Insider Chatter by Donna Bogatin

YAY! “Make ad changes without replacing code” is the latest greatest AdSense invention. “Fancy,” Google pats itself on the back, heralding “simplify the process of optimizing ad units.”

Nevertheless, while AdSense blog publishing partners hail Google for “Wow, reading my mind,” AdSense advertisers are lamenting that the click fraud rates for the Google content network AND the Yahoo Publisher Network have grown to 28%, according to Tom Cuthbert, CEO, ClickForensics.

I spoke with Cuthbert about the current state of click fraud in the pay-per-click (PPC) search advertising market: “Click fraud activity continues to grow,” Cuthbert told me, underscoring “advertisers and agencies continue to be deeply concerned about the issue of click fraud.”

ClickForensics describes itself as “the leading provider of click fraud management solutions for identifying and eliminating click fraud.” The company also runs the Click Fraud Network (CFN), founded 18 months ago and now claiming 4000 plus online advertiser and agency members. The CFN collects and tracks data on PPC ad campaigns, correlating information from both the search providers and the advertisers’ own Web sites, for “the industry’s most accurate view of click fraud to date.”

The latest Click Fraud Index (CFI) data reported by the CFN shows click fraud has grown, with dramatic increases in the content networks, particularly on “parked domains” and “made for ads” sites.

Cuthbert told me: “Content networks are becoming the fastest growing source of click fraud.”

Specifically, the average click fraud rate of PPC advertisements appearing on search engine content networks, including Google AdSense and Yahoo Publisher Network, was 28.1% in Q3, 2007, up from 25.6% for Q2 2007, 21.9% for Q1 2007 and 19.2 percent for Q4 of 2006, as calculated by the CFI.

What’s more, the CFN reports over 60% of traffic from parked domains and made for ad sites was click fraud.

How can ClickForensics be so sure? Cuthbert described to me how a “heuristics engine” scores each click recorded and tracked based on multiple attributes, such as visitor behavioral data, technical data, economic data, country of origin, whether or not the traffic is from bots, botnets or click frams, or other types of unwanted traffic.

Cuthbert told me well over 60% of clicks in made-for-ad sites and parked domains are “fraud or clicks that the advertiser shouldn’t have paid for.”

I pointed out to Cuthbert that Yahoo is claiming a dramatic decrease in advertiser complaints; SEE my interview with Reggie Davis, Yahoo Vice President, Marketplace Quality, Reggie Davis: Yahoo Click Fraud Claims Plummet, INTERVIEW.

Cutherbert told me that while a Yahoo VP overseeing advertiser quality initiiatives demonstrates the number two search engine is taking the click fraud problem seriously, he believes an onerous advertiser claims submission system results in an under estimation of actual damages.

What about number one search engine Google? “Trust us,” Cutherbert indicated to be the reigning unsatisfactory advertiser facing modus operandi of the Googleplex.

Advertisers ought not uniquely trust Google or Yahoo to fully solve the click fraud problem, is the core message of ClickForensics. After all, the search engines even have “a financial incentive to allow it to occur,” Cuthbert told me.

(Google CEO Eric Schmidt did once famously say about click fraud, ‘let it happen’ is perfect economic solution; Google’s public facing comments have radically changed since.)

In the words of Cuthbert’s ClickForensics: “Does your bank balance your checkbook? (We didn’t think so)…”

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PLUS: Google Nielsen TV Ads STILL Blurry: NOT AdWords for Television

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Microsoft search rejoices that it “thinks about relevance constantly,” in it its effort to catch up to Google and Yahoo search. BUT, will Microsoft soon have to “eat, live and breathe” click fraud detection, same as the big(ger) search guns, as well?   

What a difference six months makes in the click fraud battle? YES, in the case of Yahoo’s quest to bolster marketplace quality under the leadership of Reggie Davis. Davis is a seven year veteran of Yahoo and was tapped to implement the company’s enhanced quality strategy after having managed the company’s click fraud litigation response.

When I met with Davis last April, just weeks after he assumed the position of VP, Marketplace Quality, he told me he had seen “decreases in the number of click fraud/traffic quality investigation requests” at Yahoo. Yesterday, Davis quantified for me the decrease in advertiser claims.

“We are receiving about 100 claims a month now, compared to about 800 claims a month last year,” Davis told me.

