Is Click Fraud Just A Cost of Doing Business?

Click fraud is repeatedly in the news lately as reports come out about how one traffic source or another is sending fraudulent clicks. Back in July, a startup claimed that 80% of clicks from their Facebook Ads campaigns were bots. This week, Trademob is saying that 40% of mobile clicks are accidental or fraudulent.

Click Fraud Isn’t New

I can remember arguing over the results of advertising campaigns with makegoods being all too common back in the late 1990’s and early 2000’s. Back then, it was easier to just run some additional impressions rather than try to combat the underlying problem. Early Google AdWords and Overture campaigns were frequently gamed, in some cases by competitive bidders trying to drain spending budgets. Both companies responded rapidly to the issues, with fraud prevention becoming a priority.

Repeating the Past or a New Reality?

So why haven’t the newer ad networks simply adopted the best practices of existing companies for preventing fraud? Fraud is a hard problem to solve. There isn’t a simple anti-fraud detection plugin you can slap on a web server to block all the fakers.

In the affiliate space, we turn to companies like Scrubkit to analyze leads for signs of fraudulent form filling and lead stuffing, but that’s a protective measure put in place to solve a problem after the click. As the guys committing fraud get more creative the tools continue to evolve. For ad clicks, there isn’t a simple solution for rejecting certain clicks because people can do some fairly sneaky things to make a click appear real.

In an app-to-app scenario, one of the roles our Mobile App Tracking product plays is making sure the correct publisher gets credit for delivering an install. We do this because simultaneous advertising campaigns can potentially result in more than one ad network claiming credit. Duplication isn’t happening because the ad networks are doing anything shady, but because they don’t have visibility into all the steps an individual user goes through from the time they click an ad until they install an app and open it. In that respect, in-app advertising is fundamentally different from what we’ve seen on the web.

Adjust Your Budgets and Move On?

Click fraud exists in a frustrating reality. As an advertiser, I know I need traffic in order to acquire new customers. But I don’t want to pay any more than I have to for that traffic. As a publisher, my payout is largely dependent on the spread between the price of the advertising and the commission for the action. In order to maximize revenue, it’s important to minimize the number of clicks required to get a conversion. When some of those clicks are fraudulent, it’s a slippery slope to maintaining profitability.

When you can’t control the fraud, what do you do instead? One option is to optimize the things you can control. For example, you might not have control over click fraud, but you do have control over landing page optimization. If you can get slightly higher conversion rates out of the real clicks, the fraudulent clicks can be absorbed as a cost of doing business.

Moving Beyond PPC

In performance marketing, most of what we do is built around the idea that a specific action results in a specific payout, whether the action is someone filling out a form, placing a phone call, or making a purchase. If I know it takes an average of ten clicks to get one completed action, I need to make sure the amount of money I’m spending to get those ten clicks is less than the commission.

For the ad networks currently bombarded with accusations of fraud, there’s very little motivation to solve the problem of fraud until advertisers stop spending money. If the ad network becomes a partner in the transaction, the relationship changes, because they are going to want to make sure they are delivering higher quality traffic in order to maximize their own revenue. In other words, by making the advertising network an affiliate/publisher, there’s potentially a better result for everyone involved.

Mobile traffic sources like JumpTap and TapJoy are already experimenting with models where they get paid for performance. Is it time for the rest of the industry to adopt a similar model or is click fraud just a cost of doing business?