In Game of Click and Mouse, Advertisers Come Up Empty

By Leslie Walker
Thursday, March 16, 2006 got a jolt this month from the firm it hired to audit the nearly $40,000 worth of sponsored links it buys every month from Google and Yahoo.

It appears that many of the clicks on the Web site's search-engine ads were made not by potential customers but instead by automated programs or people trying to drive up Radiator's advertising bill. Like other advertisers that place links on search engines, pays only when people click on the links.

After analyzing where and when each click came from, auditing firm ClickFacts Inc. estimated that 35 percent of the referrals that Radiator paid Google for stemmed from bogus traffic. Likewise, 17 percent of the leads that came from Yahoo search results were illegitimate.

"They are reporting some very high fraud rates to us," said John Thys, director of Internet marketing for 1-800-Radiator, the Benicia, Calif., distributor that owns Thys said his firm will present the report to Google and Yahoo next week and request a refund for the invalid clicks.

Such activity, commonly known as click fraud, may be far more common than search engines are willing to admit. Over the past year, click fraud has mushroomed into a problem so thorny that some analysts fear that it could bring the high-flying Internet economy to its knees.

I don't know if the issue is that serious, but I'm convinced that it deserves more attention than it's getting, especially since Google distributes paid links all over the Web and shares ad revenue with thousands of sites.

Think about it: If revenue from paid links suddenly were to shrink or dry up, you could kiss a lot of Web sites goodbye.

Google has repeatedly pooh-poohed click fraud, contending that it is a minor annoyance that it has under control with automated detection technology. At a meeting with analysts two weeks ago, chief executive Eric Schmidt said click fraud "is not a material issue." Co-founder Sergey Brin said such cases amount to "a small fraction" of Google's ad clicks.

But six days later, Google surprised analysts when it agreed to settle an Arkansas class-action lawsuit by setting aside $90 million worth of ad credits to advertisers that can show invalid click charges dating to 2002.

Few other details were released regarding terms of the settlement, still to be approved by the Arkansas court. Yahoo and six other search engines remain defendants in that case.

"We stand firmly by our proprietary click-protection system and look forward to vigorously defending our system," said Gaude Paez, a Yahoo spokeswoman.

Some analysts worry that Google is rushing to establish a legal precedent that could undermine a more serious click-fraud suit pending in federal court in California. That suit, which alleges that Google knows that click fraud is rampant and has not taken significant steps to prevent it, will be considered for class-action status at a hearing in May.

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