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Online advertisers beware. Click fraud is on the rise, according to numbers released Monday by the Click Fraud Index, an independent click fraud reporting service.
Pay-per-click fraud reached 14.1 percent of all clicks tallied in the second quarter of 2006, slightly higher than the average of 13.7 percent for the first quarter, according to the Index, which monitors and reports on data gathered from the Click Fraud Network.
Click Forensics, which released the numbers, defines click fraud as "high threat level clicks ... likely to be generated for a purpose other than legitimate searches." The index scores are based upon dozens of attributes monitored by the Click Forensics' fraud detection technology, including IP address, country of origin, time of day and time between clicks, among other factors.
Clicks Cost
One of the biggest takeaways from this latest index was that the click fraud rate for high-priced search terms -- defined as US$2 or more -- reached 20.2 percent. These high-priced terms often make up the majority of an advertiser's total spend, according to Click Forensics.
"For the first time, we have industry data that clearly shows what many have expected -- organizations purchasing higher-priced search terms are significantly more vulnerable to click fraud," said Tom Cuthbert, president and CEO of Click Forensics.
The average pay-per-click term cost for the top key terms across the five biggest search advertising industries -- retail 
, financial services, health and fitness, technology and entertainment -- was down slightly in Q2, however, to $4.51, from $4.75 in Q1.
"Folks benefiting from fraud are getting more sophisticated [and] making money," Cuthbert told the E-Commerce Times.
Companies running online advertising campaigns through Yahoo (Nasdaq: YHOO), Google (Nasdaq: GOOG) and other Tier 1 search providers fared better than those doing so at smaller providers, but the numbers still climbed to 12.8 percent in the second quarter, up from 12.1 percent in Q1.
Comparatively, the average click fraud rate on Tier 2 search providers, like Ask.com, Lycos and MSN.com, was 20.3 percent, down from 21.3 percent in Q1. The rate for Tier 3 search providers, which include smaller niche companies like Dogpile, was 27.1 percent, down from 29.8 percent in Q1.
Growing Concern
Advertisers are obviously concerned, as the number of members in the Click Fraud Network has climbed from 500 in April to 1,300 members today. The network allows them to monitor for fraud free of charge using Click Forensics' technology.
Advertisers suspect click fraud when their usual return rates are not achieved and clicks increase, Cuthbert explained. Using monitoring technology allows them to determine what is happening in days or even hours.
Click fraud cannot be prevented, but relief is possible, Cuthbert said. "Advertisers can optimize their PPC spend by reviewing unwanted clicks and take immediate action to ... change their terms, even [those] used on each search engine," he said. "This is a much better approach than waiting until your budget is depleted and you get your bill at the end of the month."
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