A new study that's been released by the research team at Outsell, Inc talks about the growing problems associated with click fraud and online advertising. The San Francisco Chronicle reports on the data and points out that internet advertisers paid an estimated $800 million on bogus clicks last year. It goes on to explain that 27% of surveyed business owners have either reduced or stopped their spending due to click fraud concerns and that an additional ten percent plan to reduce spending in the future for the same reasons.

From the article:

Outsell found that 7 percent of advertisers request a refund, netting an average of $9,507. Unsolicited refunds were paid to 4.2 percent of advertisers, with an average of $9,444 coming from Google and $4,068 from Yahoo.

and

That some of the advertisers cut some of their spending had a big effect on the finances of Google, Yahoo and other Web sites, according to Outsell. Combined, they missed out on $500 million in revenue in the United States, according to the report.

Still, the U.S. Internet advertising industry grew in 2005, as did Google and Yahoo. Such marketing, called pay-per-click, was a $5.5 billion business overall.

"Regardless of how impressed anyone is with the growth of pay-per-click advertising, it's dragging an anchor behind it," Outsells's Richard said in an interview. "It could be much larger."

Perhaps the most interesting figure shared in the article is the fact that just 7% of advertisers ever both to apply for a refund for fraudulent clicks. What makes this even more surprising is that the average refund is more than $9,500.

The article goes on to talk about both the challenge of tracking and uncovering click fraud from the search engine's perspective and of managing to get refunds from the advertisers' perspective. It also mentions the growing interest in cost-per-action contextual ads like those being tested by several companies.

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Search Engine Guide > Jennifer Laycock > 27% of PPC Advertisers Reduce Spending Due to Click Fraud

Jennifer Laycock is the Editor of Search Engine Guide, the Social Media Faculty Chair for MarketMotive and offers small business social media strategy & consulting. Jennifer enjoys the challenge of finding unique and creative ways to connect with consumers without spending a fortune in marketing dollars. Though she now prefers to work with small businesses, Jennifer’s clients have included companies like Verizon, American Greetings and Highlights for Children.