click fraud - harvard university · • advertisers agree to pay google or yahoo for preferential...

Click Fraud

CyberGroupJanuary 18, 2006

The Basics

• Advertisers agree to pay Google or Yahoo for preferential placement in searches

The Basics


• Advertisers also pay Google or Yahoo to place ads in third party websites

The Basics


• Advertisers also pay Google or Yahoo to place ads in third party websites

• When a user clicks an ad, Google or Yahoo recognize revenue from the advertiser’s budget and pay third parties a portion

• Prices per click run from a few cents - $84

The Stakes

• Google earns over 95% of its revenue on the pay per click model– 2006 est. $5.2 Billion

• Because of expectations of growth in this revenue it commands a P/E ratio greater than 100 vs. an average of 14 for the S&P 500

• At these high multiples, share prices can collapse on missed earnings. Yahoo’s stock tumbled 13% Tuesday afternoon after only growing income by 39%

How are Google and Yahoo Responding to Click Fraud?

• We don’t really know specifically– Google says it looks at IP addresses and

timing patters, among other things


• Yahoo has a “Click Protection System”– Each click is evaluated along 90 data points. Some of

the data points evaluated are: • IP address • User session information • User cookie information • The network to which an IP belongs • The user's browser information • The search term requested by the user • The time of the click • The rank of the advertiser's listing • The bid of the advertiser's listing • The time of the search • The time of the click


• Google does offer credits for invalid clicks, but only in the prior two months

• It is likely that fraudulent clickers and pay-per-click advertisement providers are engaged in continuous escalation and adaptation

• In November 2004, Google sued a company for hiring 50 people to click on ads on its own website, thereby generating false ad revenue– Google was victorious and collected $75,000 in

damages

Google and Yahoo both assert that they cannot reveal how they

combat click fraud

• They say it would undermine their fraud prevention systems

• Yahoo also says, “We have two patents pending related to this technology, so we cannot currently disclose too many details about the methods we use.”

Third-party auditors have stepped in to fill the click fraud gap

• Clicklab, WhosClickingWho, Click Fraud Detective, among many others

Third-party auditors have stepped in to fill the click fraud gap

Advertisers Could Monitor Click Fraud on their Ads

• A few lines of code in a web site can help gather information about visitors– Browser/Resolution/other stats– Referring page– IP address

Advertisers Could Monitor Click Fraud on their Ads

• Invisible code in a web site can gather information about visitors– Browser/Resolution/other stats– Referring page– IP address

• This is currently available to advertisers– Most do not track this information– Most do not even keep track of their return on

investment

Possible Solutions by OSPs• If 3rd parties can do it, Google and Yahoo can

too• Filter using IP addresses

– Remove multiple clicks that originate from the same IP

– Proxy servers at work places or ISPs may assign the same IP address to several users

– Blocking IP addresses that are suspected of fraudulent clicks is not effective

– Serious evil doers will either mask their IP or use different addresses

Possible Solutions by OSPs

• Other things to monitor: cookies, ad ranks, time of clicks and searches, browser information, etc.

• May need to increase the anti-click fraud team• Use GeoPositioning

– Once GeoPositioning improves, can tell if clicks are coming from a competitor’s office or a company specializing in click fraud

– Now can probably tell what country clicks are coming from, so can monitor for suspicious traffic

• Team up with 3rd parties to develop new tools

Alternatives and Modifications to Pay-Per-Click

Other Formats Already in Place or In the Works

AdSense• Google places links it thinks are relevant on third

party sites and splits the revenue with the host• Google allows advertisers to pick and bid on

whose websites they appear• Advertisers can pay based on how many people

are expected to see the ad ("cost per thousand" basis)

• But, they must still compete with advertisers who choose a cost-per-click scheme

Other Formats Already in Place or In the Works

Pay-Per-Call• Links hooked up to telephonic systems like

Skype will then connect you with the company when clicked

• This makes it harder, or at least more expensive to engage in click fraud

Pay-Per-Action• Advertisers pay only when clickers follow up and

provide requested demographic or contact information or purchase a product

Flat Rate

• Model used for other media advertising• Fee charged for certain period of time• Variations in price for placement

• In order to match the revenue of pay-per-click, Google could auction off top placement for certain searches

CPM (Cost-Per-Thousand) Model

AdSense Advertisements• Charge based on average number of visits to a

site where link is hosted• Agree to post the ad for a given period of time to

circumvent competitors’ use of fraudulent clicking to get the link off the site

Advertisements on Google Search• Charge based on popularity of search term• Agree to post for a given period of time• Variations for placement

Pay Per Time at Site

Charge advertisers per unit of time the clicker spends at the site after clicking the link

Pay-Per-Sale- The “Holy Grail” of Advertising according to

some- Google gets paid a percentage of the sales that

occur after a clicker links to the advertiser's website

- Could operate in addition to a flat rate - Could create a sales-per-click scheme where

Google gets a percentage of total sales through Google divided by the number of clicks - This way, Google has an incentive to combat

fraudulent clicking- “Google Wallet”

Role of Government

Outlaw Click Fraud?

• Enforcement?• Incentives?

– Who benefits?• Advertisers?• Or search engines?

– Knowledge Problem• Resources

– Will small advertisers pursue expensive litigation?– A threshold?

• What if Google / Overture is already taking best efforts?

Transparency Regime

• Require Reporting• Standards• Problems?

– Too much information?

Government Action on the Fraudulent Clicking Problem

is a Bad Idea • Because it would be excessive/ineffective

to outlaw click fraud– Seems like a problem that should be resolved

contractually between the relevant parties– It would be difficult to enforce against

particular competitors– Jurisdiction problems

Government Action on the Fraudulent Clicking Problem

is a Bad Idea • Because the market will solve this problem itself

– Stores don't close their doors because of shoplifting. Click fraud is just part of the cost of doing business and advertisers will just budget for it

– Already there are some Google/Yahoo competitors with different models, like Snap.com

– If the problem gets so bad that advertisers can't afford PPC advertising anymore, providers may begin offering other models rather than lose advertisers altogether

The Future of the Internet: PPC?

• Generativity: – Will new ways to “optimize” sites to get at the

top of search results be developed?– Will more companies move to an online

storefront so that they can go to a pay-per-sale model?


• OSP Control: – How will companies count clicks?– Will Google/Yahoo create a new model?– When click fraud occurs, will OSPs and ISPs

be shielded from liability in the same way the DCMA provides a shield?

• Is click fraud analogous to other types of “real world” or online fraud?


• Culture: – Do people see this as fraud?– Who will have the upper hand – the

advertisers or the providers?• Will PPC become obsolete?

– Create better fraud detection?– Movement toward pay-per-sale?

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