue what we have begun.  The current guidelines will serve as a roadmap to the future standards.  We need to examine the items removed, listen to the community and think of better ways to ensure advertisers get what they pay for in the future.  The roadmap has been built.  Now we need to move on.

In January of 2006 as Click Forensics was just beginning as a company, I wrote the following challenge to our industry:

“Define standards for what an unwanted click looks like. We believe that there are certain characteristics or attributes that are common to a large percentage of click fraud. We are working with publishers and advertisers to agree on common ground and work together to expose it. Once this is developed it should be published so that the entire community can benefit from it.”

Today, over three years later, we have the cooperation of community leaders, the foundation of technical standards and the desire to continue to improve on what we have built.  I invite you, to join us as we build a future of ongoing growth and improving effectiveness by enhancing the process of online advertising.  I can assure you that both the Click Quality Council and Click Forensics will continue to support the work of the IAB and other industry organizations to work together to make our community a better place.  Let’s not stop with the foundation.

Wow!  Click fraud is real?  Click fraud costs online advertisers millions of dollars?  Click fraud can be uncovered and the perpetrators caught and punished?   Who knew?   Well, we did.

This week Microsoft filed the a complaint in U.S. District Court (Microsoft v. Lam, et. al., case number 09-cv-0815) seeking injunctive relief and damages from a group of people found to be perpetrating click fraud through the Microsoft adCenter platform.  This is only the second time (Google sued Auctions Expert International in 2004) that a search provider has ever caught and sued an individual (or a family, in this case) for click fraud.  We congratulate Microsoft for their efforts to root out this activity and encourage them in their pursuit of relief.  Online advertisers should appreciate knowing that click fraud does not always go undetected or unpunished.

For those not familiar with the case, it’s an example of what we call “competitor click fraud.”  The motivation of the perpetrators was simply to obtain higher-placed ad positions for lower bid amounts by depleting the daily budget of their competitors.  The verticals affected were auto insurance and the online role-playing game World of Warcraft.  Microsoft identified two brothers and their mother who controlled adCenter accounts that benefited from this fraud.  They believe that this scheme affected more than just adCenter advertisers, but also the advertisers on competitive search engines.

Microsoft’s complaint, now public information, is so well written it could be used as a tutorial on click fraud detection.  The most fascinating section describes the nearly year long game of cat-and-mouse played with the defendants.  Reading from the complaint: “When Microsoft took steps to mitigate these automated attacks, the perpetrators followed by implementing countermeasures to Microsoft’s actions.  A cycle of events ensued whereby the Defendants would update their attack methods to bypass the fixes implemented by Microsoft, and Microsoft would take additional steps to combat the new click fraud attacks.”

The lessons here are pretty clear:  Click fraud is still a problem and solving it requires constant vigilance.  The online advertising community needs to work together – search engines, ad networks, advertisers, and third-party auditors – to protect ourselves from this threat.

From spyware to bots to viruses and other unimaginable hazards… the web can be a scary place.  As far back as Prodigy in the early days of the online world, scams have been a part of the party.  The Internet is simply a new way for the bad guys to rip off unsuspecting consumers.  The key difference though is that the reach is enormous and the damage can spread to more people, more quickly than ever before.

Enter scareware, new way to trick unsuspecting consumers into parting with their money.  USA Today recently had an article  about the tricks and tactics used to perpetrate this latest rip off.  Unfortunately, online advertising has become an accomplice to the crime.

Scareware is worthless software that allegedly removes viruses from your computer.  Anyone who has surfed the web knows how easy it can be to become infected with a virus.  The damage to the users computer is often measured in slowed performance, unwanted clicking and potentially even more nefarious things like key logging and password swiping.  Now, the bad guys are selling “scareware” to solve a problem that may not actually exist.

The first such program was called “SpySheriff,” built by a team of cyber crooks from Russia.  The Anti-Phishing Working Group recently reported that scareware infections rose 48% in the second half of 2008.  The growth is tied to the ease of distribution and weaknesses in online advertising and the web in general.

There are several ways these fake products are being distributed.  Phony pages are created using hot search key words such as “American Idol” or “iPhone” and drive the unsuspecting consumer to the infected page.  Recently the Facebook email scam was used to send people to a page by promoting things like “best video.”  Since these emails came from your friends, millions clicked.  Twitter has become a vehicle for distribution. Phony Twitter accounts are created and enticing titles of posts encourage people to click.
 
