Online Advertising Fraud

Abstract

This article discusses illegitimate activities associated with online promotion activities, specifically those related to click-through fraud. Whether one is starting a new brick-and-mortar restaurant, managing a charity organization, or building an online information portal, prospective customers, donors, or users must be informed, persuaded, and reminded of the features and benefits that are offered by the business. Online promotion has some unique and advantageous characteristics over traditional promotion media, but those characteristics create a potential for abuse. Click-through fraud, more commonly termed click fraud, is a relatively recent and evolving problem that currently has few deterrents. This article outlines why and how click fraud is done, and suggests some measures that can be taken to at least recognize the potential for click fraud. The interactive nature of the Web would seem to make it an ideal advertising medium with a potential to completely eliminate advertising waste. Newspaper ads for, say, a pet store reach many people who do not have pets: the number of people in this category is termed as waste. With online advertising, it is possible—in an ideal world—to place an ad and to pay for the ad space only when a prospective customer shows interest by clicking on a linked advertisement that transports him/her to the advertiser’s online place of business. This pay-per-click (PPC) pricing model would seem to completely eliminate advertising waste. Unfortunately, advertisers, ad hosts, and fraudsters are discovering that the PPC model is open to abuse. Those who click on an online advertisement could include: • Prospective customers who actually have an interest in the product • Competitors who want to generate high advertising costs for the advertiser • Ad hosts who earn a commission from displaying pay-per-click advertising The latter two categories consist of entities that have absolutely no interest in the advertiser’s offerings and absolutely no intention of ever performing any target actions such as purchasing a product. These fraudulent click-throughs or debiting clicks could turn an ad campaign from one that has almost no waste into one that has almost 100% waste. In a survey of advertisers, the Search Engine Marketing Professional Organization found that a quarter of respondents have tracked fraud as a problem (SEMPO, 2004).