Online Advertising Survival: Combating Click Fraud - University of ...

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In 2008, online advertisers expect to lose more than $1.6 billion dollars to click fraud 1 .This figure is debatable, depending on the source of the information. There has alwaysbeen great disparity in the estimates between the search engines, advertisers and thirdparty auditing firms. The major obstacle facing the industry is also the most obvious -how to define and measure click fraud. Regardless, after much bickering, click fraud isnow at least acknowledged by all parties concerned to be a problem that has to be dealtwith urgently.It is ultimately the advertisers own responsibility for the prevention and detection of clickfrauds but the industry is doing its part to protect the victims. There are unique dynamicsin the industry in that those entities who are supposed to be protecting the advertiser arealso the one’s who are financially benefiting from the click fraud - namely the largesearch engines like Google and Yahoo. This research paper will examine the earlyorigins of click fraud and the current click fraud schemes being committed and what canbe done to protect the advertisers. The pay per click advertising model will be presentedand shown why it is so easily vulnerable to fraud.The legal aspect of click fraud will bepresented which will show just how difficult it will be to use the courts to resolvedisputes. Finally, while it is not possible to completely eliminate click fraud,recommendations will be presented as to possible solutions to alleviate the problem.While there are numerous search engines in existence, my focus will be on Google and toa lesser extent, Yahoo, as these search engines control the majority of the internet1 http://www.clickrisk.com/, Retrieved April 20, 20086
advertising industry. In addition, unless Canadian statistics are readily available, themarket will be the reference point in much of the discussion.2. Advent of E-CommerceElectronic commerce, or more commonly known as, e-commerce, consists of buying andselling of products or services over electronic systems such as the internet and othercomputer networks 2 . The amount of trade conducted electronically has growntremendously, taking away from the brick and mortar business world and old fashioncatalog sales. E-Commerce offers advantages to retailers and consumers that thetraditional retailer cannot, that of convenience, 24 hour availability, and a global reach.Total actual US retail sales from E-Commerce in 2007 are $127.7 billion, a 19.8%increase from the previous year (Appendix A). The top 500 largest e-tailing companiesgrew 22% in 2007 for total sales of $102 billion 3 . In comparison, total non E-Commerceretail sales increased only 4.0% in 2007 4 . Sales are projected to increase to $218.4billion by 2012, a five year increase of 71%. A study as to factors which would influenceincreased online expenditures in 2008 noted convenience as the top factor (Appendix B).Surprisingly, 54% of the respondents would purchase more online to save gas. With theoutrageous gas prices today, that percentage may well be understated.3 Top 500 Guide on Internet Retailer, http://internetretailer.resultspage.com/retailing/top%20500%20guide,Retrieved June 8, 20084 US Census Bureau, US Department of Commercehttp://www.census.gov/mrts/www/data/html/07Q4.html, Retrieved May 31, 20087
Page 1 and 2: Online Advertising Survival:Combati
Page 3 and 4: Table of Contents1. INTRODUCTION 52
Page 5: 1. IntroductionThere have always be
Page 9 and 10: sales recorded by the offline retai
Page 11 and 12: and newspaper circulation will see
Page 13 and 14: Pay per click advertising in theory
Page 15 and 16: Search engine marketing companies v
Page 17 and 18: click fraud try to imitate legitima
Page 19 and 20: click fraud did so in the belief th
Page 21 and 22: framing the operator or network 22
Page 23 and 24: 26An example of the relationships w
Page 25 and 26: each others work will “donate”
Page 27 and 28: with 99% coming from search adverti
Page 29 and 30: 36Google argues that virtually all
Page 31 and 32: eporting by the third party auditin
Page 33 and 34: provide a foundation for industry g
Page 35 and 36: advertisers. In turn, the third par
Page 37 and 38: the powerful advertising networks.
Page 39 and 40: human and bot generated clicks in o
Page 41 and 42: There is currently few state or fed
Page 43 and 44: 11.2 Class Action LawsuitsGoogle an
Page 45 and 46: The problem facing the plaintiffs i
Page 47 and 48: eluctantly acknowledged the click f
Page 49 and 50: 12.4 User LocationIn general terms,
Page 51 and 52: There is a difference between legit
Page 53 and 54: engines not to crack down on it. Th
Page 55 and 56: BibliographyMcCollam, Douglas, Bad
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Appendix B57
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Appendix D6464 http://www.marketing
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Appendix F6666 IAB Internet Adverti
Page 63 and 64:
Appendix H63
Page 65 and 66:
Appendix J65
Page 67 and 68:
Appendix L67
Page 69 and 70:
Appendix6868 http://www.marketingch
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