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Who's to blame? Clà ck fraud can come from a variety of sources, includingcompetitors, 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 someadditional clà ck revenue.
However, the major search engines have received the majority of the blame, eventhough they are not necessarily responsible.
Yahoo has recently settled a class-action clà ck fraud settlement. Under thesettlement, Yahoo advertisers will be allowed to submit clà ck fraud claims datingback to January 2004. Yahoo will reimburse any confirmed fraudulent clicks in cà sh,with no set limit on the amount of claims it will cover.
This year, Google has been burdened with its own clà ck fraud case to the tune of 90million dollars. Currently, the court is deciding whether to accept the searchgiant's proposed $90 million settlement while roughly 50 plaintiffs are voicingtheir dissatisfaction with it.
Clà ck fraud is certainly no small matter. It has become largà r than the totalmagnitude of credà t card fraud in the U.S.
So far, these law suits have spawned more questà ons than answers for the ultimatesolution to clà ck fraud. Clà ck fraud threatens an entire business model; one that isgenerating billions of dollars every year.
At this point, it's hard to tell whether pay-per-click advertising will stand thetest 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, clà ck fraud resistantadvertising models. Joshua Goodman, a Principal Researcher at Microsoft haspublished a white paper on pay-per-percentage as a solution to click-fraud.
Pay-per-percenta ge is an advanced form of pay-per-impression. Within this system,someone can bid for a percentage of all impressions for certain keywords or keywordphrases over a specified period of time. In the pay-per-percentage model, clà ckfraud is avoided because the advertiser is not charged any additional amount forclicks. 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 isimmune to both clà ck fraud and impression fraud... ads must be shown in a trulyrandom way, across the percentage of impressions purchased..Pre-fix match: a systemthat is similar to broad-match, but more compatible with pay-per-percentage...auction pay-per-percentage matches, including prefix matches in a revenue maximizingway...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 servicesand they switched over to the pay-per-click model.
For the pay-per-percentage model to succeed, Microsoft will certainly have to dosome things different. Their solution is outlined in the paper, "Pay-Per Percentageof Impressions: An Advertising Method that is Highly Robust to Fraud."
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 clà ck through leads to a desired action. This could be apurchase, 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 onCPA. If you are an adsense pubisher, this would mean that instead of getting paidfor clicks or impressions, you would get paid a commission for a sale or otherdesired action. These ads won't compete with the regular pay-per-click ads and willbe on a separate network. However, they may be beneficial for advertisers looking toavoid clà ck fraud.
Paid Inclusion
Another possible solution to pay-per-click is known as paid-inclusion. Although manyof the paid inclusion companies have come and gone over the years, there is a neworganization that is offering a very optimistic solution to the many pay-per-clickproblems we are facing today.
This organization is giving smaller search engines and directories the ability tocompete with the big guns (Google, Yahoo, and MSN.) The smaller search players canattain this status by becoming part of a mass community that delivers qualityadvertising at a fraction of PPC costs.
The paid inclusion program offered by this community of search providers, known asthe ISEDN, is a cross between the older paid inclusion models and the reigning PPCmodel. Purchased ads are displayed in a similar manner to the PPC ads shown byGoogle, but advertisers are charged on a flat fee basis, not on a per clà ck basis.
The ISEDN program makes clà ck fraud irrelevant because ads are displayed for acertain period of time, regardless of the number of clicks or impressions received.
Through the power of the collective community (the ISEDN currently has more than230+ members), ISEDN paid inclusion ads are displayed over 150 million times permonth. This equates to 150 million potential advertising opportunities.
Within this model, you can buy top 10 exposure across a rapidly growing network ofsearch providers for $3 to $4 per month. If you choose to buy in volume, you canexpect some significant discounts.
The ISEDN advertising model limits the sale of the same keywords or phrases to 30advertisers. If a keyword term is sold more than 10 times, then those paid listingsbegin to rotate between the SERPs. So, for the worst case scenario, a listing wouldappear on the first page of results approximately once out of every 3 searches onmost engines in the network.
This program gives advertisers the benefit of advertising with smaller searchengines on a massive scale without the fear of clà ck fraud.
As for Google, Yahoo, and MSN, you can definitely expect to see some changes beingmade with their paid search programs in the near future. The pay-per-click model isinherently flawed and must be altered to survive. Google and the other major searchengines know that their business will be crippled if they do not adapt. In themeantime, there are a number of alternatives for advertisers looking for a safersolution to advertising.
