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How Google Manages Click Fraud

Posted by ScuttleMonkey on Wed Jul 26, 2006 06:41 AM
from the making-advertisers-warm-and-happy dept.
Businesses Google The Internet Security
Finin writes "In February 2005, Google was sued by Lane's Gifts & Collectibles in a class-action lawsuit over click fraud. The company alleged that Google had been improperly billing for pay-per-click ads that were not viewed by legitimate potential customers. As part of a settlement earlier this year, Google agreed to have an independent expert examine their click fraud detection methods, policies, and procedures and make a determination of whether or not they were reasonable measures to protect advertisers. The report of the expert, NYU Information Systems Professor Alexander Tuzhilin (a Professor of Information Systems at NYU), is now available." Update 07/26/2006 at 12:52 GMT by SM: Fixed the link to Tuzhilin's report.
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[+] Google Agrees to Pay $90mln on Click Fraud Lawsuit 132 comments
Hitokiri writes "Google has agreed to pay up to $90 million to settle a class action lawsuit 'Lane's Gifts v. Google'. The settlement stems from a lawsuit filed by Lane's Gifts earlier this year in an Arkansas state court and is designed to settle all outstanding claims against Google for fraud committed using its pay-per-click ad system back to 2002Google has made a statement on their blog."
[+] Search Companies Team Up Against Click Fraud 84 comments
isabotage3 writes to tell us that the top three search companies, Google, Microsoft, and Yahoo, have teamed up to create an alliance to combat click fraud. The fact that these three bitter rivals can team up shows just how serious the industry has become about preserving the current online advertising boom that is currently underway. From the article: "Click fraud has attracted an increasing amount of attention amid class-action lawsuits and industry studies asserting advertisers have been collectively overcharged by more than $1 billion for bogus sales leads during the past four years. Google and Yahoo contend that those estimates are gross exaggerations generated by opportunistic lawyers and online advertising consultants hoping to cash in on the anxieties triggered by their calculations."
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How Google Manages Click Fraud 50 Comments More /

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  • real link to report (Score:5, Informative)

    by Anonymous Coward on Wednesday July 26 2006, @06:48AM (#15782828)
    this is the correct link, the other one is just legal blahblah:

    http://googleblog.blogspot.com/pdf/Tuzhilin_Report .pdf [blogspot.com]

    • Re:real link to report (Score:5, Informative)

      by DeadSea (69598) * on Wednesday July 26 2006, @06:59AM (#15782855) Homepage Journal
      For anyone interested in reading the findings without having to wade through it all, then go to page 36 and start with section 9.3 where a little further on it also refers to account terminations and how this occurs, section 9.6 is the bit that I guess most may be interested in...you never know, you may then decide to read it all

      - OptiRex [webmasterworld.com]

    • I conclude that Googles efforts to combat click fraud are reasonable.

      Maybe should have been in the summary. The document is also fascinating account of how they go about it however.
  • Google is (as of yesterday) now showing statistics about how many invalid clicks an adwords account has recieved. You can read all about it in the adwords blog [blogspot.com]

  • Enron (Score:3, Interesting)

    by MyLongNickName (822545) on Wednesday July 26 2006, @06:51AM (#15782834) Journal
    If ad-sense is its major source of money, and it keeps the underlying numbers pretty well buried, could we be looking at another Enron? Imagine it comes out that 90% of all clicks are fraudulent. How many advertizers leave? How badlu does the stock drop? This is one of the things that makes me nervous about Google as an investment. Remember, Enron was loved by Wall Street too. Enron did not produce anything physical either. Enron reported great numbers. Underlying numbers were hidden away.

    How is Google diferent that the big "E"?
    • Enron was loved by Wall Street too.

      Wall street hates google.

      How is Google diferent that the big "E"?

      Enron was deliberately fraudulent. Google (to our knowledge) is not.

    • Re:Enron (Score:5, Funny)

      by Zaphod2016 (971897) on Wednesday July 26 2006, @07:04AM (#15782871) Homepage

      How is Google diferent that the big "E"?

