Companies like Google and Yahoo that control major online advertising networks have not met their pledge to aggressively ferret-out click fraud among their affiliate partners, driving growth of the problem across the entire Web industry, according to new research estimates.
Click Forensics -- an independent click fraud monitoring and reporting service that markets itself as an online version of the TV industry's Nielsen ratings system -- released its latest statistics tracking Internet advertising trends on Friday, and the group reported that the issue of fraudulent ad traffic continues thrive on the Web.
According to the company, roughly 16.2 percent of all online ad clicks were derived via click fraud during the third quarter of 2007 compared to a rate of 13.8 percent for the same period during 2006 and up from 15.8 percent of all traffic during the second quarter of this year.
Even more concerning, Click Forensics leaders said, is the report's finding that the average rate of click fraud -- most often carried out by software programs designed to mimic legitimate traffic -- continues to rise on major search engine networks, including Google's AdSense and the Yahoo Publisher Network.
Fraudulent traffic accounted for 28.1 percent of all ad hits on such networks during the third quarter of 2007 compared to 25.6 percent for the second quarter of this year and 21.9 percent for the first three months of the calendar, Click Forensics contends.
The research company also reported that more than 60 percent of all ad traffic coming from so-called parked domains -- typically used solely to funnel traffic to advertisers -- was observed as being fraudulent during the third quarter of 2007.
Tom Cuthbert, chief executive of Click Forensics, said that as a result of the negative impact that click fraud is having on Web advertising as a whole -- in that it undermines the legitimacy of all Internet ad traffic -- both publishers and advertisers are feeling a pinch.
Ad publishers are seeing a diminishing of their network traffic quality, said Cuthbert, while advertisers are seeing their conversion rates "drop significantly" on content networks and are pulling back some of their spending as a result, he said.
"The issue of click fraud on these major networks is becoming a real problem for advertisers, and increasingly, they are choosing to stay away and look into other alternatives," Cuthbert said. "The big guys are not doing a better job of policing themselves; both Google and Yahoo have tools for advertisers to opt-out of suspected click fraud sites, but the vast majority of advertisers are not doing so, and the tools are too hard to use."
Cuthbert said that the major network providers have promised to cooperate with efforts to drive down automated ad clicks and other forms of fraud but have not followed through on their promises.
"We've asked the search engines to work with us to improve the situation, and they've said yes, but here we are 18 months later, and we've seen no movement in that area, which is frustrating for us and for advertisers as a whole," said Cuthbert. "So far, we've had a great process of discussion, but we're really hoping to see them act on those ideas."
Ideally, Click Forensics -- which claims to derive its figures from statistics provided by 4,000 advertisers and agencies participating in its Click Fraud Network consortium -- would like to serve as an objective third party that is used as a clearinghouse for identifying online ad fraud, much as Nielsen provides rating figures for the TV industry.
Without such an entity, the ad networks continue to hold most of the cards, leaving advertisers at a disadvantage, he said.
"There needs to be better communication and sharing of data. We have information about traffic that these guys don't have, such as conversion data and other things from the actual advertisers, that they're very skeptical to give to Google or Yahoo," said Cuthbert. "Ultimately, we believe that the first provider to embrace this third-party model we're proposing will have a significant advantage over its rivals."