Using Enforcement to Crack Down on ‘Click Fraud’

Posted by Tim Cranton
Associate General Counsel 

I’ve led Microsoft’s Internet Safety Enforcement Team for a decade now. In that time, we’ve partnered with government and industry on a variety of preventive, investigative and enforcement efforts to stymie cybercrime and online fraud. As these threats have evolved – growing in complexity and sophistication – so too has our team.  We strive to anticipate the next wave of threats to our customers and to Internet users more generally. 

Most of my team’s work to date has focused on “classic” cybercrime issues such as child protection, security, malicious code and online fraud.  Today, we are expanding that effort to tackle a less traditional but increasingly crucial area for cybercrime enforcement: Click fraud and related threats to the online advertising community. 

Earlier today, after a thorough investigation, Microsoft filed a civil lawsuit in the U.S. District Court for Western Washington outlining a massive click fraud scheme believed to have impacted Microsoft’s advertising platform and potentially other networks.  The case is Microsoft v. Lam, et. al., case number 09-cv-0815. 

Click fraud occurs when a person, automated script or computer program imitates a legitimate Web surfer and clicks on an online ad for the purpose of generating a fraudulent “charge-per-click” without having actual interest in the target of the ad’s link. 

In this case, as our complaint alleges, Microsoft gathered substantial evidence that a handful of individuals were likely responsible for these click fraud attacks, which affected online advertisements related to auto insurance and the online role playing game, World of Warcraft. 

Once we became aware of the click fraud attacks we quickly took action to address any impact on advertisers and to enhance safeguards to further protect our network.  Today’s suit seeks an injunction to help stop this activity and to recover damages. 

Consumers and businesses around the world rely on free Internet services and content funded and powered by advertising.  Indeed, just last week the Interactive Advertising Bureau released a study that found interactive advertising is responsible for $300 billion of economic activity annually and has created 3.1 million U.S. jobs.  Given the sector’s size and strategic importance, it is critically important for the industry to continue working together to help combat fraud against online advertisers and promote a healthy marketplace for online advertising and Internet services to thrive.  This marketplace will help fuel technology advancements worldwide and provide a key element in economic recovery and growth in the years ahead. 

The vast majority of online advertising activity is legitimate, of course.  But like most online activities, there are areas where fraud can be found.  The online advertising industry has been making strides in this area for years, implementing technology, best practices and techniques to help address issues such as click fraud.  Today’s action is one more step to expand that effort by utilizing the legal system to combat click fraud. Enforcement can play a critical safety role, supplementing technology and industry best practices, by using lawsuits and criminal prosecutions to stop the most egregious violators and hold them accountable for the fraud they commit.

Comments

• Anonymous
  July 22, 2010
  What do these perpetrators gain by doing click fraud?

• Anonymous
  July 22, 2010
  Very smart move.  It's refreshing to see a company act against its short-term best interests (more clicks=more $, fraudulent or not), to focus on long-term best interests (less click fraud=more advertisers).  This is exactly the kind of big picture strategic thinking Microsoft needs.

• Anonymous
  July 22, 2010
  Michael, thanks for your question.  The type of click fraud alleged in our complaint is known as "competitor click fraud."  This type of fraud arises because in the pay-per-click model of online advertising (which is used by all major search engines), each time a user clicks on an ad, the advertiser pays for that click.  Thus, when a perpetrator repeatedly clicks on a competitor's ad, it can exhaust or deplete the competitor’s advertising budget and lower the placement of the competitor’s ad, while simultaneously boosting the placement of the perpetrator’s own ads for the same keywords.  This improved ad positioning leads to increased and better quality user traffic (and presumably greater revenue) for the click fraud perpetrator—without the perpetrator paying a higher bid price for keywords.

• Anonymous
  July 22, 2010
  This will become a major problem for interactive marketers. It's great that Microsoft is taking action. More: domusinc.blogspot.com/.../click-fraud-and-ppc-marketing.html  

• Anonymous
  July 22, 2010
  I find most of those sidebar add annoying. I especially am now finding the adds that pop up in the middle of the page I am trying to view for about 30 seconds. The Seattle Times sends some like that, the Seattle Storm comes to mind. I am hopeful someone will write a add blocker soon to stop those from popping up. The pop up blocker has no effect on the Seattle Storm adds.

• Anonymous
  July 22, 2010
  As an active advertiser with Adwords and Live Center I’m glad “someone” is doing something in regards to click fraud, it’s just a joke these days that conversion rates go down while the click costs go up. A+ Microsoft!  

• Anonymous
  July 22, 2010
  The comment has been removed

• Anonymous
  July 22, 2010
  I'm glad Microsoft is doing something about this, but I'm disheartened by the fact that click fraud seems like an inevitable reality in online marketing. It can be minimized, but never totally purged. I applaud microsoft for the effort though.

• Anonymous
  July 22, 2010
  Smart move! I think that Click Fraud will be always a problem. This improved ad positioning leads to increased and better quality user traffic  for the click fraud perpetrator without the perpetrator paying a higher bid price for keywords.

• Anonymous
  July 22, 2010
  I am glad this is happening. Click fraud is a real problem and rips off advertisers.

• Anonymous
  July 22, 2010
  Click fraud is a real issue but customer service to business using ppc should be the first focus. Deal with that and everyting else will be fine...

• Anonymous
  July 22, 2010
  Today, we are expanding that effort to tackle a less traditional but increasingly crucial area for cybercrime enforcement: Click fraud and related threats to the online advertising community.