What Is Click Fraud?

Click fraud is the act of illegally clicking on pay-per-click (PPC) ads to increase site revenue or to exhaust a business's advertising budget. Click fraud is different from invalid clicks (those that are repeated or made by the ad's host/publisher) in that it is intentional, malicious, and has no potential for the ad to result in a sale.

Click fraud happens with pay-per-click advertising and may involve either a human, a computer program, or an automated script pretending to be a legitimate user and clicking on paid search advertising with no intention of purchasing something.

Key Takeaways

  • Click fraud is the practice of illegally and repeatedly clicking on pay-per-click (PPC) advertisements to increase site revenue or to deplete a business's advertising budget.
  • Websites that host ads from companies are paid every time a visitor clicks on the ad if they are utilizing a pay-per-click payment scheme.
  • Click fraud occurs when a human, a computer program, an automated script, or other method is used to click on ads pretending to be a legitimate user without the intent of actually buying the product or service advertised.
  • Click fraud can be carried out by the website owner themself to generate more ad revenue or by a competitor of the company that is advertising to deplete its ad revenue and slow sales.
  • Click fraud can be spotted and prevented by a variety of means, such as click fraud software and monitoring cost spikes and conversion rates.

Understanding Click Fraud

Many websites host ads from various companies are paid by those companies for hosting the ads. One of the payment schemes is that the hosting website will be paid depending on how many visitors to the site click on the ads. Click fraud occurs when an ad is clicked in a duplicitous manner without any real intent or interest in visiting the site or purchasing the service or product being advertised.

Why Click Fraud Occurs

Click fraud is committed for two reasons: to reduce competition among advertisers or to generate revenue by gaming the PPC advertising system. For example, Advertiser A can engage in click fraud to use up Advertiser B’s ad budget and space on irrelevant clicks, leaving Advertiser A as the sole advertiser. This is an example of a non-contracting party click fraud.

Another example is maliciously attempting to make it look like a publisher is clicking on its own ads, which may cause an advertising network to end its relationship with that publisher. Since PPC advertising revenue is the primary source of income for some publishers, this practice can put a publisher out of business.

Click fraud may also be committed to vandalize a publisher without a financial motive or when friends, family, or fans of a publisher click on ads on a website to generate more revenue for the publisher. Both can be difficult to detect.

Another reason would be for site owners (publishers) to commit click fraud to increase their ad revenue. This arrangement involves three parties: an advertising network, such as Google's AdWords/AdSense or Yahoo! Search Marketing, which places the ad; the publisher that publishes the ad; and an advertiser that creates the ad and contracts with the advertising network to place the ad.

Click fraud under this infrastructure happens as publishers click on ads that have been placed on their own websites to generate revenue. 

Click Fraud in Practice

The easiest, least detectable way to commit click fraud is to create a website that hosts banner ads and click on those ads as much as possible to generate revenue. Some companies will hire low-cost employees—often located abroad—to manually click ads all day. These are known as click farms.

Others will write or use scripts to automatically click on ads. Both of these methods are easily traceable unless the user or script masks the computer’s true IP address, which is easy to do through the use of a VPN. Another popular way is by using computer viruses to surreptitiously take over a large number of computers and to have those computers click ads. 

Determining and Eliminating Click Fraud

A business needs to know when click fraud is occurring so that their advertising budget isn't wasted. An advertising budget is important because it helps generate sales and selling a product or service is the goal of a business. If a company's advertising budget is being wasted through click fraud and not reaching actual potential customers it can financially impact the company.

There are a few ways that click fraud can be determined. One is through continuous clicks from ISP servers that appear to be similar, another is through surges in costs that are not in line with previous ad campaigns or statistics, a lack of conversions (people buying your product) even though ad costs are increasing, and any other odd occurrences that cannot be explained.

Many providers help prevent click fraud but a business can aim to determine fraud itself. A business can choose to advertise on quality, well-known sites, block certain IP addresses, use software that prevents click fraud, and constantly monitor their logs and budgets.