Additionally, the bad guys are simply buying display or search ads.  They rotate in infected pages to the landing page.  It is virtually impossible for an ad provider to scan every ad impression and linking page.  This loophole creates an opportunity for the bad guys to drive significant traffic to infected pages at a very low cost.  Microsoft reported finding 4.4M installations of one such program, so the scale is enormous.  Do the math… at $49 or $79, that is big business.

Once someone lands on the page, getting off is nearly impossible.  Immediately upon landing, a “system scan” begins.  The results are, of course, showing that your computer is infected with a number of viruses.  Conveniently you can buy the product at that point and they take your money and run.  If you try to move away from the page, or cancel, an endless number of scans take over your screen.  Essentially, users must “control/alt/delete” their way out or restart.

The danger in this scam is not limited to monetary damage to the consumer.  These type of pages and methods to attract clicks are the same methods used to install spyware, malware and perpetrate click fraud.  To their credit, USA Today has done a good job over the last few years of highlighting the dangers of the web to the average consumer.

The FTC is cracking down.  They have identified products like WinFixer, DriveCleaner and XP AntiVirus as worthless and they are going after the owners.  The problem is that like the click fraud crooks, these guys are in remote locations and move their servers often. Tracking them is a full time job and extremely difficult.  The search engines are trying to help as well.  Bing has a neat feature that highlights “at risk” url’s.  Yahoo has similar product built with McAfee.

 
Trust is what keeps consumers clicking on ads.  Without stepped up industry efforts from organizations, like the Anti Phishing Working Groups and others, trust could be diminished.  Like click fraud, scareware is damaging trust.  It takes a community effort to stay after the problem and build solutions to take the scare out of the internet.

Q1 2009 internet media revenues were announced by the IAB today, with the industry experiencing an overall drop of 5.5% from Q1 last year.   Given all the bad economic news over the first three months of 2009, along with poor results announced by internet stalwarts Google, Yahoo, AOL and MSN, it’s not much of a surprise.  However, it is the first time since 2002 that the IAB reported number experienced a year-over-year decline.

There is some solace that online media results fell at a much lower rate than offline:  newspaper ad revenue plummeted 28% and radio revenues sunk over 24% – both some of the YOY worst declines in our lifetime.  TV revenues are also sure to fall, as soon as TNS reports Q1 results later this month.  That said, it’s never good to see our industry experience a YOY decline, no matter how small.  And, frankly, it was only a few months ago where I predicted that online media would show (much slower) YOY growth.

What’s changed was the depth of the economic crisis and the swift response by marketers to tighten up their spend.  Combine this with the free-fall in traditionally strong categories (finance, automotive to name a couple), and its surprising overall online media revenue hasn’t fallen more severely.   And, frankly, I don’t think the decline is over.  Based on conversations I’ve had over the last few months with folks whose opinions I respect, it seems like Display Media may have bottomed out, but we may see a continued decline in CPC spend.  This is being driven mainly by cuts in spending on second and third tier providers, as advertisers concentrate their spend with perceived higher quality networks and providers.

In an environment of shrinking budgets and more demanding buyers, increased transparency and tangible ROI are becoming requirements not “nice to haves.”  Those networks that actively manage and cull their traffic sources to ensure high quality traffic will continue to win out as advertisers increase demand that they “get what they pay for.”

A few weeks ago I spoke at the Search Engine Strategies conference in New York.  I was struck at the conference that people in our industry had their heads down.  I recognize the economy is tough and that jobs can be hard to find and keep.  But guess what… online advertising will win!  Like you, I have friends in traditional media.  Newspapers and print in general have been hammered.  Radio and outdoor is fading and television is showing signs of weakness.  The dollars are shifting to online and with good reason.

In my preparation for the presentation (which can be found here) I spoke to senior executives at digital agencies and leading online advertisers.  While the title of my presentation was, “Measurement Matters” the focus was change.  There is no doubt that the world of online advertising is at a crossroads.  According to a recent IBM survery, over 60% of all advertisers are cutting budgets… 80% of them are trimming more than 15% of the spending.  This urgency was clear in this quote from the report,

“Advertisers are aggressively shifting their spend to even more interactive, measurable formats, as providers struggle to move “beyond advertising” to new forms of communication that combine the ROI characteristics of direct marketing with the brand characteristics of traditional advertising.”

The tone I heard when speaking to advertisers and agencies was consistent… “Now more than ever, we need to be sure we get what we pay for.”  Jobs are on the line, performance is not optional and measurement matters.  Where can advertisers get better value and solid analytics for performance advertising?  Online of course!

