New Data on Search Marketing Click Fraud: Three Action Items

According to MarketingSherpa research data, click fraud is the new e-mail filtering.

This August, we conducted the largest study of search marketers ever, with 3,944 search marketers submitting their data. This was our third annual study. Last year I was surprised to see how few marketers were highly concerned about click fraud.

At the time, the hype in the press was nearly deafening, and click-fraud panels at all the big interactive marketing shows were making solemn pronouncements to packed audiences. Why, then, weren’t more marketers worrying?

In the past year, both Google and Yahoo! settled lawsuits admitting publicly that, yes, there was fraud. Highly publicized Outsell analyst estimates have set fraud at about 13% overall. Plus, anecdotally, most marketers interviewed by MarketingSherpa for our weekly case studies told us they had noticed, and sometimes been reimbursed for, fraud activity.

So when we rolled out our big annual search engine marketing survey via e-mail, Web, and phone in August, I was expecting the answers to come back giving click-fraud concerns high marks. I was wrong. Which is, again, why I should never make predictions but stick to analyzing the data at hand.

We asked marketers if they were monitoring their fraud levels and if they were terribly concerned about it. Only 9% were worried that “click fraud will only get worse.” On the other hand, only 20% said click fraud was a nonissue or on its way to becoming a nonissue.

The majority of respondents–55%–said, “Like e-mail spam, click fraud will continue to cost time and money.” In other words, it’s here, it’s not getting much worse, it’s not getting much better … get used to it. Which is pretty much the way a lot of marketers feel about e-mail filters. You know a portion of your e-mail will be filtered, you do your best to get permission mail through, but you’re also resigned to the fact that this will perhaps always be a problem.

Fraud = fact of life for everyone.

Some marketers, however, should be especially concerned. If you’re in one of these three categories, chances are that fraud will directly affect your marketing tactics in the next year:

1) Extremely competitive, niche industries targeting small and midsize businesses. Often these are b-to-b marketers who are duking it out in an industry that’s so commoditized that a slight change in costs can hugely affect your bottom line—for example, teleconferencing services.

Or it’s a small, everyone-knows-each-other industry where clicks are expensive and search marketing is run inhouse, perhaps even by the company president. I’ve heard several stories of sites that had high fraud levels except for the week each year when everyone (including the competition) was at the big annual trade show. Presumably they were too busy networking and partying to click on each other’s ads.

2) Sites paying affiliates and partners by the click. The problem here is you’re counting on your affiliates and partners to monitor their click fraud potential carefully. If you’re blithely paying for traffic without carefully tracking the value of each click (and potential of fraud), then your partners have no incentive to worry about fraud.

This seems to be increasingly a problem of large, mainly offline brands that arrived at the Internet party a bit late. They started sites and affiliate programs because they knew they should as part of an integrated initiative, but management still thinks of the Internet as that little department down the hall. It’s only a small slice of total company revenue, so why put heavy measurement into place for it? But without measurement, you’re leaving yourself open to fraud … a bit like walking down a city sidewalk with $10 bills pinned to the back of your jacket.

3) Advertisers on second-tier search engines. We consider any search engine that is used by fewer than 10% of the search audience to be in the second tier (aka Tier B). This means everyone except for Google, Yahoo!, MSN Search, and Ask.com.

These companies make a great deal less from selling search clicks than do the big four, so as you can imagine, they have far smaller budgets to fight fraud. Fraud fighting requires heavy-duty software plus a lot of people time. A fraud department at a major search engine might be staffed by dozens of people. A second-tier engine may have only one person handling that work.

The resulting fraud (along with far lower traffic) is one of the reasons that the majority of search advertisers avoid second-tier engines. Let me stress, though, that not all second-tier engines are bad. I’ve met marketers who specialize in testing these engines who are delighted at some of their results.

For b-to-b marketers, some of the vertical b-to-b engines can provide highly qualified leads. For e-commerce marketers, some of the shopping comparison search engines can provide clicks that convert better than those from any other engine.

Other, more general second-tier engines are known for very low click pricing. You may not get all that many clicks, but they are a big bargain. Except for fraud, that is. …

Which brings me to my top three action items if you are one of the above marketers beset by fraud concerns:

1) Track conversions by source. Get the budget for analytics software if you don’t already have a good package, and beyond that get the budget for a staffer to run and analyze the resulting reports.

The latter may be tougher than the former to get budgeting for. Management seems to be loath to let marketing departments grow these days. Plus, there’s a dearth of trained analytics staffers available. You can advertise all you want, but without big bucks, you may not find anyone.

Some marketers hire the best math whiz they can from the recent grad crop of a local university. Others are outsourcing to places such as India and Eastern Europe. In both cases, you’ll have to do a lot of training, but you’ll be able to afford the wages. And there are lots of training manuals out there on database marketing and Web analytics. But getting the dedicated, brainy staffer to read and act on them is the problem.

2) Review your search marketing contracts. Admit it, how often do you read every single word of a contract carefully before signing? Especially if that contract is on a computer screen where you can just click the “accept” button and move on with setting up your search marketing account?

Several marketers have spoken to me–shocked and dismayed–when the contract they signed with a search engine turned out not to have a click-fraud provision. You might (and they did) assume that if you buy something and it’s fraudulent the seller has to return your money. Guess again.

At least one of the top four search engines (and many more of the second tier) does not have a click-fraud payback provision in its standard advertiser contract. If you don’t know which one I’m talking about and you’re a heavy search advertiser, then you haven’t read your contacts carefully enough.

3) Invest in fraud-tracking software and services. Only a third of the marketers we studied invest in tracking click fraud in any way, including internal tracking reports or external services. If fraud is a concern to you, obviously that should change. Several vendors have sprung up in the past two years to help track this. Pick the one that you think is most likely to survive the inevitable fallout as the industry matures.

And good luck!

Anne Holland is president of MarketingSherpa, a research firm publishing buyer’s guides and benchmark data for its 237,000 marketing executive subscribers. For a copy of MarketingSherpa’s new Search Marketing Benchmark Guide for 2007, go to www.sherpastore.com/Search-Marketing-Benchmark-SEO-PPC.html?8966

© MarketingSherpa, Inc. 2006