Click fraud is a widely known term among pay-per-click (PPC) specialists and digital marketers. It’s one of many hurdles to running a successful PPC campaign. As an advertiser, your goal is to maximize your ad budget’s return on investment (ROI) by displaying ads to the right audience. Click fraud is one of your biggest hindrances as it makes you pay for clicks from non-human and fraudulent sources. This is a pain point that constitutes a massive 14 percent of all online ad clicks.
As Google puts it, click fraud is any click on an ad, web page element or content with the sole intention of increasing click revenue. When you invest money in an ad campaign, you don’t expect that every click becomes a conversion. Instead, you aim to get enough conversions to make it a profitable investment. Click fraud not only wastes your resources by making you pay for fake clicks but it also affects your PPC campaign data’s reliability.
No one — not even Google — can stop click fraud entirely, but there are practical click fraud prevention measures you can implement. These include learning the telltale signs of click fraud, knowing its sources and using tools to detect it.
So, what is click fraud really? And what is click fraud costing your business? To answer that, we need to understand the landscape of PPC advertising. In this blog, we’ll take you through everything you need to know about click fraud and its prevention.
Understanding PPC Advertising
Advertisers are businesses that pay publishers for the placement of ads on their platform. Publishers can be a search engine, website owner, or a network of websites that charge for its online advertising spaces. Paid media is a robust online advertising model that began in 1996 through a publisher called Planet Oasis.
While advertisers were used to paying a fixed price for displaying their ads, Planet Oasis charged businesses with a placement fee to be featured on its virtual city homepage plus an additional fee for every click. It also based its prices on the advertisers’ placement on its homepage, with center placements costing more.
Though people were initially skeptical of the advertising model, Planet Oasis saw so much success, other publishers developed the model further. Around the same time, Open Text introduced the ability to bid on keywords. In 1998, Goto.com enabled advertisers to bid against each other for the top ad placements. These models benefitted both the advertiser and the publisher by charging based on ad performance.
Today, active internet users comprise 59 percent of the world population and about one-in-four people shop online. In the digital marketing world, PPC advertising has grown as a profitable business model and is an indispensable part of many brands’ digital strategies. However, as with anything profitable, people have learned to abuse the system.
For advertisers to achieve maximum ROI from a PPC campaign, the clicks must be genuine and have a real chance of conversions. The intention behind click fraud is to simply raise the cost of the advertiser without any real benefit.
What Is Click Fraud?
According to Google, advertising fraud is any invalid activity to drive ad traffic while pretending to be genuine. Click fraud is a subset of ad fraud where clicks are generated to sabotage competitors or drive up ad revenue. This can be done by real people or via a click bot that is programmed to target links or take actions that a human would.
An example that would best illustrate this is mobile click fraud. Any mobile phone user has experienced seeing an ad to install an app. This type of advertising relies on last-click attribution to determine which platform the advertiser will compensate for the app install. Click injection is a type of mobile click fraud where a click bot injects itself before the user’s last click to take credit for the desired action.
It’s clear why this type of mobile click fraud is damaging as it earns a reward for not doing anything related to the app install.
Click fraud is widespread because of the large sums of money involved in PPC advertising. A 2015 study by Bloomberg revealed that the top industry affected by click fraud is finance. The industry offers products and services related to insurance, loans, mortgage, credit and tax where large cash flows are involved in its transactions.
Click fraud offenders directly or indirectly siphon part of the funds for their own gain. In 2017, as many as one-in-five desktop clicks were found to be fraudulent. This is an alarming figure that makes advertisers work hard to find those behind it.
Click Fraud Culprits
Click fraud offenders target competitive industries with high cash flows. These industries often have a large paid media budget that the culprits want to take advantage of.
To better understand the different forms of click fraud, you need to know who is behind it and what they stand to gain.
Here are some of the biggest click fraud offenders:
While there are strategies for you to succeed in ranking high for your desired keywords, there can only be one ad that ranks the highest. Your competitors waste your advertising budget through fraudulent clicks on your ads. If you set a daily click limit, your ad will be taken down after it’s been reached, leaving your competitor with the best chance of ranking first. This is the incentive for a business to use click fraud to boost itself to the top.
Webmasters are publishers who have ad spaces on the website(s) they own. They charge advertisers for every click from site visitors. Unfortunately, some webmasters abuse this by generating fake clicks to drive up their ad revenue. These counterfeit clicks do not come from genuine site visitors, nor are they performed by anyone with a real interest in the ad. A webmaster might hire a click farm or a group to generate fraudulent clicks for this purpose.
