The Cost of Click Fraud: eCommerce will lose $3.8 Billion



Online retailers rely on paid search and paid social media spend for their growth. Where once an online retailer might have struggled to find customers, eCommerce players, whether a mom-and-pop store or a multi-billion-dollar enterprise, find scores of relevant clients through pay-per-click (PPC) and social media advertising. Google Ads makes up a massive 44% of all online marketing spend among retailers, with 96% of marketers expected to spend more on this in 2020. Online retailers are also making use of Facebook (spend on which is expected to rise by 81% this year), Instagram (seeing a 53% rise in spending), and Pinterest (a 13% increase in 2020). Spending by eCommerce players alone on paid search and paid social media is estimated to hit a staggering $40.1 billion by the end of 2020.

Rise of sophisticated click fraud

However, with this growth in spending on these channels, e-commerce marketers are facing unprecedented growth in click fraud. This is according to a staggering new report. Economists at the University of Baltimore have found that, at present, one in ten ad clicks across all eCommerce campaigns is fraudulent. The economic study calculates that click fraud is set to cost $3.8 billion for online retailers alone by the end of 2020. Click fraud across all paid and social media spend is set to rise to a massive $23.7 billion, according to the study.

Click Fraud: Why is it increasing?

During the COVID-19 downturn, fraudsters have notably increased their hijacking of online spending across online campaigns. Fraudsters have found in PPC spend easy and unprotected prey. Invalid clicks are being generated maliciously by many different sources, from standard web crawlers to malicious bots, click farms, malicious data centers, ad fraud schemes, and even competitor clicks (rivals trying to drain your advertising budget). This is driving billions of clicks. At a time when campaigns are under pressure to deliver, many online marketers find themselves paying for bot clicks and junk.

How online retailers are being targeted by click fraud

The University of Baltimore’s study outlines several cases in which unwary demand-generation managers are seeing their campaign clicks undermined by rampant click fraud. In one case analyzed, a major fashion retailer was running their PPC and shopping campaigns across Facebook, Bing Ads, YouTube, Instagram, Snap, and Amazon, with an average CPA of $12. Here, 12% of all clicks were invalid (non-human, fraudulent, or with no purchase intentions). The company found such invalid clicks across all campaigns: Bing, Snap, Amazon, Facebook, and Instagram. Looking at individual popular keywords, “men’s jacket” saw a 56% invalid click rate, “shoe coupon” a 52% invalid click rate, and “Asics New” a 48% invalid click rate. To be clear, the majority of clicks on the majority of keywords were simply not generated by real humans.

Remarketing campaigns, a major target of click fraud

Investigators also find that in the chase for clicks, there is a tendency to throw good money after bad bots. The practice of remarketing or retargeting – the tactic of serving targeted ads to people who have already visited or acted on your website – is often merely a reconnection with bot networks, incentivizing further invalid clicks to a site. If you are seeing large retargeting audience pools, but low conversion volume, online retailers have found they are almost certainly spending money on bot clicks.

Discovering affiliate click-fraud

In many other cases, there are widespread instances of affiliate fraud—hosts of affiliate networks attempting to take credit for thousands of clicks on a regular basis. This creates a dangerous situation where sites are duped by businesses they are transacting with. For instance, Uber found a huge case of attribution fraud, in which Kevin Frisch, former head of acquisitions at Uber, turned off two-thirds of the ride-hailing giant’s $150m spend to attract new drivers, seeing no change in the number of app installs, and revealing huge spend on potentially fraudulent partners.

How can you stop click fraud?

The sophistication of cyber-attack-based click fraud has meant that detection of fraud is harder than ever. Fraudsters and professional operators are now highly incentivized with sophisticated tactics. Fraudsters realize that catching their activity is improbable. At the same time any form of prosecution has proved impossible. As a cybersecurity company, CHEQ  has launched the first cyber security and AI based advanced anti-click-fraud protection for paid search and paid social campaigns. It is the first solution to block invalid clicks across platforms including Google and Facebook, alongside Amazon, Baidu, Bing, Facebook, LinkedIn, Snap, Twitter, Pinterest, Yahoo, and Yandex. Up until now click fraud solutions have focused on Google, and only detected basic invalid clicks through the use of outdated IP blacklists to detect invalid fraud. In contrast, CHEQ for PPC uses more than 1,000 cybersecurity parameters and machine learning in real-time certifying that every click is valid.

Ending eCommerce’s $3.8 billion problem, now more important than ever

Paid search and paid social media spend have never been more important to online retail. In the wake of covid19, genuine leads are vital for online retailers to bring new customers and achieve revenue growth. For PPC and social media managers, to everyone in the company, elimination of rising click fraud has become a core business priority.  With such eye-watering money being lost every day on paid search, and growing, click fraud detection is vital insurance to protect online campaigns from crashing and burning. It has become a top priority to secure the future of online retail, bringing back real customers and killing off crooked clicks.

To learn more about our click fraud prevention solution, Book a Demo here.

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