Search marketing feels pressure of click fraud

Search marketing has been the engine of growth for online advertising ever since Google launched its services in the late 1990s. But following scare stories about click fraud and lack of privacy, could it be in danger of going out of fashion?

The dangers for consumers have been put into focus by recent events in the US. In the past month, AOL has been slammed for releasing details of hundreds of thousands of its customers’ search queries. While the details were in theory anonymous, the US media quickly identified several of the people behind the queries.

Click fraud is potentially even more serious for the industry. It involves the practice of using third-party sites, known as affiliates, to deliver traffic to a brand’s website. The affiliates get paid on the basis of the traffic they deliver. This encourages them to work harder to deliver more traffic, but also creates an incentive for unscrupulous operators to deliver irrelevant or non-existent traffic to boost their own revenues.

A secondary, smaller problem is rivals trying to force their competitors to waste their marketing budget online by clicking on their sponsored ads.

Overall, the problem could be costing advertisers as much as $1.3bn (&£680m) a year, according to US research company Outsell.

Ted Rooke, vice-president of marketing at online agency Modem Media, which provides search marketing for Hewlett-Packard and Delta, estimates that 14% of traffic could be fraudulent. “You’re always going to have affiliates trying to boost revenues. I think it will get bigger before it fades away,” he says.

The search engines have tools in place to look out for suspect practices but deny it is a big issue. “We take it very seriously and have devoted significant resources and some of our best talent to this,” says a Google spokeswoman.

Yahoo! Search Marketing commercial director Richard Firminger says the 14% figure is “absolute nonsense. It’s impossible for it to be anything like that”.

However, Steve Leach, chief executive of search marketing specialist Bigmouthmedia, estimates that these two companies don’t bill him for up to 10% of the potential clicks for his clients. Not all may be fraud but it indicates the possible scale of the issue.

Mark Harwood, head of technology at digital marketing company Agency.com, advocates the use of pay-per-action instead. This means advertisers would only pay for traffic to their website if the user went on to, say, book a holiday or buy a CD. While this means advertisers would avoid paying for irrelevant clicks, they are likely to come up against opposition from affiliates worried about their loss of revenues.

“It makes a lot of sense for advertisers. The worry among some Web publishers is that power switches to the advertiser,” he says.

No matter what efforts are made to tackle fraud, it’s almost impossible to prevent entirely. The major search engines appear to be doing a good job of meeting the concerns of their advertising paymasters for now – but they know that if that changes, advertisers could easily move their marketing spend to other areas where they perceive less risk.

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