Click farms cost advertisers billions

By Gary Anders

Online advertising is a booming industry. Market and consumer data group Statista estimates US$567 billion (A$840 billion) was spent on digital advertising in 2022 alone, compared with a spend of US$50.82 billion (A$75.3 billion) for print advertising and US$155.4 billion (A$230.1 billion) for TV advertising. Statista also predicts that online ad spending will hit more than US$680 billion (A$1 trillion) in 2023.

One of the most popular online advertising models is pay-per-click (PPC). 

Despite growth in the PPC sector, advertisers are facing a persistent, expensive problem that governments and regulators, as well as digital platform providers themselves, have struggled to address – click farming.

How pay-per-click advertising works

When companies that use the PPC model advertise on search engines or social media platforms, they are typically charged every time their ads are clicked on by a user. This includes clicks on keyword ads that they have created to capture business from online searches.

Search engines also often partner with advertising networks to display ads on third-party websites. Third-party website owners sign up for these advertising networks to display ads on their sites and generate revenue.

The “click price” – or “cost-per-click” (CPC) – is the amount an advertiser is prepared to be charged whenever its ad is clicked on, as set by the advertising network.

Each click could cost as little as a few cents, but many advertisers are prepared to pay dollars per click. 

When a user clicks on an ad, the advertiser pays the advertising network, which then shares a portion of that revenue with the website owner.

What is a click farm?

One common method of online advertising fraud is through so-called “click farms”.

Click farms often employ large groups of workers who are paid to click on advertising links manually. The farms, using banks of computers or mobile phones, may be engaged to inflate online ad traffic and impressions, which has the effect of draining competitors’ advertising budgets.

Click farms may also be used to create fake social media “likes” and followers, which individuals and businesses can then buy to inflate their reviews and ratings to deceive consumers.

Some click farms use “non-human agents”, such as malware and internet robots, or “bots”. These are designed to generate huge click rates on website-hosted ads with the objective of generating their own pay-per-click revenue. 

In some cases, click farms also use artificial intelligence software to mimic human behaviours, even filling in online forms or clicking on embedded links to other pages.

The cost of click farms

According to the app industry news site Business of Apps, the total cost of digital advertising fraud, including click farming, reached a staggering US$81 billion (A$122 billion) globally in 2022.

The figure is expected to hit US$100 billion (A$151 billion) in 2023, driven by an ever-increasing and diverse array of fraudulent mobile apps, scam websites, fake online ads and fabricated social media posts and endorsements.

Interceptd, a US-based company specialising in ad fraud detection and blocking software, estimates that one out of every three dollars spent on digital advertising is lost to fraud.

According to global software giant Adobe, other fraudulent techniques include the posting of “invisible” ads, fake ad impressions, ad and click hijacking, and “pop-under” ads, which are hidden in a new browser window behind the current one.

Mobile ad fraud involves fraudulent clicks being generated through automated software or scripts to inflate click-through rates, which can lead to significant losses for digital marketers.

Click farm detection

Fraudulent ad activity can be difficult to detect, but signs can include an increase in clicks, low conversion rates, high bounce rates, low performance, low page views and low page session times.

Click farms can follow regular patterns when targeting online ads, such as using the same models of mobile phones, IP addresses and browsers, from the same geographic location.

There is now a wide range of click fraud prevention software available to advertisers that uses sophisticated algorithms to detect and block suspicious activity, including abnormally high click rates and fake impressions.

Prevention software can also help to block bots and business competitors and remove fake users from social media platform accounts.

Business ethics

David Vaile, co-convenor of the Cyberspace Law and Policy Community and lecturer in cyberspace law at the University of New South Wales, says advertising fraud has undermined trust in the use of online platforms and the ability to conduct digital marketing activities.

“Obviously those who are perpetrating it have got some business model that makes it worthwhile. In a sense, the actual advertisers and the actual viewers are not the ‘meat in the sandwich’, but the long-suffering bystanders,” Vaile says.

From a legal perspective, the activities of online fraudsters fall under consumer protection laws that cover deceptive and misleading conduct – and could potentially constitute a breach of contract by platform providers.

“If you are an advertiser, and you pay so much for a thousand clicks on the basis that the clicks represent actual potential interested people seeing your stuff, then, if either the advertiser themselves or someone else interferes via a click farm, you’ve frustrated the contract,” Vaile says.

“The Australian Competition and Consumer Commission [ACCC] has spent years trying to understand the absence of competitive pressures in a functioning market on some of the platforms.

“Very few people are prepared to take it on, very few regulators, very few companies, and very few due diligence advisers are prepared to call a spade a spade.”

Transparency and protection

The ACCC is currently preparing a report that will examine the expanding ecosystems of digital platform service providers in Australia as part of its five-year Digital Platform Services Inquiry.

“Australian consumers and businesses are increasingly reliant on the products and services offered by digital platforms, so it’s crucial we examine how these companies are expanding their reach,” says ACCC chair Gina Cass-Gottlieb.

“Large digital platforms have become an integral part of our daily lives. They have access to enormous user databases and personal information across their ecosystems.

“This report will assess how that data can be leveraged across products and services within an ecosystem that may prevent businesses from entering and competing,” Cass-Gottlieb explains.

According to the World Federation of Advertisers (WFA), while there is no silver bullet to eliminate ad fraud, advertisers need to develop in-house expertise and work with cybersecurity partners to help understand common threats and demand full transparency of investment. 

This includes full disclosure of the websites being used to promote their products or services.

The organisation also advocates for greater education and communication. The WFA recommends contracts with agencies and vendor partners be revised to ensure there are clear penalties for misallocating spend to ad fraud-related inventory, where preventing it could be reasonably achieved.