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What is Click Fraud: How to Prevent Losing Ad Budget to Fraud

Did you know that for every $3 you spend to advertise online, $1 might be lost to click fraud?

Now, I admit that the figure might not seem significant at first. It’s only a buck, after all. But think of it this way – How many more leads could you generate with that 30% of your budget?

Because, ultimately, that’s what happens when your campaigns fall prey to click fraud. Not only you lose money but also, you miss out on opportunities to grow your business.

It’s not all bad news, of course. There are ways to detect fraudulent clicks and recover your lost budget. In this post, you’ll learn all about how to do it. Plus, I’ll also share with you how much money one company saved by actively monitoring and preventing click fraud.

So, let’s begin.

What is Click Fraud?

To understand the issue, we must first look at the pay-per-click (PPC) advertising works.

In this online advertising model, companies place ads that show up in search engine search results pages. However, those companies are only charged when a user clicks on their ad.

For example, imagine that your ad appeared in the search results 100 times yesterday (we call these ad impressions). You do not have to pay for any of those impressions. However, let’s also imagine that 12 people clicked on it during that time. In this case, you will be charged for each of those twelve impressions, depending on how much you bid per click to appear in the search results.

Impressions per day Clicks Cost Per Click Total Cost
100 12 $7.27 $87.24

Why is understanding the PPC model important? 

Well, for one, because click fraud targets the exact activity that costs you money – clicking on an ad.

Click fraud is a strategy to generate fraudulent clicks to PPC ads to accrue charges for advertisers. 

If not detected, fraudulent clicks will pass as genuine engagement with your ads, resulting in your company being charged for those as if real and actual users have clicked on those.

However, since these clicks came as a result of click fraud, you get zero ROI for those dollars spent and lose your ad budget.

Is Click Fraud a Serious Threat to Your Campaigns?

Absolutely. I’ve quoted one statistic that proves it at the start of this post. But let me share with you more data to put the problem into a broader perspective:

  • WhiteOps discovered that, in 2019, brands lost $5.8 billion to digital ad fraud.
  • eMarketer predicts that the total ad spend lost to fraud will reach $100bn worldwide. Worth to note that this figure includes all fraudulent activities, beyond just the click fraud.
  • Finally, 1 in 5 clicks was fraudulent in 2017. Given that click fraud is growing at 50% per year, the figure might certainly be higher today.

Using the example campaign from the example above, if we consider that 1 in 5 of those twelve clicks was fraudulent, that means that you’ve lost $14.54 from the total budget.

Impressions per day Clicks Cost per click Total spend Fraudulent clicks Lost budget
100 12 $7.27 $87.24 2 $14.54

Who’s Responsible for Click Fraud?

It seems almost impossible that someone would deliberately click on other company’s ads, but it happens. There are four types of companies or individuals committing click fraud, and each does it for a different reason.

#1. Competitors

A lot of fraudulent clicks come from competitors, sadly.

Think about it, as an online advertiser; you specify the total budget that you’re willing to spend on the campaign per day. This helps you manage spending to maximize the budget and generate the highest possible ROI.

Typically, once you’ve exhausted the daily budget, your ads will stop showing until the next day. And with your daily budget gone, potential customers won’t see your ads. But they might discover your competitors instead.

#2. Click farms

Fraud generated by click farms rarely affects professional companies. Instead, those companies target large companies with automated systems that generate fake impressions and click schemes.

#3. Webmasters

Many websites feature online ads in their content. For many, that is a serious way to generate revenue and monetize the site. The site receives an affiliate commission from the PPC network (like Google Ads campaigns, for example) for every click.

Unfortunately, some webmasters try to game the system and boost their revenue by clicking on the ads themselves.

#4. Disgruntled Customers

Finally, clients unhappy with a company’s service might click on its ads as a form of punishment. These clicks are far and few; however, they do happen and might cause companies some losses.

How Search Engines Prevent Click Fraud?

I’ve already mentioned that you can identify and prevent click fraud. Naturally, online advertising platforms – Google Ads, Bing Ads, and others – have internal systems to catch as many fraudulent clicks as they can.

Google uses several methods to combat click fraud. Although it’s worth noting that the company chooses to refer to click fraud as “invalid clicks.”

The search engine employs manual reviewers who monitor ad clicks for potentially fraudulent activity. It also builds automated filters in the Ad Center that protect advertisers and their Google accounts.

However, despite all this, many fraudulent clicks still slip up. 

And that’s where we come in. 

How to Detect Click Fraud – Client Case Study

The cost per click in professional services is high. One of our clients, a company in a competitive market, for example, often pays anything from $80 to $100 per click.

This means that even if they’d lost 1 out of 5 clicks to fraud, it would bring a heavy financial blow to their budget.

Other professional services struggle with a similar problem. Personal injury lawyers, for example, often have to pay $150 and more per click.

Imagine losing even a couple of clicks like that to a fraud per day?

Which is exactly what we suspected might be happening to our client, and they are becoming a victim of click fraud.

We noticed a fluctuation in their ads’ conversion rates and repeated clicks and a stagnant ad quality score – All symptomatic of potential click fraud.

Upon a quick review, we began implementing ad fraud prevention measures on their account.

First, we’ve set up an AI-based tool to monitor the client’s ad performance.

The tool has worked around the clock, blocking malicious and known fraudulent IP addresses clicking on the client’s ads.

We also set the tool to block IP addresses associated with the client’s developers, staff, and companies. As a result, none of those people could see (and ultimately, click) on the client’s ads.

We’ve also limited the number of times an ad would show to a potential client. This helped us reduce the possibilities of manual click fraud as well.

We supplemented the AI with reviewing the ad traffic manually, too, to add another layer of client protection.

With a great team that was well-trained and versed in building ad data, we knew that we could spot fraudulent ad clicks that the AI might have missed.

The result?

After implementing all the ad fraud prevention measures above, our client has seen:

  • A 97 decrease in clicks from bots and automated click software,
  • 92% decrease of clicks from competitors, and
  • Generated a staggering 13 x average ROI on PPC fraud monitoring.

Are you suspecting that you might be losing the ad budget due to click fraud? Talk to us today, and let’s discuss how we can help you recover the budget and achieve similar results as above.