Online advertisers are becoming increasingly concerned about ‘click fraud’, which is pushing advertising costs to unrealistic levels and threatening to undermine the model upon which search engine marketing is based. This worrying practice has led to an
What is Click Fraud?
Click fraud can occur where search engines charge for listings on a ‘pay per click’ basis (PPC). This is a common way to obtain advertising revenue as theoretically the advertisers pay only for the amount of traffic being diverted to their site rather than for simply including an advert on a given Web site.
However, the advertising industry is becoming increasingly aware that many clicks are in fact fraudulent. Current industry estimates suggest that anything between 20 and 30% of clicks are not from bona fide Web users (http://searchlineinfo.com/Click_fraud_lawsuit/) – disturbing news for the advertisers and for the reputation of the search engines.
Click fraud falls into two distinct categories.
Competitor/disgruntled employee fraud – occurs when either a company clicks on a competitor’s advert or a disgruntled employee clicks on their employer’s advert in order to run down the target’s advertising budget. This may then result in the PPC advertising becoming too expensive for the company so that it can no longer compete in the online market place.
Affiliate fraud – arises where search engines have affiliations with other Web sites which feature results from the search engine on their own site. Affiliates receive a share of revenue from each click on a PPC advert from the search engine. Affiliate fraud occurs when an affiliate seeks artificially to increase the number of clicks on paid listings so as to increase the revenue they earn. Some entities have even gone so far as to set up fake content sites to assist in carrying out this fraud and to aid them in increasing the advertising revenue they earn in tandem with the search engines.
The problems with each of these methods of click fraud can be exacerbated where the fraud is not being carried out by repeated manual clicking but by automated software, by a web server script or by a similar mechanism designed to click repeatedly and artificially on PPC adverts.
These various practices can raise advertising costs for a particular advertiser and can also drive up the costs of advertising generally as search engines adjust the minimum price of each click based on the popularity of the category of the keyword.
Legal Issues
Fraudster
If an entity is committing click fraud, the perpetrators will probably be committing a criminal offence although this will not automatically reimburse the advertiser for any lost advertising revenue. It may be possible for the advertiser to bring an action for the tort of ‘intentional damage to business by unlawful means’. This tort applies where the perpetrators carry out the harmful acts (ie the click fraud) with the object or intention of causing loss to the advertiser (Barretts & Baird (Wholesale) Ltd v IPCS [1987] IRLR 3). This means that it may apply to competitor/disgruntled employee fraud but not affiliate fraud where the perpetrators’ acts are really intended to increase its own, or an affiliate’s, advertising revenue rather than to cause damage to another business specifically. Whether this tort can be applied to the click fraud scenario is as yet untested.
However, even if legal liability is not an issue, more practical problems are likely to arise for the advertiser in identifying and recovering losses from the fraudster, which may be possible only where the search engines provide information. This may not be straightforward since the search engines may be subject to contractual obligations of confidentiality in their standard terms and conditions or the non-disclosure provisions in the Data Protection Act 1998, where the information required relates to an individual. The advertiser may be able to obtain a court order for information to be provided (under the principles in Totalise plc v Motley Fool Ltd and another [2001] EWCA Civ 1897) although a costs order may made against them. There may also be problems for the advertisers in recovering losses owing to issues of jurisdiction.
Search engines
Owing to the difficulties in establishing the identify and liability on the part of a fraudster, the advertiser may well turn its attention to the search engine to look to cover any losses it may suffer as a result of ‘click fraud’. The advertiser could allege that the search engine is negligently failing to take sufficient steps to track and prevent click fraud which is leading to over-inflated advertising charges. If the advertiser can demonstrate that the search engine owes them a duty of care which has been breached by the lack of response to click fraud and has led to a loss on the part of the advertiser (ie the increased advertising costs), this may be an action worthy of consideration.
It may also be possible to bring an action for breach of contract or misrepresentation where the search engine has made contractual statements or representations (express or implied) that it will take steps to prevent click fraud or to minimise losses to the advertiser as a result. The terms and conditions of the search engine’s contract with the advertiser may well limit this type of claim, and will doubtless cap liability even where a claim is successful, but an action against the search engine may in turn lead to greater efforts being made to detect and limit click fraud.
Practical Steps
Difficulties are presented in detecting click fraud as the technology is failing to keep pace with the fraudsters. Currently the search engines have to carry out surveillance manually by studying server logs and checking IP addresses for any unusual patterns which may suggest either an automated system or repeated manual clicking. These steps are clearly limited and leave room for human error in detecting fraud.
There are a number of steps which advertisers can take to protect their interests:
(1) Implement a click fraud prevention system. This could include installing a detection system tracking unusual or irregular behaviour patterns which would lead to a pop-up box on the user’s screen indicating to them that their behaviour is being tracked and warning them against such behaviour.
(2) Avoid advertising with search engines whose affiliates entice users to click by offering them incentives or which allow affiliates to sign up automatically without some form of human intervention to check the relationship between the affiliates and any existing advertisers.
(3) Limit the daily click allowance, so that any sudden fraudulent increases in traffic can be limited.
(4) Switch to a ‘pay per call’ model (such as that pioneered by Findwhat in the USA and its subsidiary espotting) pursuant to which the advertiser includes a telephone number with the advert and the advertiser pays only where a call is made as a result of the online advert rather than when the advert is clicked.
In addition, there are some steps the search engines can take to protect their reputation and interests. First, they could offer advertisers a frequency cap on traffic. This cap acts as a filter to reject multiple clicks coming from the same IP address to the same Web address from a single query. Secondly, they could attach a unique number or session ID to the advertiser’s URL each time the advert is displayed. The search engine can then create an expiry time which will refuse any clicks if they occur after the predetermined time period. This allows the search engine to ensure that the clicks made on the URL are being made from a live search environment and any automated software which continually reloads the same page will cease working.
Conclusions
If click fraud continues unabated this may lead to a loss of confidence in the multi-million pound online advertising market. This type of fraud is also problematic for search engines themselves as they are obliged to incur significant costs in preventing and detecting click fraud, in reimbursing or compensating advertisers and, crucially, in repairing the damage to their own reputation as well as that of the industry as a whole. For both the advertisers and the search engines there is an incentive to police click fraud or else risk causing irreparable harm to the online advertising market. However, establishing when a click is not a click may prove to be a difficult task!
Mike Conradi heads up the technology section of Stephenson Harwood’s Commercial, Outsourcing and Technology group. He specialises in giving transactional and regulatory advice to clients in the sector – whether suppliers, customers, investors or lenders. His recent work includes two large IT projects, each involving the purchase by different international banks of multi-faceted IT or communications solutions.
Travers Symons is a solicitor in Stephenson Harwood’s Commercial, Technology and Outsourcing team. Travers specialises in IT procurement and exploitation and the protection and use of IP in both new age and traditional media: travers.symons@shlegal.com
