Posted On 02/19/05
Contributed by Boris

Recently, I discovered some research about a new form of click fraud. The good news is that this form of fraud will only work on Google AdWords campaigns, but the bad news is if you have a Google account, you're going to have to be even more on top of your game than ever.

The reason this new form of click fraud only applies to Google is because Google's AdWords program is the only one that uses a complex algorithm to determine how high a ranking you get. Part of it depends on how well your ad converts.

For example, if you get a 5% CTR (50 clicks out of 1000 impressions), but your maximum bid is only 50 cents, and your competitor bids 80 cents but has 1% CTR, you WILL appear higher than him. With AdWords, though, if your CTR is less than 0.5%, your ad is disabled and disappears until you make some changes to bring your CTR back up.

Now, some fraudsters recently came up with a way to artificially inflate the number of times your ad is shown (impressions). So if the highest 5 bids for the term "web hosting" range from $2 to $5, by artificially inflating their impressions, their CTR goes down under .5% and their ads are disabled automatically by AdSense. Then a guy paying 50 cents per click will swoop in and occupy the top positions paying significantly less than they are worth.

This type of fraud is not just difficult to detect, but also very problematic to prevent. Technically, the fraudster isn't doing anything illegal, since he's not clicking on the ads and stealing other people's advertising money. He just gets them disabled and reaps the benefits of low keyword costs until his victims have discovered they've been disabled and re-bid into the ranking.

Wonder where this is going to lead?