I’ve identified five specific attitudes that need to be addressed to fully capitalize on the shifting dollars…

1. Stand on our strengths – Online advertising is measurable, has a growing reach and new and creative ways to deliver meaningful ad impressions to consumers.  These are meaningful strengths that need to be communicated.
2. Tout the targeting – Saying that television advertising can target is like saying you can tell what kind of fish are in the water from the boat.  Targeting (behavioral, demographic and geographic) are a strong suit of online advertising that is unmatched in traditional advertising.
3. Get creative with compensation – Advertisers need to (and will) hold agencies feet to the fire.  Agencies that embrace this and are open to new models of compensation, will win.
4. Measure, measure and measure – Performance standards, benchmarking and goals are critical for success.  The good news is that online holds that as a competitive advantage over traditional media.  More tools are available to help with this and insight into campaigns makes a major difference in success.
5. Look beyond the “Big Two” – Yahoo and Google hold a lot of the cards when it comes to online.  However, there is a growing community of quality ad networks and publishers that can deliver strong results.  I’ll talk more about how to find them in a future project.

My presentation included the chart below highlighting a SWOT (strengths, weaknesses, opportunities, threats) analysis I did on our space.

The current economic conditions create an opportunity for those of us in the digital world.  Now is not the time to complain… it is the time to aggressively promote the benefits that online holds over traditional media.

On a recent trip to New York, I was asked by an ad provider executive, “Which side are you on?” At first I didn’t know what he meant, but he clarified it for me by saying that in the world of advertisers, ad networks, publishers, and ad providers, it’s important to know whose side you’re on.

When I told him that we are on the side of the advertiser he paused, thought about it and then the light bulb went off. What’s good for the advertiser is good for our entire industry. 100% of the over $22B spent on search advertising comes from advertisers. They pay the bills for search engines, ad providers, parked domain companies publishers as well as those of us that are working to provide tools to improve traffic quality.

Despite our diverse client base, the lens Click Forensics looks through for every decision we make is that of the advertiser. While Click Forensics works with a number of advertisers and agencies, we also have many clients that are ad providers. This list includes search engines, ad networks, publishers and even parked domain companies. The reason these companies choose to work with us is that we provide insight into the traffic quality they are selling to advertisers. They are able to use this information to route, block, price and value the traffic to help advertisers get a better return on their ad spend.

Smart sellers look through this lens too. Companies like Yahoo that asked advertisers how they could improve communication. The result was the cooperative development of the FACTr system enabling advertisers to communicate concerns to Yahoo. Companies like Lycos, who realized early on that “quality matters” and began working to enhance their quality using traffic insight tools. And industry organizations including the Click Quality Council, while made of all parts of the ecosystem, is always advertiser focused.

Advertisers drive our industry and that reality will become even clearer in the future as mobile grows more important and display begins to look like search. We are proud of our involvement and the work of the Click Quality Council. The CQC is an example of an industry organization that is not dominated by one constituency. The over 100 members include companies from every corner and every perspective of the eco-system. They sit around the virtual table as equals, all understanding it is the lens of the advertiser that matters.

So this week, as the IAB releases the Click Measurement Working Group Guidelines, it is important that they are reviewed through the lens that matters, that of the advertiser. We should be asking, are these guidelines fair? Do they have enough substance to improve traffic quality and help ensure advertisers get what they pay for? Do the guidelines improve transparency and enhance trust between buyers and sellers?

I attended the IAB’s annual conference in Orlando this week and have a clear picture of their lens. We applaud the IAB’s leadership and the work of the Media Rating Council and task force members who produced a foundational document. Our hope now is that we can work together to build on this foundation to build trust, enhance transparency and accelerate the growth of online advertising.

It’s reaffirming to see the online media industry buck some of the recent “chicken little” pronouncements of the last few months.  While the industry isn’t out of the woods yet, it’s clear that online media in aggregate continues to perform better than its offline brethren, even as the overall global economy goes through the worst contraction of our collective lifetime.

Some recent data points:

• Google and Yahoo’s recent Q4 earnings announcements that exceeded beaten down expectations.
• A recent Ad Age post that highlighted the divergent job trends in Q4, with online media agency positions holding their own/showing slight growth against significant job loses/declines in the offline media space.
• Rumors that Q1 online media results may not be as bad as initially feared, and may actually show growth over 2008.
• Continued importance of ad networks, with more and more available inventory being filled through this aggregation channel.

