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Bogus Clicks on Online Advertising Links Continue to Rise, Report Says

July 17, 2006|From the Associated Press

Swindlers have stepped up their effort to fleece millions of dollars from online advertisers that use lucrative marketing networks run by Google Inc. and Yahoo Inc., according to a quarterly report to be released today.

The sales referrals generated by clicks on the advertising links popularized by the two Internet powerhouses are a sham 14.1% of the time, based on information collected from 1,300 online marketers.

That's up from a click fraud rate of 13.7% three months ago, according to Click Forensics, a San Antonio-based consulting service that compiles the numbers.

The statistics jibe with other data asserting that advertisers are paying a significant sum to Google, Yahoo and their partner websites for phantom shoppers even as more resources are devoted to thwarting scammers.

A recently released survey of 407 online advertisers by market research firm Outsell Inc. estimated that click fraud cost advertisers $800 million last year.

Click fraud is a highly sensitive subject for Mountain View, Calif.-based Google and Sunnyvale, Calif.-based Yahoo because it raises doubts about the trustworthiness of the advertising model that drives their profits and stock prices.

Google, Yahoo and partner websites get paid each time someone clicks on advertising links on Web pages.

Advertisers pay the commission even when the click doesn't produce a sale -- a system that inspired bilking schemes.

The motives for click fraud vary. Most often, website owners repeatedly click the ads on their own sites to generate money for themselves. In other cases, advertisers target the ads of their rivals to drain their marketing budgets.

As click fraud becomes more prevalent and attracts more media attention, advertisers are becoming more aggressive about demanding refunds and better protection, said Tom Cuthbert, Click Forensics' president.

"Advertisers aren't satisfied with the status quo," he said. "They don't want to keep losing sleep at night wondering how much money they are losing to click fraud."

Reflecting those concerns, about 900 advertisers have joined Click Forensics' anti-fraud network during the last three months.

Google and Yahoo are better at weeding out click fraud than smaller websites, but Click Forensics still concluded that both companies are being hard hit. About 12.8% of the clicks on ads served up by Google and Yahoo are deceptive, up from 12.1% three months ago.

Cuthbert said Google and Yahoo might be identifying some of those fraudulent clicks and removing fees from advertisers' bills. Both companies are tight-lipped about how they monitor for click fraud.

Google Chief Executive Eric Schmidt acknowledged that click fraud remained an ongoing headache but disputed the notion that the problem was becoming more prevalent.

"Smart people are trying to break the law, but we have even smarter people trying to prevent it," Schmidt said.

Yahoo CEO Terry Semel said he would address the issue Tuesday when the company is scheduled to release its second-quarter earnings.

"We will be very proactive about it," Semel said.

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