'Click Fraud' Threatens Foundation of Web Ads

By Sara Kehaulani Goo
Washington Post Staff Writer
Sunday, October 22, 2006

From her home surrounded by cornfields in Dow City, Iowa, Jackie Park spends hours each day on her computer, earning half a penny every time she clicks on an Internet advertisement.

By the end of the day, she usually tallies a few hundred clicks, yielding about $300 a year. It's not much, but it adds up for the 35-year-old mother of five who became disabled three years ago.

"You don't make tons of money," Park said. "But once you start clicking and you get actual payments, it becomes an addiction."

Park is one of thousands of people around the world who receive e-mailed lists of Web sites every day to click on for cash. Operators of these fast-growing "pay to read" networks and similar "pay to click" rings say they provide a genuine audience for advertisers, but Internet fraud experts disagree. They say the networks fuel click fraud, which means using bogus clicks to pump up revenue artificially for search engines and their affiliated Web sites.

In the past year, industry analysts say, new forms of click fraud have emerged from the shadows of masked operations into plain view on the Internet. Dozens of Web sites offer to pay people to sit and click on ads, or to type certain words into search engines for hours at a time. Some sites have forums where people swap click-fraud tips.

Advertisers, who often pay for online ads only when someone clicks on them, have been crying foul and complaining to federal regulators. They've also sued the Internet's largest ad networks, Google Inc. and Yahoo Inc., which earlier this year settled class-action lawsuits by advertisers.

A new lawsuit was filed last month in Pennsylvania seeking class-action status against Google. The FBI, the Securities and Exchange Commission and the U.S. Postal Inspection Service are investigating click fraud.

Google and Yahoo, which together handle more than 70 percent of all Web searches in the United States, say they have click fraud under control through technology that identifies suspicious clicks. But industry analysts are skeptical.

Search engines "have a problem that defies controls," said Chuck Richard, a media analyst with Outsell Inc. who has studied the issue.

The Yankee Group research firm recently concluded that if more aggressive measures are not put in place to validate clicks, fraud could undermine the entire business model of Internet search engines by causing advertisers to lose confidence. While search engines have taken steps to "self-regulate and police" their ad networks, Yankee Group analyst Jennifer Simpson wrote, "to date these efforts have been insufficient."

Yankee Group estimated that fraudulent means are involved in 1 of every 10 clicks on text ads, which translated to a $500 million problem last year, when pay-per-click ads generated a total of $5 billion. Other consultants estimate that click fraud is much larger, perhaps a $1 billion problem affecting 12 percent to 30 percent of all ad clicks.

No one knows for sure. Search engines have declined to release their estimates of bogus clicks, although Google said it amounts to less than 10 percent.

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