Report: Click Fraud Reaching New Heights

Advertisers waste millions of dollars on fake ad clicks, eroding the credibility of brands and throwing away budget dollars for invalid ads on Google, Microsoft and Yahoo. Click fraud for online advertisements rose to 22.3% in the third quarter, ending Sept. 30 -- up from 14.1% during the year-ago quarter, according to a report released by Click Forensics Wednesday.

The countries outside North America with significant CPC traffic producing the greatest volume of click fraud in the third quarter were Japan, the Netherlands, the Philippines and China, respectively, Click Forensics reports. But startups like Irvine-based BlueCava have begun to develop technology to identify click fraud by identifying the devices that cause the fraudulent action.

The technology begins by validating the type of device that clicks on the ad, as well as the number of times to detect click fraud. In fact, BlueCava plans to make public a test running with one client that will demonstrate how many invalid ads run on Google and on its affiliate network. "It will offer proof for advertisers that click fraud occurs," says David Norris, CEO at BlueCava, a credit bureau for devices conducting business online. "Most advertisers waste between 20% and 30% of their budget, so they should go get their money back from Google."

The idea of identifying devices is not unique, especially for enterprise-related platforms. It's a little like remotely downloading updated software to a set-top box, or a Hewlett-Packard printer that when plugged into a Sony laptop can sign on through an open Internet connection and find and download the correct printer driver.

BlueCava has begun to provide original equipment manufacturers with the device identification technology to integrate it into consumer products. This means the device would come out of the box with the ability to identify itself. The services might include security and identity protection, but it would also include the ability to match the device owner with online ads.

Rather than the device relying on a browser cookie to identify a specific audience segment, it now appears it will have a specific demographic profile of its own that Norris believes is "99.9999% accurate." If a billion devices, not people, visited a specific Web site, he says the technology would accurately identify more than 90% of them. The profile of the device could accurately serve up the appropriate ad.

Not only can BlueCava's technology identify the device, but the company has put together a data exchange where businesses can contribute information they know about a device that should make targeting ads more accurate. BlueCava plans to market the data to advertising agencies, brand marketers, ad exchanges, and media-buying companies.

And if that's not enough, the technology can identify fraudulent actions such as child predators. Sites like Disney, which shut down accounts once they find them, tend to be a Mecca for child predators. But companies like Disney must do it manually. There's a way to limit people who are not welcome on Web sites, from sites catering to children to online dating sites like Match.com.

BlueCava also has begun to develop a service that allows devices to identify malware or possibly when someone downloads a piece of software onto a machine and begins siphoning information. During the next 12 to 24 months, Norris says the company will introduce the technology in a variety of places that will "revolutionize" the industry. Norris says BlueCava plans to provide educational material that explains behavioral targeting and the opt-out and opt-in process -- and that if a consumer opts out, it doesn't mean they won't get advertising, it just means they won't get advertising that is relevant to them. The information will launch on a Web site within the next 60 days.

BlueCava continues to attract attention with this focus. The company closed a $5 million first funding round this week led by billionaire Mark Cuban and entrepreneur Tim Headington.

FEC Rules Paid-Search Political Ads Partially Exempt From Disclosure

Handing Google a partial victory, the Federal Elections Commission said that political candidates can, in some circumstances, run pay-per-click ads without including disclaimers in the copy.

But the FEC didn't completely grant Google's request, which was for a ruling that search ads are exempt from any disclosure rules the same as bumper stickers, pens or other small items.

In an opinion issued on Thursday, the FEC said it couldn't agree on whether to completely exempt search ads from disclosure rules, but that pay-per-click ad copy need not include all required information "where the text ad displays the URL of the committee sponsor's website ... and the landing page contains a full disclaimer."

FEC regulations typically require that political ads include information about who paid for the ad and whether it is authorized by the candidate. But those rules don't apply when the ads are on items too small for the disclaimers.

Google in August asked the FEC to rule that search ads are exempt from disclaimer rules because of the ad copy's 95-character limit. "As a result of this severe space limitation, a text ad is fundamentally different from a television or newspaper advertisement," Google wrote in its request. "Both Google and the advertiser view the landing page as the primary forum in which advertiser-to-customer communications take place."

The FEC's decision regarding search ads stands in contrast to actions by another federal agency, the Food and Drug Administration, which last year rebuked 14 pharmaceutical companies that had advertised on search engines.

The FDA warned that the pay-per-click ads were misleading because the ad copy touted the benefits of drugs without also informing consumers about risks and contraindications. Critics of that move said that the character limits make it virtually impossible to convey in a search ad that a particular drug is a potential treatment while also alerting users to its drawbacks.

Ringleader Adds 'Mobile Cookie' Certification For Publishers

Mobile ad firm Ringleader Digital has launched a certification program for publishers to use the company's Media Stamp, its mobile equivalent of a Web cookie for tracking usage. Ringleader's new Certification Center will allow agencies to access the complete list of participating publishers along with key site demographics and contact information to help them run more targeted mobile campaigns.

"This gives advertisers the ability to come in and see the value of the Media Stamp across multiple publishers and who's participating," said Brad Blanken, chief revenue officer at Ringleader. He added that the move would help pave the way for marketers to make direct buys with mobile publishers, hundreds of whom have already signed up for certification.

The new vetting process is also ensuring that publishers are sharing information about Ringleader's privacy and opt-out policies with their visitors, according to the company.

Its Media Stamp technology has raised privacy concerns over its ability to create and store profiles about cell users based on the sites they visit. By collecting data based on more than 100 device characteristics, the company says it can gather enough information this way to create unique, "anonymous" stamps for each mobile phone user.

A class action suit filed last month against Ringleader alleged that the company is violating consumers' privacy by tracing their mobile activity for ad purposes without their permission. The action, which also named publishing partners including CNN and WhitePages.com, further claimed that Ringleader makes it impossible to delete tracking databases in the iPhone and other devices using HTML5 software.

Blanken said the company's privacy policy provides "a very clear, conspicuous way to be notified on what's happening and to opt out if that's their choice. When a consumer opts out, we're taking them out of any type of targeting or contextually relevant ad-serving." The company's privacy policy provides an opt-out link that allows users to refrain from receiving targeted ads.

As demand for mobile audience measurement increases, more companies are offering tracking tools for mobile publishers. Earlier this week, comScore announced a new service with analytics firm Bango to let users tag mobile sites and applications to track engagement metrics.