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Understanding and Dealing with Click Fraud

November 13th, 2010
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This is an excerpt from a whitepaper that I was commissioned to write for the FBI. It was part of an internal research project where they were to determine the effects and solutions regarding the rampant Click Fraud concern with online advertising and the like. – Brian Grayless

What is click fraud?

Let’s start out by defining some key terms that are important in understanding click fraud.

  • Advertiser – The entity that pays money to get traffic to their site in the way of bidding on keywords or topical categories (bid auctions).
  • Publisher – Any entity which displays advertiser ads on their web site or in some other publicly viewable medium.
  • Visitor – A legitimate user who clicked on something to get to the appropriate target web site.
  • Click – A visitor to the advertiser’s site that came by route of one or more publishers.
  • PPC (Pay Per Click) – An internet advertising model where the amount the advertiser pays is dictated on a per click basis for the terms (keyword or categories) being bid on.
  • CPC (Cost Per Click) – The amount (bid price) paid by the advertiser to receive one visitor for a particular term. The amount is paid only if the visit occurs.
  • CPA (Cost Per Action) – An advertising cost associated to a particular desired visitor action, i.e. purchased a product or service, filled out a survey, or signed up for a newsletter.
  • Conversion – A completion of the advertiser’s desired action under a CPA advertising model.
  • Click Stream – The route the click traffic takes from the time the click is made through the time the web user arrives on the advertiser’s targeted URL. There can often be URL redirects and several publishers (usually tracked by cookies or ID’s in the URL) that receive information for each click, completely transparent to the user.
  • Rev Share – A single publisher’s fraction of the revenue generated by specific click and conversion sources. For example, a smaller publisher might arrange to send click traffic into a larger publisher’s click stream, providing the larger publisher with more traffic and retaining a 5% rev share of the total per click amount for the smaller publisher. Rev Share can be seen as a multi-tier sales commission.
  • Ad Feed – ad listings/data provided by an n-tier publisher by request to display to users on another publisher’s web site or application.

Click fraud, generally speaking, occurs when something (person, web bot, etc…) posing as a legitimate internet user follows (or clicks) a paid advertisement URL to the advertisers web site from which money is generated for some entity other than the advertiser.

Valid User

An advertiser pays good money for advertising, expecting that a portion of the traffic received in return will generate revenue in some fashion. Non-legitimate visitors produce bad clicks which in effect spend advertiser dollars with no hope of a return for the advertiser. This expense is instead divvied up between the layers (rev share) of publishers that are likely to be present in the click stream. Publishers, especially the ones on the end of the chain, often have the most to gain from this practice and will devise all sorts of innovative ways to game the system. Larger publishers in the click stream will often ignore or downplay this activity, knowing that it lines their pockets in the process.

In short, advertisers are being hijacked of their advertising dollars from inflated term bidding marketplaces because of traffic that is posing as real, live, interested web site visitors. It is theft akin to diverting fractions of a penny from financial transactions to a private account.

See more information on Click Fraud and get the complete and detailed whitepaper.

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