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Do You Pay Per Click Fraud?
By Kim Roach (c) 2006

The world of pay-per-click marketing started in 1997 with
GoTo.com. Today they are known as Yahoo Search Marketing.
What started in 1997 as a way to quickly get listed in the top
of the search engines has turned into a 5.6 billion dollar
industry in 2005. In fact, about 99% of Google's revenue comes
from advertising.

However, this multi-billion dollar search industry is under
attack and has been for quite a while. Click fraud has become the
greatest threat to the rapid growth of the paid search marketing
sector. The Interactive Advertising Bureau estimates that 20 to
35 percent of ad clicks are fraudulent.

Who's to blame? Click fraud can come from a variety of sources,
including competitors, bots that simulate the human behavior of
clicking on ads in web pages, or even friends of the publisher
who want to "help" the publisher gain some additional click
revenue.

However, the major search engines have received the majority of
the blame, even though they are not necessarily responsible.

Yahoo has recently settled a class-action click fraud settlement.
Under the settlement, Yahoo advertisers will be allowed to submit
click fraud claims dating back to January 2004. Yahoo will
reimburse any confirmed fraudulent clicks in cash, with no set
limit on the amount of claims it will cover.

This year, Google has been burdened with its own click fraud
case to the tune of 90 million dollars. Currently, the court
is deciding whether to accept the search giant's proposed $90
million settlement while roughly 50 plaintiffs are voicing their
dissatisfaction with it.

Click fraud is certainly no small matter. It has become larger than
the total magnitude of credit card fraud in the U.S.

So far, these law suits have spawned more questions than answers
for the ultimate solution to click fraud. Click fraud threatens
an entire business model; one that is generating billions of
dollars every year.

At this point, it's hard to tell whether pay-per-click
advertising will stand the test of time, or line up for the
chopping block.

Many of the search engines are already looking for solutions.

Pay-Per Percentage

Microsoft is currently engaging in research to develop new, click
fraud resistant advertising models. Joshua Goodman, a Principal
Researcher at Microsoft has published a white paper on
pay-per-percentage as a solution to click-fraud.

Pay-per-percentage is an advanced form of pay-per-impression.
Within this system, someone can bid for a percentage of all
impressions for certain keywords or keyword phrases over a
specified period of time. In the pay-per-percentage model, click
fraud is avoided because the advertiser is not charged any
additional amount for clicks. The business model is based upon
a percentage of ad impressions.

Microsoft research describes it as:

"A simple method for selling advertising, pay-per-percentage of
impressions, that is immune to both click fraud and impression
fraud... ads must be shown in a truly random way, across the
percentage of impressions purchased..Pre-fix match: a system
that is similar to broad-match, but more compatible with
pay-per-percentage... auction pay-per-percentage matches,
including prefix matches in a revenue maximizing way...make it
easier to sell to advertisers."        

The Google Adwords system itself was initially based on a
cost-per-view model. Unfortunately, there was a lack of
enthusiasm for the cost-per-impression services and they
switched over to the pay-per-click model.

For the pay-per-percentage model to succeed, Microsoft will
certainly have to do some things different. Their solution is
outlined in the paper, "Pay-Per Percentage of Impressions:
An Advertising Method that is Highly Robust to Fraud"
(http://research.microsoft.com/~joshuago/percentageworkshop-
final.pdf)

Another possible solution being explored is Pay Per Action.

Under this model, advertisers do not pay every time a user
clicks on an ad. Instead, payment is only made when a click
through leads to a desired action. This could be a purchase,
filling out a form, downloading trial software, or even making
a call.

This model takes much of the risk out of advertising.

In fact, Google Adsense is currently beta testing a compensation
system based on CPA. If you are an adsense pubisher, this would
mean that instead of getting paid for clicks or impressions, you
would get paid a commission for a sale or other desired action.
These ads won't compete with the regular pay-per-click ads and
will be on a separate network. However, they may be beneficial
for advertisers looking to avoid click fraud.

Paid Inclusion

Another possible solution to pay-per-click is known as
paid-inclusion. Although many of the paid inclusion companies
have come and gone over the years, there is a new organization
that is offering a very optimistic solution to the many
pay-per-click problems we are facing today.

This organization is giving smaller search engines and
directories the ability to compete with the big guns (Google,
Yahoo, and MSN.) The smaller search players can attain this
status by becoming part of a mass community that delivers
quality advertising at a fraction of PPC costs.

The paid inclusion program offered by this community of
search providers, known as the ISEDN (http://www.isedn.com),
is a cross between the older paid inclusion models and the
reigning PPC model. Purchased ads are displayed in a similar
manner to the PPC ads shown by Google, but advertisers are
charged on a flat fee basis, not on a per click basis.

The ISEDN program makes click fraud irrelevant because ads
are displayed for a certain period of time, regardless of
the number of clicks or impressions received.

Through the power of the collective community (the ISEDN
currently has more than 230+ members), ISEDN paid inclusion
ads are displayed over 150 million times per month. This
equates to 150 million potential advertising opportunities.

Within this model, you can buy top 10 exposure across a
rapidly growing network of search providers for $3 to $4 per
month. If you choose to buy in volume, you can expect some
significant discounts.

The ISEDN advertising model limits the sale of the same keywords
or phrases to 30 advertisers. If a keyword term is sold more
than 10 times, then those paid listings begin to rotate between
the SERPs. So, for the worst case scenario, a listing would
appear on the first page of results approximately once out of
every 3 searches on most engines in the network.

This program gives advertisers the benefit of advertising with
smaller search engines on a massive scale without the fear of
click fraud. For more information on this advertising model
visit ISEDN founding member ExactSeek.com
(http://new.exactseek.com/featured_listings.html).

As for Google, Yahoo, and MSN, you can definitely expect to see
some changes being made with their paid search programs in the
near future. The pay-per-click model is inherently flawed and
must be altered to survive. Google and the other major search
engines know that their business will be crippled if they do not
adapt. In the meantime, there are a number of alternatives for
advertisers looking for a safer solution to advertising.
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Kim Roach is a staff writer and editor for the SiteProNews
(http://www.sitepronews.com) and SEO-News
(http://www.seo-news.com) newsletters. You can contact Kim at:
kim @ seo-news.com

This article may be freely distributed without modification and
provided that the copyright notice and author information remain
intact.
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