      Branding. For example, Google's famous motto is: "don't be evil". If memory serves, Enron's less-famous motto was: "Ken Lay needs a new boat".

    • There is no way of knowing for sure but Google does produce things (like gmail and gcalender) and is not simply a black hole that money comes out of (how investment profesonals fall for that I will never know). I know that I trust a company that doesn't hinge there busness model on energy futures trading (what is that anyway?) more than one who's busness I understand (essentaly advertising).
      • Energy future trading is about trying to figure out how much energy will cost in a week, month, year even longer, and trading on values of that. You try to predict whether energy will be cheaper or more expensive, by looking at a whole range of factors, including weather, wars, politics, etc...Of course, trading on those future values will actually change those future values, so this needs to be taken into consideration. Yes, it is a load of bollocks, to an even greater degree than the stock market, but by
        • Generally no one makes money just betting on things (a few very well informed individuals make a nice living at it). A large company to make money they have to be able to something bigger than that. Enron's trading got it's start by taking a spread between producers and consumers who both wanted to be able to lock in prices to facilitate planning (they also owned pipelines which transfered physical gas around the country). Where they got into trouble was in internaitonal deals (that were poorly structure
        • Why? Google already has a solid and profitable business model.

          The additional projects are just R&D with a very public face. They offer great brand exposure. They give Google's software team lots of experience dealing with the realities of building and maintaining software that thousands to millions of people use every day. They keep the company from developing tunnel vision. And in some cases they've put Microsoft on the defensive, so it has to spend time and resources defending its own markets rat
    • While I agree with you in principle that Google is an uneasy investment (which is why, although I love everything Google, I have yet to invest in them), I must protest the comparison to Enron. While it is always possible that I am wrong, I get the distinct impression that Google is much more forthcoming and honest about their situation than Enron. When Enron tanked, it was because of a deliberate and illegal practice of doctoring their financial situation. I highly doubt Google is doing the same thing.

      Furt
      • Damn! I was hoping since you were talking about vidoes and office competitors in the same line, that you were suggesting the Google would come out with its own version of the BBCs The Office.

        Serg: "What is the single most important thing for a company? Is it the building? Is it the stock? Is it the turnover? It's the engineers, investment in engineers. My proudest moment here wasn't when I increased profits by 1000%, or cut expenditure without losing a single member of staff. No. It was a young Greek guy, f
    • Hmm, all replies thus far don't really appeal to me. 'I assume google is not doing bad stuff' doesn't sound like a decent fundament for fair and correct trading to me. What the Parent is trying to say, google can just make up the income from clicks themselves, or charge extra clicks to their costumers where they see appropriate. This is of course a mechanism beyond where any of us can get insight.

      I guess what do counts is that they earn a percentage of all click-throughs on websites, which means that by l

    • Re:Enron (Score:4, Insightful)

      by IamTheRealMike (537420) on Wednesday July 26 2006, @07:51AM (#15783100) Homepage

      Google make pots of money because AdWords does result in a good return on investment relative to other forms of advertising.

      Consider this. Imagine a fictional company that spends $10,000/month with Google on advertising, and is completely happy with the service because it results in lots of leads and sales. So it is actually profitable to spend this money. There are many companies in exactly this situation. Does it matter if 90% of clicks are fraudulent (which is probably not going to happen unless you are being deliberately targetted by a competitor)? If you are still getting a great ROI then no it doesn't matter. The invalid clicks are just noise.

      Google does produce something valuable if not physical - it produces a ton of people viewing websites who then go onto buy things. Same as any form of advertising. Except the relevance of AdWords makes it more valuable than most.

    • If ad-sense is its major source of money, and it keeps the underlying numbers pretty well buried, could we be looking at another Enron?

      To my knowledge, Enron never produced anything of marketable value. It was essentially a mercantile operation that got increasingly further away from trading in actual goods to trading in promises of future deliveries. That has always been a bubbly area.

      OTOH, Google's underlying success is based on a kind of entrepreneural manufacture: they were the first to develop a c

  • There is no report (Score:4, Informative)

    by Saib0t (204692) <saibot@NoSPAM.hesperia-mud.org> on Wednesday July 26 2006, @06:53AM (#15782840) Homepage
    The PFG linked to in the summary does not contain the report of the expert.