3. Fraud Rings
Fraud rings operate similarly to webmasters, where the goal is to gain ad revenue through fake clicks. The difference is that fraud rings are doing these fraudulent activities on a colossal scale. They own networks of websites and hundreds of thousands of unique IP addresses. Methbot, the biggest ad fraud ring ever discovered, generated more than $3 million in fraudulent daily earnings.
The Costs Of Click Fraud
With a good understanding of the incentives for click fraud, it’s easier to see the actual consequences for advertisers. The cost of click fraud is expected to reach $23.7 billion by the end of 2020. But there are additional, indirect costs to businesses to consider as well.
Here are the top challenges brought about by click fraud:
1. Wasted Ad Budget
Publishers have sophisticated tracking algorithms to keep a real-time record of every ad click. Click fraud instantly drives up your advertising costs unless it’s detected and stopped by publishers. While publishers such as Google claim to be able to detect AdWords click fraud, it can’t stop it 100 percent. The rest simply becomes a losing investment for you.
2. Skewed Campaign Data
An indirect but significant cost to advertisers is how click fraud skews campaign data. It’s tough to attribute the fraudulent activity to specific areas in your campaign performance. Click fraud dramatically affects the accuracy of the data that businesses base big and small decisions on.
3. Lower Conversion Rate
Advertising cost of sales (ACoS) is a crucial metric obtained by dividing your ad spend by your generated sales. Click fraud drives up your ACoS as it wastes your ad spend without any potential for sales. Fraudulent clicks drive up your click-through rate (CTR) where your conversion rate is based. Getting many clicks without customers taking the desired action reflects a poor conversion rate.
Managing AdWords Click Fraud
It’s clear how click fraud affects advertisers, but it also affects publishers like Google. Because advertisers are only interested in paying for genuine clicks, PPC platforms bear the responsibility of detecting and minimizing click fraud.
Unlike its counterparts, Google entered the picture late in 2000 but has since overtaken many publishers as a top PPC platform. Google takes AdWords click fraud detection seriously to maintain its reputation as a reliable publisher.
Through its traffic quality center, Google takes extensive measures against invalid activity such as filtering, detecting and disabling fraudulent accounts. These are executed through sophisticated algorithms and manual reviews.
Google’s automatic detection means your ads will not be charged for invalid clicks. Should AdWords click fraud offenders escape automatic detection, you’re eligible for invalid activity adjustments in the form of credits.
3 Tips for Click Fraud Prevention
Ad fraud is expected to be a $44 billion industry by 2022 and poses a growing threat to advertisers. While publishers are doing their part for click fraud prevention measures, here are practical steps you can take to detect and address click fraud:
1. Monitor Your Metrics Closely
Watch out for sudden spikes in your campaign activity and advertising costs. It is particularly suspicious when your ad metrics don’t align with your current PPC strategy. Another indicator is having an alarmingly high bounce rate of more than 70 percent. When a high percentage of users exit after only one page, it may be a sign of fraudulent clicks.
2. Refine Your Ad Targeting
One of the best ways to ensure your ads aren’t shown to potential click fraud offenders is to limit their exposure. You can control your ad reach by refining your target audience to precise locations and demographics. You can also prioritize remarketing campaigns to target audiences in the different stages of your sales funnel.
3. Study Your Traffic Sources
You can access the IP address information of your ad clicks to check for suspicious activity. Repeated clicks coming from regions you don’t operate in are among the most prominent signs of click fraud. Some publishers provide ways to blacklist offenders and exclude them from your campaigns. Third-party click fraud detection services make this process easier.
Enhance Your PPC Strategy
What we’ve seen is that pay-per-click is a win-win advertising model. Advertisers aren’t compelled to pay fixed fees for low campaign performance and publishers aren’t limited to fixed rates for highly successful campaigns. However, its profitability attracts fraudsters who continuously abuse the system and target highly competitive industries, resulting in massive direct and indirect revenue losses.
The unfortunate reality is that as online advertising develops into more complex and innovative features, click fraud offenders adapt and get creative. Trusted publishers such as Google have click fraud detection algorithms in place, but it would benefit your business to take matters into your own hands with simple prevention measures.
Click fraud is one of many threats to successful PPC campaigns. To achieve a top-performing PPC strategy, you need expert PPC management for the optimal allocation of your ad budget and diligent monitoring of your campaign performance on all your channels.
Enlist the help of PPC experts to craft a PPC strategy completely tailored to your needs and ensure you’re never negatively impacted by click fraud.