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Click laundering and PPC fraud

Posted by Michael Bloch in web marketing (Sunday May 23, 2010 )

As click fraud detection becomes more refined, so too do the strategies of those looking to commit it.

Microsoft Corp. filed two lawsuits last week in relation to a new form of click fraud the company has called “click laundering.”

A previously unknown form of PPC advertising fraud, click laundering was detected by Microsoft after dramatic and unusual growth in click traffic on two sites within the Microsoft adCenter network. These weren’t shady sorts of sites – one of them is a quite well known space, science, health, and technology news site attracting over 5 million visits a month.

Click laundering is a process whereby invalid ad clicks appear to originate from legitimate sources. Through the use of various technologies including malware programs, fraudsters trick users into visiting web sites where they unknowingly click on advertisements. This kind of activity is usually easy to detect, but click launderers also can further disguise the origin of those invalid clicks, making them appear to come from approved sites within an ad network.

While fraudsters may be getting smarter in terms of technology, it doesn’t appear to be the case when it comes to common sense. This fraud may have gone undetected if the parties involved had slowly boosted up the fraudulent click rate and in that aspect, that’s where greed has been a good thing by allowing early detection. But who knows? Perhaps this sort of fraud had been perpetrated for a very long time by more patient fraudsters.

Unfortunately, click fraud appears to be on the increase again generally. Click Forensics recently released its report for the first quarter of 2010, which states the overall industry average click fraud rate for the period was 17.4 percent – up from 15.3 percent for Q4 2009 and 13.8 percent reported for Q1 2009.

In Q1 2010, the countries outside North America with significant levels of click fraud were the Philippines, Ukraine and China, respectively.

An interesting finding : traffic from leading social networking sites, including MySpace, Facebook, Twitter, and LinkedIn demonstrated an average overall click fraud rate of 11.5 percent, significantly lower than the industry average.

While a lower rate, I don’t quite understand this – where is the benefit for the fraudster? After all, the social network gets the cash. One scenario for fraud I guess would be a company clicking on competitor ads in order to rack up the advertiser’s PPC bills, but I think a more accurate term for anything else would be “invalid clicks”?

Read more: “Click Fraud Rate Q1 2010” PDF

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