Google to Tighten Defense Against Click Fraudsters

Google (Nasdaq: GOOG) plans to provide Web advertisers with more data and tools to combat click fraud, a damaging practice that costs advertisers an estimated US$16 billion a year.

The new tools are part of an effort to crack down on click fraud and dull its impact on the otherwise highly profitable pay per click online advertising model.

"There has been an increasingly growing cloud over Google on this issue," Ron Enderle, a principal analyst with the Enderle Group, told the E-Commerce Times. "If folks have been gaming the system, advertisers want to see some corrections."

Per Click Model

With the pay per click model, advertisers pay every time someone clicks on their ads. However, some companies mount campaigns to click repeatedly on their competitors' ads just to drive up their costs.

The practice takes advantage of the system Google currently has in place for Internet advertisers to pay their fees.

Now, Google intends to address the issue by providing advertisers with a means to scrutinize the process and gain more control over it, according to Enderle.

Blacklisting Fraudsters

In March, Google will begin allowing advertisers to blacklist certain IP addresses if click fraud is suspected -- for example, if a large number of clicks from a particular address results in few or no sales .

The company also plans to launch a Web site resource center to combat click fraud, where it will post information and tutorials to educate its advertisers on the issue of invalid clicks.

Behind the Data

On Wednesday, Google released data indicating that most fraudulent clicks are automatically detected, but it acknowledged that its pay per click Web advertising system has been abused.

Critics contend the practice is already out of control, claiming that up to half of all ad clicks are fraudulent. However, that figure is overblown, Google maintained, pegging the true number at closer to 10 percent.

Google bases its estimate on the average number of invalid clicks it catches, and doesn't charge for. The 10 percent represents an estimate US$100 million in lost revenue, Google said.

Google conceded that it doesn't catch about 0.02 percent of the click fraud that occurs -- those instances are brought to its attention by advertisers.

More Fraudulent Clicks

However, says Enderle, the information Google released does not present a complete picture. What is missing is the number of fraudulent clicks neither the search giant nor the advertisers catch.

Google is now moving to put adequate tools in place so it can more accurately measure what is happening.

"Google is realizing it better get its arms around this, or advertisers will fix the problems themselves," said Enderle, "and Google won't like that."