Google, Yahoo, MSN Tackle Click Fraud With Working Group

Hoping to boost advertiser confidence in the interactive marketing industry, the Interactive Advertising Bureau (IAB) said it would form a working group to create click fraud prevention guidelines.

Yahoo (Nasdaq: YHOO), Google (Nasdaq: GOOG), Microsoft (Nasdaq: MSFT) and Ask.com are among the companies that have already agreed to participate in the Click Measurement Working Group, the IAB said.

The group's aim will be to develop guidelines to better define the understanding of click-through advertising metrics, tackling such basic issues as what constitutes a "click" and how invalid or fraudulent clicks can and should be identified.

The commitment to creating deadlines "demonstrates our continued commitment to being the most accountable advertising medium and providing marketers with the highest possible level of transparency," said IAB CEO Greg Stuart.

The group forms at a time when click fraud makes headlines on a nearly daily basis, with both Google and Yahoo recently agreeing to pay out millions in order to settle lawsuits alleging widespread abuse of the pay-per-click approach. Many in the industry have worried that over time, click fraud and the attention it garners could begin to erode advertiser confidence and slow the phenomenal growth of the online advertising industry, which is expected to continue for several more years.

Partnership Approach

There are at least two forms of click fraud: In one, a Web site publisher clicks on ads or gets others to do so in a bid to boost the revenue received from Google or other ad providers. In another, competitors click on the ads of their rivals in order to drive up their advertising costs.

Per-click rates have skyrocketed in recent years due to the growth of online marketing, and the favored auction-style approach that encourages marketers to bid high to ensure they control keywords that generate and appear in ads.

In addition to definitions and guidelines, the working group will establish a process for auditing ad campaigns to ensure companies are getting what they pay for.

The group will work with the Media Rating Council, an independent group that monitors advertising, on the guidelines. Council Executive Director George Ivie said the group's formation should help ad agencies and marketing firms "feel assured that the interactive industry is striving for increased reliability and consistency through the guideline-setting process and through their support for audits."

Self-Preservation Moves

The debate about how widespread click fraud actually is may never be fully settled, though recent data suggest it is a problem for the industry. In a report issued in mid-July, Click Forensics said 14.1 percent of all clicks recorded in the second quarter of 2006 were fraudulent, up from the first quarter, with even higher rates of fraudulent clicks on top-rated and more expensive keywords.

Meanwhile, Outsell has estimated that fraudulent clicks are costing major search providers US$1.3 billion annually.

The direct financial exposure, however -- in the form of refunds made to advertisers -- could pale in comparison to any long-term damage to the interactive advertising industry. Online ads generated an estimated $4 billion in revenue in the first quarter of 2006 alone, with strong growth forecast through 2009, as more multimedia ads are deployed on the Web.

Outsell Vice President Chuck Richard said the industry-wide numbers on click fraud produced by his firm and others have long disagreed with those that Google and others produce based on their internal reviews.

Working with competitors enables Google and others to portray the problem as an industry-wide one rather than one facing them directly and specifically, he added. "If Google or the others were seen being too aggressive, it would be an admission the problem was a serious one," he added.

Still, Web publishers and search providers have been making their own moves to address the click fraud issue. As part of its settlement, Yahoo established a click fraud control center and set up a system to provide advertisers real-time feedback on any potentially fraudulent activity surrounding its accounts.

Google also quietly changed its AdWords ad platform to include a feature through which advertisers can get updated information about clicks on their ads that appear to be fraudulent.