Much ado over click-fraud statistics

The battle between advertisers and online search networks over the pervasiveness of click-fraud continues to grow more heated with researchers claiming rapid growth of automated ad impressions and outside observers noting an overall lack of transparency in the space.

According to a research report issued on July 19 by Click Forensics -- which markets services used by advertisers to analyze online advertisement traffic -- the average click-fraud rate for Web ads was 15.8 percent across the industry during the second quarter of 2007.

The result indicates a 14.1 percent increase in click fraud when compared to the same period last year and a 14.8 percent gain over the first quarter of this year, based on the company's numbers.

Further, Click Forensics contends that the fraud rate within pay-per-click networks run by industry leaders, including Google and Yahoo, accounted for 25.6 percent of all traffic during the second quarter, representing a 21.9 percent gain over the same timeframe in 2006 and a 19.2 percent leap in fraudulent hits compared to Q1 2007.

Contributing heavily to the significant gains in contested impressions, Click Forensics maintains, was the increased use of hijacked botnet PCs to manipulate online traffic. While not offering concrete statistics on the trend, Click Forensics' research showed that such activity roughly doubled over the second quarter.

Market watchers have been trumpeting massive growth of the online ad sector in 2007, and rightfully so, said Tom Cuthbert, chief executive of Click Forensics.

However, if the online space is going maintain credibility with advertisers going forward, Cuthbert said, those who control the largest networks must begin working harder to track and eliminate inflated results.

New York-based market research firm eMarketer has predicted that the North American online advertising segment alone will grow by more than $3 billion in 2007 to reach $19.5 billion by the end of this year.

"The problem only appears to be getting worse within the content networks run by companies like Google and Yahoo, it's very concerning to advertisers, and the botnet issue appears to be fueling this growth," Cuthbert said.

"A big part of the problem is that the content networks themselves aren't doing enough to look for traffic coming from automated sites and parked domains that only exist to create fraudulent clicks," he said. "We see a lot of this low-quality traffic occurring inside those networks."

Click Forensics gathers its research data from Click Fraud Network, an effort it sponsors that aggregates information provided by the company's advertising customers about the advertising traffic that they receive.

Yahoo representatives did not discredit the Click Forensics report but defended that the company is weeding out fraudulent ad hits and working to ensure that its customers only pay for legitimate traffic.

"We've dedicated significant resources to delivering high-quality traffic to our advertisers and have identified and not billed for 12 to 15 percent of the clicks on our network [as a result of click-fraud]," said Reggie Davis, vice president of marketplace quality at Yahoo.

The company is also launching new programs to help offer its advertisers a better idea of what they're paying for, Davis said.