While this continued, albeit slower growth is generally good news, it is coming at a price…

Even before our recent economic uncertainties, the overall online media industry was seeing an explosion of web traffic growth that has been far outpacing the migration of media dollars online.  The result has been simple supply and demand economics – overall CPMs are plummeting (see Pubmatic’s recent trend data here) as the “glut” of online media inventory creates a buyer’s market.  And, much of this web traffic growth is coming from new sources that are less desirable from a media buying standpoint – social networking sites, social media sites, etc. – that exacerbates the challenge.

So, what’s the solution?

In the near term, you’ll just see more and more media sold via performance based options – CPC and CPA.  This will allow web site publishers and traffic providers to monetize their inventory as best as possible.

In the longer term, you’ll see the development of more targeting technology and options so as to create higher value “buckets” of inventory from this vast sea of growing untargeted, “run of network” inventory.  Advances and improvements in contextual and behavioral targeting are already occurring.  And, you’re starting to see some interesting new techniques – from social media targeting (to identify mavens and influencers) and location-aware targeting (so you could be shown a Starbucks coupon/ad while you surf via WiFi at a local Starbucks) to improvements in predictive modeling/collaborative filtering.   And, you’re also seeing the rise of ad exchanges as a mechanism for aggregating these new audiences and streamlining the bidding process for bringing targeted online media buyers and sellers together.

The last piece of the puzzle, then, is to convince advertisers to increase their share of overall media budgets that they allocate online.  But, these new targeting and bid technologies alone won’t be enough to accomplish this.  It will also be important to increase advertisers’ confidence that they’re getting what they pay for through increased transparency on exactly what the advertiser is buying.

At Click Forensics, we believe that the more forward-looking ad networks will realize that transparency can be a core differentiator.  And, we’re starting to work with many of them to provide assurance to their advertisers thru 3rd party authentication and scoring that validates overall traffic quality.  This isn’t just filtering out invalid and fraudulent traffic, but using a comprehensive traffic quality management solution to actively manage and work with an ad network’s various traffic sources and partners to ensure that only qualified traffic is delivered upstream to their advertisers.  The net result is better results for advertisers, which increases overall retention and follow on media buys.  And, frankly, that’s the key to increasing overall online media allocation!

Depending on whom you ask, search marketing is either in a world of hurt or faring pretty well. While the mainstream media is quick to highlight the decline in online advertising, their focus is usually on display (banner) advertising and the plummeting CPM rates that publishers and ad networks can command. By almost all accounts, 2009 will be a difficult year for display advertising. But search advertising (CPC) continues to be a bright spot that will continue to shine for the foreseeable future.

Prior to Google’s and Yahoo’s earnings reports, the estimates for Q4 search spending were all over the map. An Efficient Frontier study concluded that search advertising spending had dropped by 8% in the most recent quarter. Another SEM firm, SearchIgnite, reported that search spending by retailers was up 12%. And yet another search marketing solution, Clickable, reported that Q4 search advertising spending saw “marginal search … spending increases” in the same quarter. So based on data from three leading solution providers, search advertising spending in Q4 either decreased, increased, or stayed about the same. Thanks, guys.

We now have earnings results from Google, Yahoo, and Microsoft and the picture from these Tier 1 search providers is pretty clear.

Results from Microsoft’s online and Yahoo’s search businesses were relatively flat, which isn’t all that bad in an economy where a 10% decline is often viewed as “good news.”  But Google’s results showed an 18% growth in paid clicks and revenue. That’s just stellar.  Since Google controls the large majority of the search market and 98+% of Google’s revenue comes from paid search, this means two things. One, Google is increasing market share. No news there. Two, the market as a whole is still growing at double-digit rates. That’s the real surprise and the truly good news.

Sure, we all have fond memories of the days when the CPC market was growing at 100% and new ad networks and business models were sprouting every week. Heck, that was only last year! But it’s important to remember that in a world where the unemployment rate in California exceeds 9% and even Google is cutting costs and laying off employees, the CPC market is still healthy and growing.

This week we released the Click Fraud Index® numbers for Q4 2008 and they showed a surprising uptick in the click fraud rate last quarter. I say surprising because the overall Index had been trending slightly down for almost a year.  But in bad times, fraudsters become more active. I think it’s healthy for an industry to pause from time-to-time to focus on the downside of business, to make sure proper controls are in place, that people get what they pay for. That’s the point of the Click Fraud Index. After all, no one was focused on Bernie Madoff when the market was going up, right?