Google, Yahoo, their partner websites, and other smaller companies get paid every time someone clicks on the provided ads, and the advertisers pay whether the click produces a sale or not. Click fraud is tempting for website owners who know they can generate revenue by clicking ads on their own site and for rival advertisers who want to deplete competitors' advertising budgets.
The market research firm Outsell recently released a study of over 400 online advertisers that estimated click fraud cost the companies $800 billion last year. The practice is prevalent enough that companies are "losing sleep at night," according to Click Forensics President Tom Cuthbert. "Advertisers aren't satisfied with the status quo." The fact that roughly 900 advertisers have joined his company's antifraud network over the last three months seems to support that claim.
Giants Yahoo and Google have a better chance of separating click frauds from legitimate customers, but Click Forensics still found that 12.8 percent of both companies' clicks were fraudulent, up from 12.1 percent last quarter. Cuthbert suggested the two companies may be removing identified click fraud from advertiser bills, but neither company is outspoken about their monitoring practices -- a silence that has frustrated advertisers that want to know how their money is being protected.
While acknowledging click fraud as a bane to profits and e-commerce, Google's Chief Executive Eric Schmidt does not feel it is becoming widespread. "Smart people are trying to break the law, but we have even smarter people trying to prevent it," Schmidt said.
It remains to be seen whether Google's new cost-per-action ad service -- which only charges advertisers for clicks that produce a sales lead or purchase -- will be able to help stem the tide of click fraud.