Google: Click Fraud Is 0.02% Of Clicks

Finally, we have a click fraud rate from Google itself: less than 0.02
percent of all clicks slip past its filters and are caught after advertisers
request reviews. That low figure is sure to bring out the critics who will
disagree. Below, more about how Google comes up with the figure plus some click
fraud fighting initiatives it plans to implement later this year.

Why release this figure now, when many have wanted it for literally years?

"We’ve been working to be more transparent and informative on the issues
related to click fraud. Recently, this metric has been something advertisers
have specifically asked for and we agree that is useful in describing the scope
of the problem. Further, it is something we measure and use to monitor the
performance of our click fraud detection systems," said Shuman Ghosemajumder,
business product manager for trust & safety at Google.

To understand the figure more, I want to revisit some of the click fraud
terms I explained
back in December. The first term below is from Google itself. The rest are terms
in common use, though people might define them differently. That’s why I’m
providing my own definitions.

• Invalid Clicks: This is a Google term. It means that of ALL the
  clicks Google ads generate, a percentage of these are deemed "invalid." These
  are clicks that Google makes no money from. It either never bills for invalid
  clicks or eventually issues a refund. Not all invalid clicks are necessarily
  fraudulent (such as in cases of quick double-clicks that aren’t billed).
   
• Fraudulent Clicks: These are the percentage of clicks that an
  advertiser is charged for when the person (or bot) clicking is doing so to
  purposely cost the advertiser money or make money for themselves through an ad
  program.
   
• Overall Click Fraud Rate: This is the number of fraudulent clicks
  as a percentage of ALL clicks that happen, regardless of whether Google issues
  a refund or doesn’t bill.
   
• Detected Click Fraud Rate: This is the number of fraudulent clicks
  as a percentage of ALL clicks that happen where Google generates a refund
  after performing a requested or "reactive" investigation asked for by an
  advertiser. Google would call this the "reactively identified invalid click"
  rate.
   
• Undetected Click Fraud Rate: This is the number of fraudulent
  clicks as a percentage of ALL clicks that happen where no refund has happened
  because neither Google or the advertiser spotted the fraud.

Google could have an extremely high overall click fraud rate, yet
that’s not a problem if most of those clicks are detected and either never
charged for or refunds issued promptly. When I talk about the Google "click
fraud rate," I specifically mean the detected click fraud rate — clicks
that got past Google’s own filtering systems and only were refunded after a
manual investigation was requested.

As for the undetected click fraud rate — that’s impossible to know.
There are clicks that might get past Google and advertisers both. Potentially,
this could be a high percentage. However, if the detected rate is low, I tend to
think the undetected rate is also low or near the same level.

Next, let me recap Google’s three step process for catching click fraud.
You’re going to hear lots of people talking about this in relation to today’s
news, so it’s helpful to review:

1. Proactive Filters: Google automatically watches for activity and
   throws out clicks without billing. These are the "invalid clicks" I
   mentioned earlier. This is a "proactive" filter in that Google does it
   proactively without being asked by the advertiser.
    
2. Proactive Offline Analysis: Google uses both automated and manual
   checks on clicks after billing, in particular clicks on websites using running
   AdSense For Content. This is also a proactive filter, done without being
   asked. It’s this work that causes advertisers to sometimes get credits out of
   the blue.
    
3. Reactive Investigations: This is where the advertiser comes to
   Google concerned about charges. Google says all queries from advertisers are
   investigated and that refunds are relatively rare.

Now let’s talk percentages. First, less than 10 percent of all clicks are
deemed invalid — clicks that either are never charged for or where refunds
are issued.

"The overall rate can fluctuate. We’ve said before that this is in the single
digits and want to clarify that this means it’s from one to nine percent. It’s
not zero, but these are lower bounds," Ghosemajumder said.

Sound too low? Ghosemajumder anticipates this, pointing out: "Even one
percent of Google’s revenue is a significantly large amount of money, more than
the actual click fraud settlement," referring to

last year’s class action case.

What about the main mystery figure that I and others have been wanting — the
detected click fraud rate, the percentage of clicks that got past all Google
filters and would have cost advertisers money, had they not raised an alarm? The
detected click fraud rate is less than 0.02 percent of all clicks. To use
Google’s term, this is the rate for "reactively identified invalid clicks" —
refunds given after advertisers asked for an investigation.

It’s low, and Google says it’s been getting lower all the time.

"Our system have gotten
better and better at catching this stuff," Ghosemajumder said. "Not only is the percentage a small
amount but percentage as revenue overall is smaller."

As I said, no doubt critics are going to be in disbelief, especially when you
have
recent reports like that from the Click Forensics’
Click Fraud Index of an average
industry click fraud rate of 14.2 percent for last quarter.

Google’s answer — which is pretty compelling — is that some reports such
the Click Fraud Index don’t take clicks that aren’t billed or refunded into
account. In other words, clicks might be flagged as suspicious or fraudulent in
the monitoring system, but there’s no reconciling to see if they actually
resulted in a final charge.

Think of it as a credit card bill. Perhaps at the end of the month, you’ve
got 500 charges. You’re concerned that some of those might be fraudulent, so you
hire someone to comb through your bill. They flag all the suspicious items and
declare you have a 15 percent fraud rate. However, they don’t see the part of
the bill showing credits issued to you. If they had, some — maybe many — of
those "fraudulent" charges resulted in refunds. That would lower the fraud rate.

It’s not an entirely accurate metaphor, but hopefully it gets the main point
across. To know a click fraud rate, you have to know what clicks were and were
not charged. Some auditing companies do this — looking at actually billed
records, then combing through and raising those "reactive investigations"
mentioned above. But talking about a "click fraud rate" without first removing
clicks that were never charged for or refunded isn’t a useful figure.

It also gets more complicated. Ghosemajumder was adamant that it’s not just a
case that Google says the slice of click fraud is smaller than what auditing
firm may find. He says that the chunk of clicks that Google catches as invalid
might be significantly different than the chunk of clicks an auditing firm
considers suspicious, because of different tracking methods. For more on this,
see Why Third-Party Click Fraud
Estimates Don’t Add Up and
Why Third-Party Click Fraud Estimates Don’t Add Up – Part 2 that he posted
on his personal blog last year.

Google, of course,
reports
invalid clicks to advertisers through their advertising accounts. That

started last July. Those individual reports could be much higher or lower
than the average, and Google says there’s definitely variations between
advertisers and advertisers in particular vertical market segments.

Going forward this year, Google plans four things it hopes will help combat
click fraud and reassure advertisers more:

• IP Filtering: Advertisers can block particular IP addresses that
  they think are fraudulent. When this happens, people coming from these IP
  addresses will not see ads.
   
• Invalid Revenue & Enhanced Reporting: Advertisers will get more
  detailed information that currently provided.
   
• Invalid Clicks Resource Center: Further guidance about filtering
  and click fraud questions will be added.
   
• Standardized Inquiry Reporting: Google already has a
  
  reporting form for advertisers. But some advertisers want to provide even
  more information, logs, and other data. So Google says it will explore a more
  standardize way to take material in.

Agree or disagree with the newly released Google figure? Chime in with
comments below! Also see related discussion now going on via Techmeme.