PPC campaign managers use a number of metrics to work out whether or not their campaigns have been successful. Those metrics include the cost per lead and the return on ad spend. In an ideal world, calculating those metrics would be easy. Sadly, ad fraud can make your metrics meaningless.
What is Ad Fraud
Ad fraud, in the PPC world is the practice of artificially generating a large number of clicks on advertisements. There are a couple of reasons that someone might do this. A webmaster may choose to generate clicks on the ads on their own website because they get paid for each of those clicks. An advertiser, on the other hand, might visit other people's websites and click on ads on them in order to use up a rival's budget more quickly and drive up their advertising costs.
When a fraudster clicks on a set of advertisements frequently, not only does that cost the advertiser money because they pay for each click, it makes the keywords associated with the ad seem more popular. This causes the cost of those keywords to increase thanks to the automated algorithm that the advertising platforms use to work out what to charge per keyword.
Why Does Ad Fraud Matter?
Ad fraud can destroy what might otherwise be a successful advertising campaign. It doesn't matter whether you're running a campaign with a high cost per click and a high average sale, or one where you're banking on generating a lot of volume, but each sale is worth a much smaller amount, ad fraud will throw your calculations out of balance.
Let's take the example of a tour bus operator that runs a campaign to generate bookings from people in a specific area. The campaign is intended to promote a trip that costs $500.
- Bids for the keywords that the company wants are $0.50 to $1
- The company can get approximately 100,000 impressions per month
- Their ad copy is good, so they aim to get a CTR of 5%
So, they can expect to be spending $2,500 to $5,000 per month on that one highly focused ad campaign, and that's just to get people to arrive on their landing page.
Getting people to book a holiday is a fairly high-friction thing compared to some industries. Selling an object as an impulse buy is fairly easy, and digital downloads are things that can be bought without thinking too. Holidays require planning, booking time off work, and talking to friends and family members too. This holiday company manages to turn 10% of their clicks into sales:
- 5% of 100,000 is 5,000
- 10% of those 5000 visitors spend money, for a total of 500 people
- 500 x $500 is $250,000
This means a $5,000 ad campaign could turn into $250,000 in sales. At first glance, that sounds amazing, but remember that each sale is not pure profit. Proft margins in the tour operator industry are around 4% - 5%. So, the profit from that ad campaign could be as low as $10,000. That's assuming that every click is real.
Even a small percentage of chargebacks can eat into the profitability of an ad campaign. If the campaign was an affiliate marketing one instead of a simple PPC campaign, and the fraud included chargebacks instead of just fake clicks, the costs to the advertiser could be even higher. At the moment, most chargebacks are 'friendly fraud' from consumers who do not realize that using chargebacks to circumvent a retailer's returns process is fraudulent. There are some instances of chargebacks from people who are performing other forms of fraudulent activity, though, and in an industry with thin margins every click and every claim matters.
Fighting the Fraudsters
Google and the other ad platform operators are working to reduce and prevent click fraud. Google has a fairly robust algorithm that aims to detect fraudulent clicks early so that advertisers don't get charged for them. The platform runs a second set of checks before billing advertisers, too, in an effort to ensure that every cent spent on advertising on the platform is a cent that went towards getting legitimate views.
Their algorithm does a fairly good job, but it is far from perfect. It's thought that as many as 25% of all ad clicks are fraudulent. Can you afford to waste as much as one-quarter of your advertising budget?
Fortunately, there are ways to identify and reduce click fraud. One option is to run your own checks on your ad-related traffic. Another is to use third-party tools to detect suspicious or potentially fraudulent traffic.
Click Fraud Fighting Option 1: Look at Your Log Files
If you have access to your server's log files then it is worth looking at them to identify fraudulent traffic. Log in to your server's control panel and download the "Raw access logs". Open them up in Excel and use the sorting tools to identify users that have visited your website on multiple occasions in a short space of time.
The easiest way to do that is to sort by IP address. If you see the same IP address appearing every day or even every few hours, that user either really likes your website, or they're visiting for more nefarious reasons.
You can get an idea as to whether a user is legitimate or not if you put their IP into IPAvoid.com and look at the information it brings up. If you're marketing to people from Canada and are getting clicks from someone in Dubai, that could be suspicious.
Trawling through log files is a good starting point, but it isn't always practical. There are several challenges with this method:
- Popular websites can see millions of log entries per month, or even per day. Opening huge files in Excel can strain your computer.
- A hit from a foreign country isn't always fraudulent. The visitor could be using a VPN.
- Sometimes 'duplicate' hits are from a proxy server that many legitimate visitors are using, such as one from a university, library, or train station.
- Searching 'suspicious' IP addresses is time-consuming, and it takes some expertise to work out whether traffic is likely to be faked or not.
For websites with modest traffic and niche audiences, manual fraud detection can work. More popular websites require other solutions.
Click Fraud Fighting Option 2: Fraud Detection Tools
Marketers who operate in volatile industries or those that require high bids for keywords may feel that even 'as it happens' detection is not good enough. For those situations, continuous pre-bid analysis might be more effective. Imagine being able to get constant feedback on how much you are spending on your ad campaign, what kind of user is converting, how many bots are making it through, and how effective your ad campaigns are. If the system detects a surge in fraud attempts, that knowledge can be used to pause the campaigns that are seeing 'bad' traffic until the bots move on.
A good automated fraud detection tool will run in the background without the user even knowing that it is there. Data can be provided to the marketing manager in real-time, and that information can be used to adjust advertising bids and make sure that the traffic coming to your site is high quality. There is no need to make users fill out dozens of "CAPTCHA" tests before they can spend money with you. Users deserve a smooth experience.
Advertising fraud is a serious threat to any business that is trying to make a name for itself online. Don't rely on the ad platforms to have your best interests at heart. Be proactive and use your own tools and precautions to protect your site, reputation, and advertising budget.