Advertising Law Blog

Click fraud continues to present a growing problem for search engines and their advertisers, because Google, Yahoo and other web portals get paid each time someone clicks on advertising links displayed on a search engine result regardless as to whether a sale or legitimate lead is generated. Accordingly, the potential for those who act as affiliates to the portals to generate unearned fees is tremendous.

The Washington Post estimates that click fraud constitutes a whopping 14.1% of web searches. This increasing percentage is bound to scare those who pay for clicks through portals and who are allocating a significant portion of their advertising budget..

With respect to past click fraud, Google has potentially settled a class action in which it will pay up to $90 million in refunds and attorneys fees. Yahoo has entered into a similar settlement, although there isn't a payment cap. Both settlements are subject to court approval.

But what about the future? Both Yahoo and Google do not share with advertisers how they monitor for click fraud, so advertisers are left guessing as to how they currently their pay-per ads or what they will do in the future to ensure legitimate clicks.

Some bloggers are reporting that Google is testing a pay-per-sale or pay-per-action programs with respect to its AdSense program (affiliate type advertising based either on targeted ads and/or search engine responses). While a pay-per-sale model could potentially work where a sale is consummated over the Internet (i.e., like ebay, www.ebay.com) , it is doubtful that it could work where the advertisement only generates a lead, and the sale occurs at a later time through another channel.

Given the limitations in a pay-per-sale model, it seems that portals need to focus on improving their monitoring of those users who generate improper clicks. Minimizing click fraud committed at the behest of affiliates is a challenge confronted on a daily basis by marketers who rely on affiliates to generate leads. Marketers that I know struggle with incorporating technological advances to verify legitimate leads. Let's hope that Google and Yahoo do the same and come up with a better way to combat with this growing problem.