Do you have a sneaking (or not so sneaking) suspicion that your competitors are click click clicking away on your keywords? Even if it’s just a click a day the cost and negative ROI adds up quickly.

What’s a marketer to do? Well, luckily, our friends at Google have an answer for you: IP Exclusion.

Simply log into your account and go to the “Tools” section of campaign management then follow the steps for IP Exclusion.

This will prevent any of your campaign’s ads from showing up on this IP address. Competitor click fraud is one reason, but also preventing your competitors from getting a good read on your bid strategy, ad copy, etc. is another good reason. Additionally, if you are an agency, this is a good way to make sure your clients are not wasting money by testing ad functionality; however, the client will then be required to use the Google Ad Preview tool because they will not see the ad on the search engines.

All in all it is a very quick and easy way to increase ROI with just five minutes of work.

Yahoo!? MSN? I don’t believe they offer it, but correct me if I’m wrong.

In a recent post on the ClickForensics site, the claim was made that in Q4, click fraud rates climbed to 16.6% of all search traffic. This would represent a two percentage point increase in fraud from the previous year, if it were true. The thing is, beyond my assertion that click fraud is wildly overestimated; there seems to be some funny math going on.

Bear with me, I never was a math specialist, but take a look at these figures.

Now, the highest percentages of click fraud are coming from India (4.3%), Germany (3.9%), and Democratic Korea (3.7%). By the law of averages, if those were your highest average rates of fraud, and you had a few low rates, 1%, 2.2%, etc, you’d come up with an average somewhere below the highest rate of 4.3%. This is not a subjective argument, it’s a mathematical law.

So how did they come up with 16.6% click fraud? I absolutely don’t know, so I put it to you dear readers, how did they come to this astonishingly high figure?

They don’t really divulge much on the site. Anyone who knows Tom Cuthbert, CEO of Click Forensics is strongly encouraged to ask him.

As I’ve held for years, I think click fraud is between 1% – 5%, depending on your industry and if you are on content marketing networks. My opinion carries some weight on this issue, I have personally investigated several dozen suspected click fraud instances at the request of clients. Now, any statistician will correctly point out that several dozen is not statistically significant. But if it’s true, that click fraud is pervasive, where are the anecdotes? Where are the fraud billionaires? Search is now a several hundred billion dollar a year industry; if 16.6% of hundreds of billions is being diverted illicitly, where are the mansions?

You always have to look for motive, and only those who will gain by 1) driving you out of business, 2) clicking on your ad, would have an incentive to perpetrate click fraud. If you don’t use content, you cut out number 2 entirely, and number 1 is going to be rare, and with new tools you can limit it once identified.

My last point. I don’t think I’ve ever seen an unbiased estimate on click fraud from someone I would trust on the matter. ClickForensics wants to sell you a fancy detection package:

But simply doing a reverse IP lookup off your server logs for any source with more than a few clicks will tell you everything you need to know. Don’t trust these guys, do your own work, it’s not rocketry. I’d be interested if anyone has any anecdotes suggesting anything near the 16.6% that Click Forensics wants to scare us into believing.

If there’s one thing that scares PPC marketers, it’s click fraud. While I maintain that the incidence is rarer than it’s made out to be by alarmists, it’s quite obvious that there are fraudulent sites trying to take advertiser’s money illegitimately. I was tipped off to this one by a friend who happened to see it within many of his PPC content targeting networks as a high traffic, no return site.

The first thing I notice about El Khalifa.net is the obscene number of Google AdSense ads, placed rather prominently, in close proximity to onsite buttons and in a similar color choice as the rest of the site. One concludes that they are not actually trying to provide a TV service, but rather a site where you frequently click on ads by accident. I actually tried to get a couple of the TV stations the site claims to stream, and I gave up after four in a row were broken. Another conclusion is that the scheme is to get people here either organically, or by buying ads elsewhere, and when the user gets frustrated because none of the channels work, they click on the much higher cost Google ads which offer a wide selection of foreign television channels. This is the best scenario, since the user might still be interested in TV.

But there is also the possibility that a network of individuals is actively clicking and pumping the numbers up to increase site revenue and advertiser cost. Given what we already know about the site, I would not be shocked if this turned out to be the case.

So who is at fault for getting into this mess? The site is obviously duplicitous, but we have come to expect that people will try to game anything that can be gamed (this is why my bike is locked up outside my office, it’s a nice area but…). Google certainly engages with this site at some level in allowing it to place Google’s advertisements, so I would say Google has failed to fulfill the advertisers trust by not booting these guys from the network. But again, their motive is to make money, and while I sincerely believe what they say about “Don’t be Evil,” they have been a little sloppy and slow with their distribution standards. This brings us to the advertisers. It’s their money and they are trusting two parties—Google and El Khalifa—to help spend it wisely… BAD DECISION!

A little bit of scrutiny here would go a long way. Now that Google is offering content match reports by site, wise search marketers will use these reports, as my friend did, to find the garbage and get rid of it. If you haven’t done this, you risk having hundreds of El Khalifas slowly erode your ad budget with no money making potential.

Click fraud is going to occur in this industry, it has become a cost of doing business. We as an agency have the data and the analysis to identify most incidences of click fraud and work hand in hand with the engines to remedy the situation.

Our experience is that the search engines are good with working with us to come to an agreement on refunds and future prevention. Which means we are winning the click fraud war, right?

Unfortunately the real cost of click fraud is the negative effect it has on campaign performance and especially volume goals.

Lets say we are running a campaign on engine “Y” and experience a drop in conversion rate. If we are spending a few thousand dollars a day on this campaign and the ROI drops due to this lowered conversion rate we are compelled by the data to pull back on bid prices and position, effectively lowering volume on the campaign.

It isn’t until a few days/weeks that the cause of this drop is click fraud, but by then the damage is done. The campaign traffic was lowered based on the statistical evidence. That traffic is gone. Those sales are gone.

Our mission is to identify this click fraud in as real time as possible and hopefully work with then engines to respond quickly, not after 10 + business days. Until this occurs the real cost of click fraud is the loss of otherwise quality traffic due to the demands of a positive ROI.

Fair Isaac recently suggested that 10-15% of online advertising is pathological. Personal experience tells me this is wildly off.

Let’s first distinguish categories of online marketing, of course we have PPC, and then we have Contextual Marketing.

In PPC, if you or your agency maintains the proper control of contextual PPC programs, there is only one reason someone would click on your adds repeatedly… To drive up the cost of your marketing. This type of activity is either minimal at best, or is easily detected, and doesn’t approach 10 or 15% on average, maybe in the most competitive vertical, but not across the board.

If you aren’t careful with your contextual PPC, and just allow Google or Yahoo or whoever to place your ads wherever the computer thinks is relevant, then you open yourself up to site owners who want to pump up their own revenue by clicking on your ads, or having someone else do it. This can be bad, but this rarely accounts for very much of your ad budget, and the sheer volume of adspace is unlikely to foster a few advertisers really boosting their revenue at your expense without detection by you or the engines.

Moving on to other forms of contextual, banners and pop under ads, the same is true, only people trying to boost their revenue on a site they control have incentive to click on your ads. Close monitoring of IPs and clicks by source can help you determine if this is happening, that is if the engines don’t catch it and stop it first.

Having personally investigated dozens of click fraud allegations by clients, and having found almost no merit to any of them, I am skeptical. Of the few cases in which there was merit, the amounts at stake were at most 5% of any month’s adbudget, not even near the 10 – 15% alleged by Fair Isaac.

I’m calling them out… No Way guys.