Case in point: Rebecca owns a small business in Kansas City. Her webmaster offered to set up a few Google PPC ads to drive business to the site. In the first month, $80 brought something close to 20 leads. The following month, 20 leads came in, but the costs soared over $800. Rebecca told her webmaster to shut down the campaign. “I never want to advertise on pay-per-click again.” She announced, “I’m done with it.”

Rebecca’s situation isn’t unlike many small businesses that start out using Google or Yahoo! PPC campaigns. Understanding how click fraud occurs, in relation to how PPC campaigns are set up, can help advertisers such as Rebecca continue to reap the business advantages of PPC without falling into the click fraud trap.

Click fraud occurs when a person or a programmed script triggers a “pay-per-click” event charged to you (the advertiser) without the intent to view your website. What would motivate someone to do this? Follow the money: PPC ads don’t just show up on the search engines. They also show up on various sites where the site owner gets some of the advertising revenue for each ad-click they can provide. Some of these site owners hire groups of people to click on their ads or write sophisticated software (robots) that click on their own ads. It’s quite profitable, and arguably, not illegal, so it continues to be ubiquitous in the industry.

Three Steps to Click Fraud Freedom

PPC campaigns can bring excellent results, so the objective is to not only continue with PPC but also to tune up your PPC campaigns, all the while banishing click fraud from the picture. Here’s how in three easy steps:

Step 1: Identify ads that are generating click fraud. A legitimate web session has notably different characteristics than a fraudulent session. Legitimate visitors tend to linger on good content pages and often reach goal pages — something that’s hard for a click fraud perpetrator to imitate. A session caused by a fraud perpetrator may appear to request several pages, but won’t focus on key content pages. Fraud perpetrators use the minimum activity necessary to trigger a pay-per-click charge.

That is why fraudulent sessions end quickly and will rarely request goal pages.
A good web analytics tool that includes a click fraud report can identify which PPC ads are attracting this unusual behavior. Combinations of two or more of the following behaviors will indicate likely click fraud.

• A large number of visits where the client IP addresses are similar
• A large number of sessions where there is no referring domain
• A higher percentage of visitors that don’t reach goal pages
• A sudden, disproportionate increase in sessions from a particular ad
• An affiliate domain that refers a high number of single page visits
• A particular affiliate domain that refers a high number of sessions with near zero time on site

Pay a quick visit to referring sites that appear frequently but still generate low page counts or low time on site. If the site is merely a link list, and has no relevant content, then you should be highly suspicious of click fraud.

Step 2: Make your ads less attractive to the fraud perpetrators.
This involves lowering or eliminating syndication, narrowing geographic targets and messaging, and blocking bad affiliate sites. First, login to your PPC account and, for each ad campaign, adjust the following attributes to decrease the likelihood of click fraud and increase the chances of attracting real site visitors.

So you’ve received and read the settlement notice, and perhaps even some of the outside news coverage. Now what? Well first, you’re going to have to decide which of the following three options you’re going to take:

1. Opt out of the settlement and try to make your own claim
2. Object to the current settlement being offered
3. Do nothing– in which case any claims for click fraud from January 2002 to May 2006 would fall under the terms of the settlement

Participating in the settlement, which is the default if you don’t respond, will entitle you to make claims for some of the $90M settlement, though it’s worth reading the fine print. Legal fees will come off the top, and the credits back to advertisers are likely to be pretty small.

Whether you decide to stay in, or opt out and make your own claims, you’re going to need historical data detailing possible click fraud along.

If You Do Nothing and Stay In

According to the settlement offer, companies who make claims against the current settlement will be able to request credits for ads going back through 2002. However, those who remain a member of the settlement give up the right to make future claims.

This gets even more interesting when you consider that the amount of a refund may not be appealing at all. Some reports calculate a possible $0.05 credit for every $1 spent on advertising. However, the wording in the settlement offer seems to indicate that the credit only applies to “affected ads”. From the Google notice:

“…For example, if the amounts that you paid to Google for the affected ads were 1% of Google’s revenues from online advertising since January 1, 2002, you would be eligible to receive 1% of the total available credits. You must certify in your claim form the percentage of your ads you believe were affected by “click fraud”…”

If the credit only applies to the amount you claim that you spent on the “affected ads” (i.e., the fraudulent clicks), you would get less than $0.0045 for every $1.00 you paid for fraudulent clicks–it’s a little tricky mathematically, so we’ve put together a concrete example for you in the side bar example. Regardless of which interpretation you choose, the amount of money you’d be refunded may not be worth the time.