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Pay-Per-Click advertising may well be your best bet for generating leads in this (and any) economy, but you have to be careful. I was reminded of this last week when I read Click Forensics announcement that US click fraud reached 17.1% in the last quarter of 2008. This is the highest it’s been since they began counting.

Click fraud occurs when someone or something (a person, automated script, or computer program) clicks on a PPC ad without any intention of buying the product or taking advantage of the offer.

Click fraud is usually done by either a) competitors trying to push you to your daily spend limit so your ad won’t appear anymore or b) publishers who make money every time an ad on their site gets clicked.

Either way, the advertiser gets charged.

This means on a $5000-a-month media budget, an average of $855 a month is being wasted.

Unless you catch it.

Trying to monitor your campaign manually would be a pain – unless you love to pour over click reports. You’d have to keep an eye out for clicks that happen in rapid succession, those that come from shared IP addresses, clicks that hit at the same time of day – all kinds of things that computers are better at catching than people are.

Then you’d have to organize and submit your claims and, in some cases, hound the search engine staff until you get a credit.

Fortunately, with click fraud on an upward trend, software solutions have appeared to help advertisers and their agencies control it.

I spoke with Wendy Zenshychyn of Enquisite which publishes an online application called PPC Assurance.

Wendy pointed out that click fraud is only a part of the larger issue of invalid clicks, which can cause some advertisers to spend more than 20% on bad clicks. Invalid clicks, she says, include clicks that come from outside the advertisers’ campaign parameters.

“For example, an advertiser who has set a campaign to run only in the United States finds they are getting clicks from Asia,” Wendy explained. “Or the advertiser gets clicks in the middle of the night when the campaign has been set to run only during business hours. The more geo-targeted a campaign – such as a pizza parlor in a specific area of New York City – the higher the chance for invalid clicks. Search engines are just not perfect at delivering the ads under all the right parameters.”

At 20%, now we’re talking about as much as $1000 a month being wasted from a $5000 media budget.

So pay attention.

To be fair, Google, Yahoo and other search engines do some of their own policing (see http://www.google.com/adwords/adtrafficquality/) but I’m cynical enough not to trust our clients’ invalid click protection solely to people who make money off the clicks.

Click fraud isn’t the only way to lose money with pay-per-click advertising. As with any type of investment, companies have lost plenty of money on PPC by not knowing what they’re doing, not seeing fit to work with someone who knows what they’re doing and/or by not paying attention.

We’ll look at some other ways to lose money in a future article.

Technorati Tags: click fraud, pay-per-click, ppc