    Rather it is the answer to the judge and mentions (2 or 3 times, shortly) the report of the expert. All the meat that is to be found in the PDF is that the report is conclusive that Google does all it can reasonably to combat click fraud.

    The PDF is interesting only if you're interested in legal stuff...

    My 0.02

  • Link Fraud (Score:4, Informative)

    by digitaldc (879047) * on Wednesday July 26 2006, @07:11AM (#15782895)
    If you don't have time to read the full 47 page report, Search Engine Watch [searchenginewatch.com] has summarized some of the most interesting findings.

    404 - File Not Found

  • From the objections_response (Score:5, Funny)

    by mustafap (452510) on Wednesday July 26 2006, @07:18AM (#15782922)
    Nice quote:

    "The California attorneys take the position that the damages are 200 times $90 million, or 18 billion, which is more revenuse than google has received in its entire existance"

    You just have to hand it to lawyers, they'll try anything.
    • Damages to a third party CAN be more than the company makes.

      The number itself might be unreasonable, but not the fact that the damages are more than the income.
      • >Damages to a third party CAN be more than the company makes.

        Would you care to explain your reasoning *in this case* though?

      • The number itself might be unreasonable, but not the fact that the damages are more than the income.

        Really? Aren't the damages in this particular case supposed to be fees that advertisers paid to Google that they shouldn't have paid? If that's true, how can the plaintiff attorneys allege that the damages for click fraud exceed the total revenue that Google has taken in during it's entire lifetime?

        NOTE: I'm not saying your wrong. I just don't understand. Can you clarify?

        • Re:From the objections_response (Score:4, Informative)

          by The-Bus (138060) on Wednesday July 26 2006, @10:37AM (#15784574) Homepage
          Let's say your advertising budget is $100. In our example, each $1 you spent on advertising (historically) returns you $20 in sales and $5 in profits. You spent $20 of your budget on Google Adwords, 25% of which went to click fraud. So that's not only $10 wasted, but $200 less in sales and $50 less in profit that you could've had if there was no fraud.

          That's the basic logic, I believe.
        • They may be saying that had the advertiser known that this mechanism was worthless sooner, they would have advertised elsewhere which would have brought in additional sales.

          so they're seeking damages on lost sales opportunity, which may very well be much more than advertising costs.
        • Really? Aren't the damages in this particular case supposed to be fees that advertisers paid to Google that they shouldn't have paid?

          Not at all. You would start with the percentage of fees paid that were fraudulent as the base amount. Then you add in the opportunity cost of, a) lost revenue for the duration of the AdSense subscription; b) fees that could have been paid to a more accurate advertiser for the duration of the AdSense subscription; c) time spent trying to track down and discover that the maj
      • This is true - if a company spends 50 cents for each dollar that comes in, it is charging its customers double its income, and therefore can be sued for double its income.

        But in google's case it is all almost pure profit. They *maybe* spend 10 cents for each dollar.

  • Billboards (Score:3, Insightful)

    by MichaelSmith (789609) on Wednesday July 26 2006, @07:45AM (#15783053) Homepage Journal

    Advertisers will pay for a billboard without any guarantee from the advertising company about how many people will drive past the sign, how many of those will read it, how many will take the information in and act on it. The client is assumed to be taking a risk in that regard.

    Over time people decide for themselves whether a particular type of advertising is working for them. If the business keeps coming in why should there be a need for this type of analysis?

    • Re:Billboards (Score:5, Insightful)

      by jalefkowit (101585) <jason@ja s o n l efkowitz.net> on Wednesday July 26 2006, @08:05AM (#15783196) Homepage
      Advertisers will pay for a billboard without any guarantee from the advertising company about how many people will drive past the sign, how many of those will read it, how many will take the information in and act on it. The client is assumed to be taking a risk in that regard.

