"Google, Yahoo, and MSN are stonewalling on click fraud, to their own and others' detriments," concluded Outsell Inc., an industry research firm based in Burlingame, California, a short distance south of San Francisco.
"Pay-per-click" advertising is a core revenue source for search engines and has come under attack by those concerned about fraud.
Internet advertisers pay search engines or Websites every time an advertising link is clicked, presumably by a potential customer.
Click fraud is when competitors arrange to have rivals' ads clicked on, sometimes by robot programs, to drive up their expenses.
Another form of fraud takes place when Websites that get rewarded for sending traffic to advertising links orchestrate phony clicks to increase pay-offs.
Major online search engines have adamantly maintained that they vigilantly guard against click fraud and refund money to advertisers when chicanery is uncovered.
Nearly 15 percent of ad clicks are frauds, Outsell estimated based on a survey of 407 US advertisers in May.
With the US online advertising market pegged at $5.5 billion in 2005, that meant that $800 million was paid for bogus clicks, Outsell vice-president Chuck Richard said in a written release.
The survey indicated that 27 percent of advertisers have reduced the amount of money that they spend on pay-per-click advertising and that another 10 percent intend to do so, according to Richard.
The drop in online advertising prompted by fear of click fraud deprived search engines of an estimated $500 million, raising the financial impact of the problem to $1.3 billion, Richard said.
Google, Yahoo, and MSN, referred to by Outsell as GYM, need to be more candid about the extent of the problem and more team-oriented in fighting it, according to the research company.
"The industry must openly admit there is a major problem, adopt independent audits and open itself to new approaches created through collaborative solutions with GYM, publishers, advertisers, and the hacker-geek community," Richard said.
The survey represented a cross-section of US companies, Outsell reported.
Fewer than 8 percent of advertisers requested refunds from Google, Yahoo, or Microsoft for purported click fraud, and the average refund was $9,507, according to the survey.
Online advertisers were turning increasingly to "pay-per-conversion" or "cost-per-action" deals in which they were only charged for ads when customers did something such as call them or make a purchase, Outsell determined.
"The fraudster community is like the hacker community in that it always seems to stay one step ahead of the technological traps thrown in its path," Richard said.
"As long as you can get paid for generating a click or harm your competitor with a click that has no value, the pay-per-click system will be gamed."
© 2006 Agence France-Presse
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