For Davis, the decrease in advertiser requests for investigations regarding concerns over possible click fraud and/or traffic quality issues means his team is delivering on its mission to drive:

More rapid innovation, greater transparency and faster delivery of product and service enhancements to build an even higher quality advertising network for Yahoo’s customers.

Davis’ marketplace quality enhancement initiatives designed to bolster advertiser conversions and ROI:

Quality Based Pricing: Pricing discounts whereby advertisers may be charged less based on Yahoo’s assessment of the quality of its partners’ traffic.

Domain Level Blocking (launching this month): Advertisers can block up to 250 domains per account and thereby prevent their ads from appearing on Websites that don’t meet their needs.

Blocked Continents: Adverisers can exclude traffic from continents other than North America if intercontinental traffic is not important to their businesses.

Advertiser Traffic Quality Online Resource with Automated Advertiser Claim Process

Greater Detail in Advertiser Reports (2008)

Davis told me that when Domain Blocking launches later this month, advertisers will be able to “partner with us to help drive traffic quality.”

In sum, “bad clicks have no business here,” is the Yahoo traffic quality motto and the end goal of Davis’ mission.

ALSO Read Interview with Click Forensics CEO, Tom Cuthbert: Google, Yahoo Click Fraud Audit Minefield Looms: Look to the IAB?

AND: AdWords Inflation = More Google Click Fraud Financial Risk

PLUS: Y Combinator to Hackers: Dream SMALL and Code for Google on the Cheap

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Google is squeezing customers for higher AdWords bids.

Google buyers beware: Along with increased AdWords costs comes a corresponding increased financial risk from the effects of click fraud. In other words, if it costs more to obtain top placement at Google AND an AdWords customer is wrongly billed for an invalid click at that higher rate, the economic loss sustained from click fraud is greater by an amount equal to the increase in CPC cost.

I missed the SES San Jose Click Fraud panel this week, BUT apparently I did not miss much! Same old, same old talk of “premptive filtering” and “click quality,” by all reports.

Last year’s meetup beween search engines and search engine “spolier” click fraud “management” firms was marked by fireworks: Shuman Ghosemajumder ambushed fellow panelists with a surprise unveiling of a Google penned report aiming to discredit them: “Troubling findings on how some third parties detect click fraud.”

The SES San Jose 2006 “Auditing Paid Listings & Click Fraud Issues” panel was also marked by a call, by me, for both Google and Yahoo to submit to independent, third-party click fraud audits.

I asked Ghosemajumder and John Slade, Yahoo Search Marketing to “commit to upholding the Interactive Adverising Bureau “auditing and certification recommendations” under development in conjunction with the IAB Click Measurement Guideline initiative.

Both Slade and Ghosemajumder told me they committed, on behalf of their respective companies, to accept third party independent click fraud audits. When I asked for a timeline for initiating the audits, Slade indicated Yahoo would follow the development of the IAB’s Guidelines.

Last month I underscored: Google, Yahoo Click Fraud Audit Minefield Looms: Look to the IAB?

Google customers, in particular, are now at greater click fraud risk, due to what the company is calling an “improved top ad placement formula” for AdWords.

I countered, Google Tightens Screws on Advertisers: AdWords Black Box Gets Blacker upon Google’s announcement of its latest bid up your own ad costs Google auction scheme.

WHY? For all of Google’s high falutin talk of ad “quality,” higher bids win the privilege of buying ads from Google.

AND for all of Google’s double speak on “invalid clicks,” AdWords customers remain at high click fraud risk when they accept the costly privilege of buying ads from Google.

ALSO: Yahoo vs. Google in Ad Network Quality Battle

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CONTACT DONNA BOGATIN

Almost one year ago, I asked both the Google and Yahoo point men on click fraud at the SES San Jose conference if their employers would commit to upholding the Interactive Advertising Bureau (IAB) “auditing and certification recommendations” said to be under development in conjunction with the IAB Click Measurement Guideline initiative.AND, I have been asking them ever since! Most recently at the SES New York conference in April.

The SES San Jose panel last August was a tumultuous affair, sparked by Google representative Shuman Ghosemajumder seemingly sabotaging fellow panelists with a surprise strategic unveiling of a Google engineers’ penned “Troubling findings on how some third parties detect click fraud” report, purporting to expose the “work of several click fraud consultants,” such as fellow panelists.