      But "outdoor advertising" firms make no representations that they can measure these things. You know what you're getting when you buy space on a billboard. AdWords is different because Google sells it with claims that they can track these things (indeed, they bill you based on the results of that tracking). If Google's click tracking is inaccurate, you aren't getting what you thought you were getting. That's the difference.

      • Re:Billboards (Score:4, Insightful)

        by mstone (8523) on Wednesday July 26 2006, @08:57AM (#15783673)
        That objection can be solved if you add the concept of 'noise' to Google's reported numbers, and I'd say most people already do that.. at least to some degree.

        I don't think many people expect every adwords click to result in a sale for the advertiser. Instead, people just check to see whether there's a correlation between 'more adwords clicks' and 'more sales'. If 100 adwords clicks produce 30 additional sales, you can say that the adwords are 30% effective. Then it's up to you to decide whether those 30 additional sales are worth the cost of those 100 clicks. If so, you can write 70% of their adwords fee off as a cost of doing business. If not, you can close your adwords account, or lower the amount you're willing to pay per click.

        If Google was padding its numbers, people would see lower return rates from their adwords accounts. Those people would then be less willing to pay for the service. They wouldn't expand their accounts to cover other words.

        In other words, there's already a feedback mechanism that punishes Google for any loss of efficiency in its adwords program, and rewards Google for providing the best results it can.

      • Re:Billboards (Score:4, Informative)

        by swb (14022) <mobocracy@gmail.com> on Wednesday July 26 2006, @11:44AM (#15785141)
        But "outdoor advertising" firms make no representations that they can measure these things. You know what you're getting when you buy space on a billboard.

        I worked in advertising for over a decade and your statement is totally false. These days EVERY advertising medium being pitched to a client MUST contain all kinds of analytical data backing it up, and this includes billboards. Locations, lighting, traffic patterns, etc, etc.

        And I'm sure that some outdoor media companies have their own internal research demonstrating that some locations feature superior demographics (ie, this road is between the corporate HQs and the wealthy suburbs and gets seen by all the wealthy commuters).

  • Thinking about stuff (Score:3, Interesting)

    by ajs318 (655362) <sd_resp2@earthsh ... o.uk minus punct> on Wednesday July 26 2006, @07:54AM (#15783120)
    I'm writing a piece of ad-blocking software myself, and I was actually thinking of incorporating a few features. Specifically, the option of whether not to download the advert at all; to download the advert without displaying it; or to download the advert without displaying it and download the linked page without displaying it. Is this last option an example of "click fraud"?
    • "Is this last option an example of "click fraud"?"

      Only if you are writing the software for Google and it is used to generate revenue. It certainly isn't fraud when a user clicks on an ad and then decides not to buy. That is the risk of advertising...

      • "Probably. Besides, why would the user ever pick that last option?" (The last option being to download the ad and the ad's linked page, without displaying either.

        If you really don't like ads, or especially a certain type (say, flash-based or pop-up-based ads), then the option to have the link "clicked" and cost the advertiser money without giving them any benefit might be appealing to the users of the ad-blocking software.

        Personally, I like text-based meaningful ads like the ones Google provides, but c

          • Sorry to be nitpicky and jump into this discussion, but none of the behvior you're talking about re: clicks is illegal. It goes against the Google terms of service (which is why they try to stop it) and it means that Google misrepresents click-through rate to its customers if they can't account for it; the latter constitutes fraud.

            In other words, it's not illegal for you to build an ad-block that does what you describe. It's illegal for Google to refer to the pageloads that result as a legitimate click-th

  • Academic community (Score:2, Insightful)

    by Anonymous Coward
    It is interesting to see Google asked someone from the academic
    community to do this study.

    The most the study says is that the algorithms the Google
    uses are good to detect click fraud. It does not give any clue on
    how much fraud is not detected by the algorithms.
    • > It does not give any clue on how much fraud is not detected by the algorithms.
      Ummm... But... Oh, never mind.
    • This is impossible, since fraudulent clicks can be in every aspect equal to true clicks. First there is no clear definition on what is a fraudulent click, google and the target site only see an ip, a user-agent among some other http fields and a timestamp of the time that several things were loaded and clicked.

