When search Goliath Google settled a click-fraud suit with Lane's Gifts last month, the search industry's collective eyebrows went up. Maybe there was a problem.

Except no one knows how bad the problem is. The industry whisper number ranges from 10 percent to 30 percent of all clicks. And search providers insist they have mechanisms to keep it under control. But you can't keep something under control if you can't define it. The industry first needs to know what constitutes a fraudulent click and what constitutes an unqualified click.

A so-called unqualified click could be made by a person who either clicked on the ad by mistake or clicked expecting a different type of site.

Fraudulent clicks are generated by human hand or by bots programmed to hit competitors' sites over and over. The result is a decrease in the retailer's return on investment.

Some tip-offs to bad clicks are repeated clicks from the same IP address; clicks within the site that are random; a pattern of precisely timed clicks, such as several page views lasting exactly two seconds each; and clicks coming from countries known for fraud.

Search providers admit that some scammers click on ads, but insist the practice doesn't negate the effectiveness of search marketing.

The Advertiser Eye
While search providers use a mixture of automated processes and human analysis to eliminate fraudulent traffic from their networks, it's up to advertisers to report what they believe are fraudulent clicks.

"You can't rely on search providers to be proactive about returning money," Beal said. "I know they say they constantly look, but with billions of dollars a year flowing through their systems, it's like relying on the IRS to find you a refund."

Kevin Ryan, principal of search marketing firm Kinetic Results, agreed.

"I don't think the onus should be completely on the search provider. There have to be architectures implemented to put our arms around the problem. Simply blaming Yahoo or Google is not the answer."

Ryan said he's never had a problem getting a refund for his clients because of the tools Kinetics uses to analyze traffic.

But he said search providers, advertisers and third-party traffic-analytics vendors need to agree on what constitutes a fraudulent click, a statement echoed by many others in the industry.

"It's difficult to determine the intention behind a click," said Yahoo spokeswoman Gaude Paez. "How does one determine whether a click is fraudulent versus unqualified?"

The Business of Click Fraud
Search engines charge advertisers every time someone clicks on an ad.

But sometimes rivals click on merchants' ads to drive up their costs. In other cases, affiliate marketers solicit clicks on the links they publish to merchants' sites in order to make more money.

Online retailer Lane's Gifts and Collectibles sued Google in February 2005, claiming that the search giant collected fees for clicks that were not actually generated by consumers planning to shop at Lane's site.

Lane's also sued Yahoo, AOL, Netscape, Lycos, Ask Jeeves, Overture Services (now part of Yahoo), Time Warner (as part of AOL), Buena Vista Internet Group (operator of Go.com) and LookSmart.

The settlement between Lane's Gifts and Google, which has yet to be approved by a judge, will presumably cover AOL and Ask Jeeves, which distributes Google's ads.

The current model requires advertisers to notify Google within 60 days of receiving clicks they believed were fraudulent. Under the terms of the proposed settlement, Google will let all advertisers claim fraudulent clicks, no matter how long ago they occurred.

But Google won't be shelling out any cash. Instead, the company said, it will reimburse advertisers with credits to buy more advertising, and only up to a total of $90 million, which will include attorneys fees.

Andy Beal, CEO of search marketing agency Fortune Interactive, said the settlement is a clear win for Google.

"Google has hit a home run with this," Beal said. "Not only is the amount small, but it's not even a refund; it's a credit toward future advertising in the network."

In other words, it's the same deal advertisers claiming click fraud get anyway, except that the 60-day protest rule has been waived.

Lane's Gifts referred queries to its attorney, who didn't respond to multiple requests for comment. Nor was Google available for comment.

"It's peanuts compared to the goodwill," Beal said. "But it does set some precedent going forward." He thought the search providers might be afraid of more suits.

Paez would say only, "We stand firmly by our proprietary click-protection system and look forward to defending our position."

Meanwhile, Google faces a similar suit filed in June 2005 by Click Defense; the lead plaintiff in the class action now is AIT.

The Fraud in Clicking
Another problem is that fraudsters keep getting smarter, and their crooked technology keeps getting more sophisticated.

"We're pretty aggressive about looking for bots, but it's obviously harder to detect if [the click rate] is inconsistent," said Bill Flitter, CEO of RSS ad network Pheedo, who added that it's up to the ad network to stop click fraud.

"The people serving ads have to look for clicks; the publisher is not in that stream," he said.

Because RSS ads are relatively new, Flitter said that click fraud has not been a big problem, but he expects more fraud as the sector matures.

He's counting on analytics built into Pheedo's ad-serving platform to stem the tide.

Kinetic's Ryan said he's seen some scary new scams, such as a toolbar that clicks on an ad, goes into the site, places an item in the shopping cart and then abandons the cart.

This is behavior that would be very hard to detect as fraudulent because it so closely mirrors human behavior.

Next Page: A Way Around The Fraud