By MICHAEL LIEDTKE, AP Business Writer
Swindlers have stepped up their effort to fleece millions of dollars
from online advertisers who use lucrative marketing networks run by
Google Inc. and Yahoo Inc. according to a quarterly report to be
released Monday.
The sales referrals generated by clicks on the brief advertising links
popularized by the two Internet powerhouses are a sham 14.1 percent of
the time, based on information collected from 1,300 online marketers.
That's up from a click fraud rate of 13.7 percent three months ago,
according to Click Forensics, a San Antonio-based consulting service
that compiles the index.
The statistics jibe with other data asserting advertisers are paying a
significant sum to Google, Yahoo and their partner Web sites 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 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 Web sites get paid each time someone clicks
on advertising links usually displayed at the top and on the side of
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, Web site 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 past three months.
Google and Yahoo are better at weeding out click fraud than smaller
Web sites, but Click Forensics still concluded both companies are
being hard hit. About 12.8 percent of the clicks on ads served up by
Google and Yahoo are deceptive, up from 12.1 percent three months ago.
Cuthbert said Google and Yahoo may be identifying some of those
fraudulent clicks and removing fees from advertisers' bills. Both
companies are tightlipped about how they monitor for click fraud,
another factor that has frustrated some advertisers that want more
transparency.
Google Chief Executive Eric Schmidt acknowledged click fraud remains
an ongoing headache, but disputed the notion that the problem is
becoming more prevalent.
"Smart people are trying to break the law, but we have even smarter
people trying to prevent it," Schmidt said during an interview at a
conference that concluded Sunday in Idaho.
Yahoo CEO Terry Semel declined to discuss the latest data on click
fraud, saying he intended to address the issue Tuesday when the
company is scheduled to release its second-quarter earnings. "We will
be very proactive about it," Semel said during the same Idaho
conference.
Both Google and Yahoo have agreed to settle class-action lawsuits to
limit their potential liability for past click fraud. If approved, the
two settlements would address any click fraud that occurred amid more
than $22 billion of ad spending.
A two-day court hearing on Google's offer to pay up to $90 million in
refunds and attorney fees is scheduled to begin July 24 in an Arkansas
court. Yahoo's proposed settlement, which doesn't limit how much the
company might pay, isn't scheduled to be reviewed in a Los Angeles
federal court until late this year.
Copyright 2006 The Associated Press.
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