      One can argue that with some statistics one can find a site that is using automated clicking by using a network of infected computers. This would show as a unusual amout of clicking, but if the bad gu

  • do not think much of click fraud detection system (Score:5, Interesting)

    by dino_russ (991133) on Wednesday July 26 2006, @08:07AM (#15783212)
    Just a comment on their detection process. As a publisher who was terminated (and appeal denied) I do not believe in their process. I have a very active dinosaur website (approaches 1 million hits per month in school year -- probably lots of kids/teachers). it went well for one year then without notice (must be their autormated removal process) I was terminated for me or someother person associated with me generating what they classified as invalid clicks. Well I can state clearly i did not generate one invalid click, and I am only person doing website. So some other process was generating invalid clicks in their checking process. I am not sure what, whether with lots of activity I was getting those repeat 2 clicks that they filter out as invalid? Was there some spider clicking these (a competitor as I have heard about). All I maintain as a publisher I was terminated for nothing I did but was unfaily accused of doing invalid things. Does not make me very favorable to Google and their monolithic, unfair giant system. And I am happy to tell any one who asks what I think of their crummy system!!! Russ Jacobson Illinois State Geological Survey Champaign, IL
    • It sounds like you got a truly horrible treatment. An intersting question is whether the adword business model works at all given that fraudulent clicks can be generated for two opposite purposes and there does not seem to be a fair system to separate them: 1. Increasing website revenue, 2. Kill competitor - very efficient since there are few other advertising alternatives out there for small publishers.

  • A good read actually - Googles Omnibus Response... (Score:4, Informative)

    by us7892 (655683) on Wednesday July 26 2006, @08:18AM (#15783311) Homepage
    The last link is actually very good, and an easy read. Surprising for a legal document. It is "Googles Omnibus Response to Objections". I suggest giving it a read (PDF) http://googleblog.blogspot.com/pdf/objections_resp onse.pdf [blogspot.com]

    It is basically a response to the objections of a grand total of 51 people in "the class". An incredibly small number of objections.

    From the document:
    "The assertion that Google has done nothing wrong was echoed by advertisers that opted out of the settlement."
    "Unlike Retailers, Pay per click advertisers can limit the money risked for each click and for each day...Businesses should treat pay-per-click advertising like any other advertising...If it's costing more to advertise than your resulting profit, STOP ADVERTISING."

    And, regarding the "click fraud detection", there is only a small portion of this document that mentions the review process by Dr. Tuzhilin. It does mention that the click fraud detection methods by Google were confirmed to be reasonable.

    And finally, it was interesting to see read the jabs taken at the lawyers who brought the class action lawsuit to begin with...and the copy-cat cases from California, obviously a bunch of ambulance chasers.

  • Google Screws p2pnet.net out of its Share (Score:4, Informative)

    by cyberscan (676092) * on Wednesday July 26 2006, @11:01AM (#15784772) Homepage
    http://wwww.p2pnet.net/ [p2pnet.net] is a website deicated to filesharing news. The owner of the website, Jon Newton, runs the website and barely breaks even. He subscibed to Google's adsense in order to generate some revenue. When a story about a filesharing lawsuit broke in the lamescream news, an article in p2pnet was referenced. This article generate a huge number of visits and therefore a much larger than usual number of adsense clicks. Rather than pay what was owed to Jon, Google accused Jon of click fraud and even showed information implying his guilt. Google continues to ignore Jon's request for information relating to this accusation and refuses to communicate with him to clear things up.

    You can read about it at http://www.p2pnet.net/story/9086 [p2pnet.net] . This has happened not only to Jon Newton but also to many other small website owners. I am a Geek who used to love using Google, but now that Google has become big, it is doing what most other big companies do - screw the small guy and just walk away. Needless to say, I use alternative search engines instead.
    • Yes, well the main difference here is that Google probably expects to be exonerated by this. They obviously think their fraud detection is going to be proven at least sufficient.
      Whereas MS (and all of us forced to use it's OS) knows that if any 3rd party expert devs looked at their code in any detail, they'd probably be horrified. I'm sure they already know that their code is spaghetti, why prove it to the world?

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