What is click fraud, and is it illegal? These seemingly simple questions have a few simple answers. We take a look at this trending issue facing PPC and CPC marketers and advertisers. We will highlight some of the legal implications, as well as businesses and companies that have filed lawsuits about click fraud. Mobile ad fraud is estimated to reach $14 billion by 2022 in the shopping category alone for both Android and iOS. With that scope in mind, we think it is essential that savvy marketers and advertisers know what click fraud is and the legal ramifications of it. This is a long series, so we will continue with this topic in part two of this blog for all of you CPC and PPC professionals.
Click fraud is a type of ad fraud. It occurs when a person, device, program/software, or written script fools online advertisers that are using paid cost-per-click (CPC), click, or pay-per-click (PPC) advertising campaigns to generate fraudulent revenue via simulating fake, fraudulent, or misattributed clicks. You may also hear click fraud referred to as CPC fraud or PPC fraud. With this type of fraud, it is not just advertising and marketing spend that is impacted, as click fraud also distorts marketing and advertising data, increases advertising costs, and decreased conversion rates. Ultimately, you are paying for fraudulent clicks.
Source: Interceptd Q2, 2019 report. This report shows the scope and severity of the mobile ad fraud problem, and the potential 2020 financial forecasts.
Who Commits Click Fraud?
Click fraud can benefit multiple parties, including competitors, publishers, and attribution networks. The different methods of producing these fraudulent clicks are commonly used in either click fraud software that automates these clicks or by click farms.
Publishers
Publishers are the first most obvious perpetrators of click fraud. Publishers benefit from falsely inflated clicks. Additionally, many free sites, such as news sites and social media sites that do not follow a kind of subscription model, are monetized by advertisements. In many cases, sophisticated or simplistic forms of click fraud software might be used to automate these fraudulent clicks. A recent example of ad fraud that was used to boost website revenue was committed by The Business Times of India. They were caught twice, falsely inflating website views to increase advertising revenue. While this is not a click fraud, it shows the benefits that advertisers gain from fraudulently increasing advertising traffic.
Attribution Networks
Attribution networks can also benefit from click fraud. Although we are not at all purporting that attribution networks directly commit any ad fraud or click fraud, they are the essential auditor that allows these fraudsters to be paid. Furthermore, attribution networks are monetized via the volume of traffic they analyze. The more traffic, the more revenue generated. Therefore, attribution networks have little direct financial incentive to stop ad fraud, including click fraud. Consequently, it is important to discuss with your attribution network, what steps they’re taking to prevent ad fraud on their end and to maintain the constant cat and mouse game of ever-evolving ad fraud techniques.
Competitors
In reported cases, competitors have been known to click on various PPC or CPC ads to either increase their ad spend, or overall ad costs. This effect can be two-fold. Firstly, your competitor’s data will be increasingly skewed by false clicks. In some cases, they might be using various click fraud software to automate these clicks. Secondly, their advertising costs will increase. That can even lead to a competitor being pushed out of the market, if not caught and stopped.
Is Click Fraud Illegal?
This brings us the penultimate question and resident ‘grey area’ portion of this article – is click fraud illegal? The answer – sometimes. As you can imagine with any crime perpetrated online, rules, regulations, and laws vary from state to state and country to country. There are further legal complications that occurred due to the geological-blurring effects of the internet. Where should one be prosecuted, in the place the website domain was created, the country where the malware was designed, the place the fraudster was born, or the country of the affected innocent device? “However, in most cases, the law falls short regarding ad fraud,” said Pınar Ece Bişkin, legal counsel of App Samurai.
“Often, as there are not any specific provisions regarding click fraud or another type of online advertising fraud, often the courts would try to apply general fraud provisions of criminal codes to mobile add fraud,” she added. “Innumerable institutions are one step behind cybercrimes; thus, there is often a lack of specific legislation that directly corresponds to fraudulent online activities,” she added. Today, as far as is known, click farms and botnets are not illegal, although some aspects of their operations can be prosecuted under numerous laws.
Intermediate Thoughts on Click Fraud
These are not our final thoughts on click fraud. There is still much ground to cover. As we have discussed in part one of our click fraud series, the legal and geographical boundaries are complex and blurred when it comes to ad fraud. It is a result of low barriers to entry to starting a digital operation, and the fact that the people affected are often dispersed globally. Additionally, few jurisdictions have laws and provisions specifically pertaining to ad fraud. While ad fraud cost advertisers $2.3 billion in the first half of 2019, it is clear that the industry requires greater clarity and legal framework to deal with the issue, especially for CPI, CPA, CPC, and PPC marketers.
Click fraud will increase by 16% overall in 2021 when compared to 2020. Its losses can vary dramatically depending on a business’s exposure to online ads. In 2020:
Average yearly SMB losses due to click fraud: $14,900
Average digital agency losses due to click fraud: $207,000
Average SME+ losses due to click fraud: $705,000
This is what we will be looking at, in part two of “What is click fraud and is click fraud illegal?” We will investigate the various laws globally that relate to ad fraud, along with some global lawsuits on the different kinds of ad fraud, such as the unprecedented legal action taken by Facebook against fraudsters.