No such fireworks April, however. In fact, while the panel brought together the click fraud point men from arch rivals Yahoo and Google, as well as third party PPC “spoiler” ClickForesnics, which seeks to pierce the “cloud of mystery over the entire pay per click process” on behalf of advertisers, a we are all in this together atmosphere prevailed, on the surface.

The leading search engines have apparently escaped potentially catastrophic economic, public relations and businesss model fall-out from the click fraud law suits they recently settled and both are now confidently reaching out to advertisers evangelizing the overall click “quality” they deliver to advertisers.

By changing the conversation from click fraud to click quality, both Google and Yahoo aim to mute advertiser click fraud concerns by extolling the higher general ROI they say is to be had from the “more accountable” online medium over traditional venues, such as television and radio.

But, are advertisers buying it, literally? I spoke with Tom Cuthbert, Click Forensics CEO, to find out.

“Advertisers who run television or radio spots receive a notarized affidavit at the end of each month. In the online space there is no such process in place,” Cuthbert notes.

Contrary to Google and Yahoo’s assertions, the financial impact of click fraud on advertisers can not be sufficiently mitigated by notions of relative click “quality,” Cuthbert believes. “Click fraud has become the new spam and it’s clearly a problem that is getting worse, not better,” Cuthbert told me.

Cuthbert said “the click fraud rate jumped significantly this quarter, an entire percentage point over last quarter,” according to the Click Fraud Index which monitors and reports on data gathered from more than 4000 online advertisers and agencies.

Cuthbert underscored to me the increasingly nefarious effects of both botnet activity and low quality “publishers” within search engine content networks:

• The overall industry average click fraud rate was 15.8 percent for Q2 2007. This is an increase from 14.1 percent for the same quarter in 2006 and 14.8 percent for Q1 2007.
• The average click fraud rate of PPC advertisements appearing on search engine content networks, including Google AdSense and the Yahoo Publisher Network, was 25.6 percent. That’s up from 21.9 percent for Q1 2007 and 19.2 percent for Q4 of 2006.
• Traffic from botnets doubled from Q1 to Q2 2007 and contributed significantly to the increase in click fraud rates.
• In Q2 2007, the greatest percentage of click fraud originating from countries outside North America came from France (5.1 percent), China (3.2 percent) and Australia (3 percent).

The Google response will undoubtedly be to once again seek to discredit Click Forensics, rather than to really step-up to the click fraud transparency plate on behalf of advertisers once and for all and make a public announcement of meaningful Google implementations of click fraud audits.

Look to the IAB, is what Google AND Yahoo will also undoubtedly say, for all things click fraud audits. The IAB has not been forthcoming on the status of click fraud audits, however, under the direction of its new president, Randall Rothenberg.

Rothenberg made a lot of noisie publicly calling for interactive audience measurement services–comScore, Nielsen/Netratings–to submit to audits, launching “The Audit Challenge 2007″:

On May 16, 2007, the Interactive Advertising Bureau convened and hosted at its headquarters in New York an unprecedented summit meeting of media and marketing constituents. They gathered in a spirit of collaboration to explore ways of evolving and upgrading the way interactive media is counted and assessed for advertisers. The summit followed an IAB call for transparency into the methodologies of the two major audience measurement companies, which was issued amid ongoing industry requests for the major panel-based measurement companies to commit to a firm timetable for auditing and accreditation.

No seeming IAB outrage on the lack to date of audits on the click fraud front though.

There has been no apparent public communciation from the IAB on the progess, or not, of the Click Measurement Working Group since its formation almost one year ago. Moreover, the Group’s “goals and projects” at the IAB Website are simply identified as “Click Measurement Guidelines”; No mention of click fraud audits.

Look to the IAB for leadership on the call for click fraud audits? Hopefully.

ALSO: Google: Newspaper Ads More Trustworthy Than AdWords and Google Wants Openness? Start With NYC Googleplex!

CONTACT DONNA BOGATIN

I met with both Google and Yahoo’s point men in the war against click fraud during the SES conference in New York City earlier this year. Following my briefings with Shuman Ghosemajumder of Google and Reggie Davis of Yahoo, I predicted the competitve maneuvering between the leading search engines for leadership in the click fraud prevention arena would develop into an even more universal battle for dominance in overall network quality.

A Yahoo vs. Google battle for contextual ad network quality leadership is indeed now in full force.

