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Click Fraud Gets More Elaborate with 'Real' Purchases

A Harvard Business School professor has identified a new breed of click fraud that not only simulates clicks on a Google ad - but also seemingly generates a 'real' customer purchase on the advertiser's website.

Professor Ben Edelman, who has researched such related issues as invisible online ads - sleight-of-hand tactics used by some websites to sell more advertising than they have space for - calls this new form of fraud even more insidious as it gives the perpetrator the ability to impose charges in a way that is harder for the advertiser to notice.

"The retailer may think it can detect click fraud by a low sales conversion rate," says Edelman. "But here, the traffic converts. Based on that high conversion rate, they might even decide to raise their bid [in Google's advertising auction system] and have no way to realize that it's all a ruse." (via Forbes).

No Ordinary Click Fraud

This is how the fraud works, according to his blog: spyware on a user's PC monitors the user's browsing to determine his or her likely purchase intent. Then the spyware fakes a click on a Google PPC ad promoting the exact merchant the user was already visiting.

If the user proceeds to make a purchase - which is reasonably likely for a user already navigating to the merchant's site - the merchant will naturally credit Google for the sale.

"Furthermore, a standard ad optimization strategy will lead the merchant to increase its Google PPC bid for this keyword on the reasonable - albeit mistaken - view that Google is successfully finding new customers. But in fact Google and its partners are merely taking credit for customers the merchant had already reached by other methods."

Much of the culpability for this fraud, Edelman says, can be attributed to a search engine that Google uses to broker ads. In the scheme that Edelman tracked, these ads were passed on to more than seven other shady affiliates that perpetuated the fraud through the search engine.

Among other measures, Edelman is urging Google to cut its ties with this search engine as well as make restitution with affected advertisers.

Garden Variety Fraud

The war against more straightforward click fraud does not seem to be advancing either as new statistics show an increase in this activity. Anchor Intelligence says the average attempted click fraud rate jumped from 18.6% in Q3 to 25.7% in Q4 -  the highest attempted click fraud rate recorded by Anchor in all of 2009.

Fraudsters looking to take advantage of the surge in holiday ad spend online was the main culprit.

Separately Click Forensics also released figures for Q4. It found that the overall industry average click fraud rate was 15.3%, up from 14.1% for Q3 2009 and down from the record 17.1% rate reported for Q4 2008.

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