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March 23, 2007

Since 1999, Reggie Davis has helped Yahoo defend itself against some lawsuits by search marketers and advertisers who said they were being overcharged for pay-per-click ads that were abused as a result of click fraud.

This isn't anything new. Click fraud is defined as clicks generated by 'click bots' (ie. automated software) or by humans specifically paid to click ads many times, for the usual purpose of increasing revenue for the site the ads appear on.

Recently however, Reggie Davis has been appointed Yahoo's first vice president of marketplace quality, directly responsible for significantly lowering the amount of click fraud, and to make certain advertisers and publishers are happy with the company's display and search listings.

Davis said in an interview "the mandate I've received is to really boost advertiser trust. The goal is to develop the highest quality ad network there is."

For many years, click fraud has been a growing problem for most of the largest search engines, which have historically refused and continue to refuse to disclose how big of a problem it really is.

However, Yahoo and its largest rival Google, have slowly been a bit more communicative and are helping to provide more tools for advertisers to help reduce, if not completely eliminate click fraud.

Davis said that at Yahoo, the "discard rate," or overall percentage of clicks that for some reason or another were problematic and thus the advertiser is not billed, averaged between 12 percent and 15 percent. The rate of fraudulent clicks, those designed only to run up charges to the advertiser, is a "subset" of that total discard rate, Davis said.

For its part, Google claims that its discard rate is less than 10 percent, and that its click fraud rate is in the single digits, or 9 percent or less.

Click Forensics, which provides click fraud services and operates a Click Fraud Index survey of advertisers and agencies, has arbitrarily determined that the click fraud rate for the top tier search engines at approx. under 12 percent.

"The fact that Yahoo is creating a vice president position devoted to advertising system quality signals that the company is taking the issue of click fraud very seriously," said Tom Cuthbert, president of Click Forensics.

He added "in fact we believe Yahoo is taking a more honest approach than the others in talking about the scale of the problem. Overall, advertisers can now start to make some conclusions by analyzing their server log files and looking more closely at their invoices. However, there is still a huge disparity between clicks that are bad and should not be paid for, and what advertisers are currently paying."

In February, Google said it would offer advertisers more information on how much they are saving by filtering out fraudulent clicks, and allow them to block specific IP addresses from receiving the ads. That move is designed to stop rivals from using click fraud to eat through a competitor's advertising budget and to prevent them from bidding on the ad's keyword for the purpose of using it in their own ads.

Both Yahoo and Google have settled some click fraud class-action lawsuits, and they are working with the IAB (the Interactive Advertising Bureau) and others to establish quality guidelines for accurately measuring click fraud.

A hearing on a challenge to the settlement in Yahoo's click fraud lawsuit is scheduled for Mar. 26, Davis said.

The judge has already given preliminary approval to the settlement and Yahoo expects it will be granted final approval.

Lowering or, better yet, completely eliminating click fraud will significantly increase Yahoo's overall efforts at marketing its new Panama advertising platform, which went live last December.

Yahoo's new system offers features that are designed to make it more competitive with Google's more popular AdWords system.

One major change is that Panama determines the order of ads on things like relevancy and clickability and not just the advertiser's bid price.

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Source: C-Net News