Click fraud a ‘growing problem,’ FBI says

Online pay-per-click advertising helped Diana Frerick and Kevin Steele turn their $200,000-a-year Phoenix-based karaoke business into a nearly $3 million retail operation. Online “click fraud” almost forced them to shut their doors.

Pay-per-click advertisers assign their ads to certain search engine keywords that match up with their products, set a daily budget for how much they want to spend on advertising and determine an amount they will pay each time someone clicks on an ad.

For example, a shoe salesman could advertise under the word “shoe,” set a daily budget of $500 and opt to pay $2 each time a person clicks his ad.

The theory is that the more clicks a company’s ad receives, the more money the company will make in sales from people who like what they see in the ads and buy the company’s products.

Once a company hits its budget cap, the ad no longer appears online.

But competitors may manually, or through “robot” software, continuously click on ads to max out their budgets and make the ads disappear from search engines, hoping to steal the advertising company’s Internet traffic.

“It’s fair to say that click fraud is a big problem, it’s a growing problem and it’s one that we’re very much aware of,” said Paul Bresson, an FBI spokesman in Washington, D.C. Bresson said he was not aware of any click fraud cases that the FBI has prosecuted.

Legal action related to click fraud has included companies suing search engines for failure to prevent such fraud.

Concrete numbers for how much money click fraud is costing are hard to come by because no official group tracks the figures. But auditing companies and others in the advertising industry say that as much as 10 percent to 30 percent of all ad clicks are fraudulent, costing advertisers as much as $1 billion annually.