Last week, Yahoo announced “Quality Based Pricing.” Today, Google announces “Content Placement Reports.” While the two initiatives differ in execution, they both aim to bolster advertiser confidence in the quality of their respective publisher networks.

At the SES conference panel in April, “Auditing Paid Listings & Click Fraud,” rivals Google and Yahoo both seemed to be breathing a mutual sigh of relief that click fraud litigation is deemed to be “safely” behind them.

The leading search engines have, in fact, apparently escaped potentially catastrophic economic, public relations and businesss model fall-out from the click fraud law suits they recently settled. Subsequently, both are now confidently reaching out to advertisers evangelizing the overall click “quality” they deliver to advertisers.

By changing the conversation from click fraud to click quality, both Google and Yahoo hope, among other things, to mute advertiser click fraud concerns by extolling the higher general ROI they say is to be had from the “more accountable” online medium over traditional venues, such as television and radio.

Yahoo and Google are both upping the ad network quality ante with their current initiatives.

I spoke with Reggie Davis of Yahoo last week for his inside take on how the new Yahoo “quality-based” pricing model will impact Yahoo, its advertisers, and its publishing partners. Yahoo now:

Includes an assessment of the quality of its publisher’s traffic when advertisers are charged for a click from that source. Depending on the quality of the traffic from the partner or publisher where the click came from, the cost of the click can be automatically discounted by a certain percentage.

Yahoo seeks to strengthen advertiser confidence in the real value of the clicks they pay for, Davis indicated to me. The more Yahoo advertisers determine the clicks they pay for are really worth what they pay for them, the more advertisers will spend on the Yahoo network, Davis believes. What’s more, advertisers may end up spending less overall for their clicks and thereby have more money to reinvest in the Yahoo network, Davis suggested.

Previously, advertisers were charged the same for traffic from all Websites within the Yahoo distribution network. Going forward, quality-based pricing will result in possible decreases for the charges on certain clicks, depending on the quality of the traffic provided by the distribution partners.

Davis conveyed to me that Yahoo advertisers stand to gain economically on a net basis.

According to Yahoo, advertisers may be able to “assess the value of the discounts by comparing cost-per-click on specific keywords before and after this program was launched.” Yahoo advertisers, however, will not be able to drill down for precise performance data on a site by site basis, as the Yahoo FAQ indicates:

Can I get a list of your partners and by what percentage you discount their traffic? Due to proprietary reasons and the ever-changing nature of the marketplace, we do not publish a list of publishers with any sort of discount percentage.

Can I find out the amount of the discounts I have received, or how much by partner? We will not be making this information available to advertisers.

How will I know if I am getting any discounted traffic? While we will not be providing specific information on the discounts you are receiving, as you manage your search marketing campaigns, you may find that your average cost-per-click has gone down (provided, of course, that you do not change your bid or creative).

The Google approach towards enhancing advertiser confidence in its ad network announced today differs. Google is touting its new Content Placement reports as “providing more transparency to advertisers.” The reports will, according to Google:

Enable advertisers to see the exact sites on the Google content network where their ads appear and provide site-by-site performance metrics, inlcuding domain, URL, impression, click, conversion and cost data.

Google believes the reports will help advertisers “have much more insight into their contextually targeted advertising spend” and thus enable them to “leverage the information to more effectively optimize their campaigns.” Specifically:

Sites that perform particulalry well can be targeted more agressively by implementing complementary features such as site targeting. Conversely, specific sites that convert poorly can be excluded or optimized by refining keywords and ads in campaigns.

What does it all mean for advertisers? Both Yahoo and Google say all is good, even better now, for their advertisers.

As both Yahoo and Google pricing and reporting increases in complexity, however, there is an even greater need for in-depth analytics on the part of advertisers. Yahoo and Google would like advertrisers to depend on them for that as well. Advertisers may be better off having independendent parties assist in optimizing their ad spends, however.

As the analytic stakes get even higher in the online advertising game, smaller, individual advertisers may be at a disadvantage, but they may not even realize it.

While both Yahoo and Google proudly tout their self-serve, get sarted in five minutes, platforms, optimal benefits can only be had by those companies with the resources, and time, to do all that is necessary to optimally navigate the powerful online ad networks.

ALSO: Google Exec Skirts CPA Advertising Evil

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