How Clickfraud Works.

Louise, a disabled housewife, plays a bit part in a ring of online fraudsters.

She spends her days at home in Ohio entering queries in obscure search engines and then clicking on the ads -- over and over again.

Louise's illicit clicks cost advertisers untold amounts of money. But she doesn't care because some of their losses eventually trickle into her pockets to help pay for her prescription medicine.

"All that mattered was that I needed the money," Louise said, explaining why she leaped into a career of fraud last year.

Louise, who asked that her full name not be used because of the questionable nature of her work, is not alone. Armies of average citizens have been lured into similar fraud rings by come-ons to earn money from home.

Their work is known as click fraud, a problem that has bedeviled Internet giants Google and Yahoo in recent years. Its rise has eroded confidence in the lucrative search advertising business, which is expected to generate more than $6 billion in revenue in 2006, according to eMarketer.

Internet advertisers pay companies like Google and Yahoo every time someone clicks on their ads. In addition to placing ads on their own properties, Google and Yahoo distribute them to other Web sites and share any revenue with the owners.

Some Web site owners try to inflate the money they collect by hiring others to surreptitiously click on the ads. The theory is that spreading the clicking between different individuals in different locations provides better cover from Google's and Yahoo's fraud detection software than automated iterations of click fraud.

Various studies have concluded that between 10 and 20 percent of all clicks are fraudulent. About half of them are never detected, costing advertisers a fortune, according to several online advertising executives.

An entire subset of Web sites has emerged whose sole purpose seems to be fraudulent. They tend to be obscure search engines, portals and Web domains for sale that feature mostly advertising.

Shadowy companies

Many rely on shadowy companies to provide the manpower necessary for the scam. These companies recruit Internet users, some of whom don't realize what they're doing is illegal.

Louise said she was lured into the world of click fraud because her back problems make a regular job impossible, and she was short of cash.

In all, Louise said she works with 20 recruiters. They send her up to 600 e-mails daily that include links to the search engines that she is supposed to visit and use.

"I have always been a search freak, searching for anything from computer wallpaper to illness symptoms to recipes," Louise said. "Now I just get paid for them."

The services automatically track how many search engines Louise visits. For each click, she earns a fraction of a cent, or around $6 per day.

She doesn't know who is behind the services, though she suspects that some of her bosses are in China. Others who have signed up with similar services said they appear to be operated from Turkey and Poland.

How much money the bosses make is anyone's guess. The potential could be enormous if they recruit enough members. They're notorious for failing to pay their members what they owe them and then disappearing.

Shuman Ghosemajumder, who handles trust and safety for Google, dismissed the idea that the mom-and-pop fraudsters are having much success bilking his company and its advertisers. The techniques they use, he said, are unsophisticated and present little challenge to his company's automated fraud filters.

Mountain View's Google maintains long lists of dubious Web sites and filters out suspicious clicks that come from them. The company routinely issues warnings to Web site owners and then exiles them from its advertising network if they don't change their ways.

Fraudsters use a number of techniques to stay under the radar. Routing their foot soldiers to search engines via e-mail is one of their tricks.

Ghosemajumder said that the fraudsters may be able to use such a technique to hide the fact that an inordinate amount of clicks is coming from a single source. But he insisted that his company monitors hundreds of other signals, any one of which could raise a red flag.

Smaller distributors of online advertising, Ghosemajumder suggested, may be more susceptible to fraud because they have invested less in counter measures.

His comments were echoed by Gaude Paez, a spokeswoman for Yahoo in Sunnyvale. Her company's filters are adept at detecting fraud and that it has discounted billions of clicks over the years that were suspect, she said.

Joe Rosenbaum, an attorney who leads the e-commerce practice for the law firm Bryan Cave, said that individuals who engage in click fraud risk criminal charges or civil suits. However, the law may not be so clear in other countries, where many of the ringleaders are believed to be based, he said.

In any case, Rosenbaum said, Internet companies are probably only interested in getting the big fish, not housewives making pocket change. But determining where the kingpins are located and getting local authorities to cooperate is an uphill struggle, even if there are laws that can be used to prosecute them, he said.

In the United States, Google is known to have sued just one company, Auctions Expert International of Houston, for click fraud, a case that was ultimately settled. Yahoo is not known to have filed any suits.

Transparency needed

Samir Patel, founder of SearchForce, a San Mateo maker of software that allows companies to manage their online advertising campaigns, said that advertisers are concerned about click fraud and think that Google and Yahoo can be more transparent about it. For now, little information is available to his clients, he said, even though some of them are spending $5 or $10 per click.

"Google and Yahoo can definitely do more," Patel said.

As it is, the only way for the advertisers to uncover the scope of click fraud is to go through their computer logs, line by line. If they see an inordinate number of clicks from obscure Web sites, they can ask Google or Yahoo for refunds.

The effort to shut down mom-and-pop fraudsters is being helped by a small cadre of volunteers. They do so out of duty and self interest.

They say the surreptitious work of the fraudsters taints a related but legitimate industry known as "paid to read." That industry has existed for years and revolves around companies paying Internet users small amounts of money to visit Web sites in hope that they will eventually sell them something.

Message boards devoted to the paid-to-read industry are a cacophony of accusations between members who claim to be the good guys and those who say that defrauding prosperous companies such as Google and Yahoo is fine.

Verne Kopytoff, SfGate.Com

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