Click fraud isn't like getting robbed for a huge sum of money. It's more like having your pocket change stolen, day after day after day. Even though you don't notice the theft, be aware, it does add up.

Although some marketers don't take it seriously, click fraud is a crime – a felony in many jurisdictions – and it can be punished. But it isn't usually detected because many of us won't take the time to find out how much we're losing. We'll shrug and say it's the cost of doing business. That's fine if we have money to burn. But in today's economic climate, every dollar counts, and if we really knew the extent to which we're being defrauded, we might decide a little effort in stopping click fraud would be well worth it.

A few years ago, we were told click fraud was contained. But it wasn't. In fact, the industry-wide average click-fraud rate went up 15 percent in 2007, ending the year with 16.6 percent of all clicks on Web ads being fraudulent, according to Click Forensics. And it gets worse. Click Forensics also determined that last year, the click-fraud rate for search-engine ad networks was 28.3 percent – in other words, nearly one out of every three clicks on a Google or Yahoo! ad from third-party Web sites is fraudulent. Those are clicks you're paying for.

Follow the Money

Fraudsters could be your competitors, who want to sabotage your business by sucking your ad revenue dry. Publishers, on the other hand, make money from you one irrelevant click at a time. Advertising networks say they try to uncover click fraud, and they do –  sometimes. But they can't detect most of it without help. You'll have to give them some data to go on before they will agree you've been defrauded.

Unfortunately, there is no magic box to uncover who's stealing from you and how they're doing it. Making a case for fraud requires a little legwork, investigative savvy and common sense. The most important piece is efficiently analyzing post-click data.

The good news is, there are ways of investigating that won't take too much time out of your day.

Detection software, such as the Lyris HQ™ (formerly ClickTracks®) Click Fraud report measure and compare data across all your campaigns – such as number of sessions, number of different IP addresses, revenue conversion rates, activity by country and sessions with no referrer. This helps you zero in on ads that look suspicious, but no click-fraud detection tool is a one-step solution; you have to know what to look for and understand what the data really mean.

To maximize your time, start big, where you may be losing the most ad money. If you're paying 30 cents per click, you're losing a lot less money than on keywords that cost $10 a click. So look first at your cost per click and find your most expensive, competitive keywords. That's where you're likely to lose the most money, and where your forensic efforts will pay off quicker.

Things That Make You Go Hmmmm

One of the clearest signs of fraud is hundreds of clicks from the same IP address. But it's likely that Google or Yahoo! has already caught that. Plus, sophisticated thieves are good at throwing off the scent; changing their IP addresses is a typical way to avoid detection.

Start by looking for little things, bits of data that seem unusual about your visitors' behavior on your site. Here's an example. It looks like 100 unique visitors came to your site over the weekend, but everyone who came in from an ad did exactly the same thing – they abandoned your site after two seconds. Or, maybe one of your ads is behaving much differently than the other. That's a sign – though not proof – that some kind of fraud may be happening.

You can look at trends. Say one ad and landing page have a typical bounce rate – that is, visitors who arrive at and quickly exit from the same page – of 30 percent. But one day, the same landing page experiences a 95-percent bounce rate and much higher volume. That should raise your suspicious. Even bad ads have trends, and bounce rates should remain fairly consistent under normal circumstances.

Other signs of something fishy? You experience an abnormally large percent of international traffic or visits with no referral data. You have the right to know where every click comes from, and if you suddenly get lots of clicks from "nowhere," that should tell you something's up.

Is it Really Fraud?

Poor-quality ads produce results much like click fraud. If you have lots of clicks that don't convert, no site activity beyond the landing or home page, and clicks from the "wrong" country, you could have a badly designed or badly targeted ad. This is where your knowledge and expertise come in. Consider all the possibilities before you assume it's fraud. Bad ads need attention, whether it's fraud or not, so doing this investigation will help you save money regardless.

If you can rule out a bad ad, make sure you collect as much forensic information as possible using click-fraud tools that help you sift through your traffic data. You'll need to document every click you think is fraud, including such information as the referrer, date and time of visit, country, IP address, number of clicks and cost per click. Send an email with the requested refund amount and the forensic data that backs up your claim to the search-engine provider.

Remember, you don't always have to find the source of the click fraud to make the case that you're being ripped off. You merely have to prove to your provider that something is going on. If you can make a reasonable case for click fraud, these providers will take it from there and you could see a pleasant surprise (aka refund) on your next statement.

An Ounce of Prevention

If you've uncovered fraud, consider some ways to prevent it in the future. Contextual networks are a big source of fraud, and it's much harder to capture one publisher that's defrauding many companies. So you might consider opting out of these networks (and you may see better conversion rates by doing so). You can also consider limiting your geography and syndication. Last but not least, if you take a closer look at how your ads are really performing, not only will you be able to better decipher whether aberrant visitor behavior is fraud or just visitors frustrated by bad ads, you'll be able to adjust your campaigns to bring in more quality visitors.

Only you can decide whether it's worth your time to look into click fraud. But if you don't investigate, you won't have any idea how much you're losing.

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About the Author

Andres Galdames is a business analyst at Lyris. He is an expert in integrated online marketing and pay-per-click campaigns.

Related Resources:

• Subscribe to Inside Lyris HQ our monthly online-marketing newsletter.
• Download free online-marketing guides, tools and webinars in the Lyris Online-Marketing Resource Center.

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