Many websites contain advertisements that are related to the subject material of the website. These advertisements may be in plain view along the side of written materials, or they may be embedded advertising: certain words that if clicked on, will take you off the site to a sponsor’s page. These advertisements are purchased by companies, usually through companies like Google® and Yahoo®. When a user clicks on an ad, the company pays a small amount to the website owner, and to the company (such as Google®) that distributes their ads. The goal is to generate sales for the company, but not all clicks express true interest in a company’s product.
When a person, or machine, or clickbot (a type of virus that can cause clicking on ads), clicks on advertisement with no intent to purchase anything on the ads, this is called click fraud. Companies like Google® will suspend advertising accounts of people who feature their ads and then click on them to generate income for themselves. Yet it’s not always possible to detect whether clicks on ads are genuine interest or not, since many of them don’t occur on someone’s home computer. When the clicks generate from external sources, other computers not belonging to a company, this is called external click fraud, and it’s costing advertisers a lot of money; some estimate well into the hundreds of millions.
There are several reasons why external click fraud may occur. A rival company could initiate clicks on an advertiser’s site to decrease the advertiser’s budget. This doesn’t profit the rival company, but instead is viciously aimed at causing income loss to another company. A disgruntled, possibly “fired” employee might start clicking on his/her former company’s ads to deplete budget too. He or she might also engage others in this clicking, and since it’s not just coming from one computer, it can be hard to determine whether clicks are legitimate or fraudulent. He or she could write software or viruses that cause computers to click on ads, and this type of software has been found on hundreds of thousands of computers in conjunction with downloading web browsers.
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There are also allegations that certain companies hire people, especially in foreign countries, to simply click on advertisements as their work. They make money per each click, and again, since the clicking is occurring from multiple computers it is hard to allege that external click fraud is taking place. There are also people in the US who are paid to read ads, though their earnings are small, and these may sometimes be used in conjunction with sites that offer money for completing surveys or entering contests.
One of the biggest problems with external click fraud from the point of view of advertisers is that most people pay a certain percentage of their click advertising budget to search engine companies. Since search engine companies derive part of their income from clicks, they may not be sufficiently motivated to stop click fraud. Estimates of revenue gained from external click fraud are anywhere from 10% to less than 1%.
Especially for small companies even small losses to budget can be hard to take. There have been allegations against several search engines that they may initiate external click fraud to boost profits. These remain unproven, but they have many advertisers in a quandary about whether to continue to use Internet advertisement on a pay per click basis. Few advertisers actually make claims regarding external click fraud, and those that do may have a difficult time having money refunded.
Some companies like Amazon®: combat external click fraud by offering advertisements on pages and paying only when people actually make purchases. This may be the wave of the future for featured ads on pages, especially with the many programs that may be capable of generating clicks from all over the country or the world, sometimes even unbeknownst to computer users.