A US company that helps protect online advertisers from fraud says it has uncovered an elaborate scam that has resulted in advertisers being charged for fake web traffic sent by a series of fake porn sites.
AdSafe Media, which says it detected the scam after a number of its clients were caught up in it, has told the Wall Street Journal that large companies targetted included Lycos, video sites Mevio and Current TV, Verizon Communications and TD Ameritrade.
The elaborate scam starts with a series of fake porn websites. Once a user visits one of these sites, the sites launch dozens of invisible pages with hundreds of links to legitimate websites. Software launched by the porn sites then forces the user’s computer to click on the links, sending them to the legitimate sites.
The owners of these legitimate sites pay a commission to the porn site publishers for providing them with traffic. Advertisers on these legitimate sites then pay for ads that haven’t been clicked on by real users.
“The criminal enterprise is very sophisticated,” AdSafe executive Matthew Scott told the Wall Street Journal.
“There has been explosive growth in the online advertising space, and at the same time, fraud and scams are evolving.”
AdSafe’s investigations found up to 1000 websites with possible links to the scam. The matter has been referred to the FBI for further examination while Google has also taken steps to block the scam.
The elaborate scam shows that click fraud – the process by which dodgy publishers rip off advertisers by creating fake clicks on cost-per-click ads – is becoming more and more sophisticated.
According to a report from US click fraud detection and prevention company ClickForensics, the incidence of click fraud was 19.1% in the fourth quarter of 2010 (that is, 19.1% of clicks on cost-per-click advertisements were fraudulent).
This rate was up sharply from the 15.3% seen in the third quarter of 2009 and not far below the all-time peak of 22.3% recorded in the third quarter of 2010.
Given that US advertisers spend as much as $3 billion a quarter on cost-per-click ads, the cost of click fraud is substantial.
In related news, Google has announced a fresh crackdown on online advertisers of counterfeit goods, promising to respond to counterfeit ad complaints within 24 hours and improving its internal processes for spotting counterfeit advertisers.
“In the last six months of 2010 alone, we shut down approximately 50,000 AdWords accounts for attempting to advertise counterfeit goods,” Kent Walker, one of Google’s senior vice presidents and its general counsel said in a blog post.
“But there’s no silver bullet here. Instead, it’s a cat-and-mouse game, where we are constantly working to improve our practices and tune our systems to keep out the bad guys… After all, a Google user duped by a fake is far less likely to click on another Google ad in the future.”
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
