The Economic Cost of Invalid Clicks in
Paid Search and Paid Social
Campaigns
Professor Roberto Cavazos,
Execu've in Residence at the Merrick School of Business at the University of Bal'more

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Main Findings
Globally, approximately $144 Billion is spent on paid search and paid social campaigns, not least as brands reallocate parts of their trade marke'ng budgets from brick-and-mortar retail to product search on
ecommerce plaEorms. 1 There has been a sharp rise in alloca'on of budgets to Google, while Amazon,
Pinterest, LinkedIn, Instagram and other plaEorms are aNrac'ng a rising rate of PPC adver'sing dollars. As isthe case in emerging digital adver'sing channels and strategies there is a parallel growth in invalid traﬃc.
Based on empirical-based research, we found that 14% of PPC spending is invalid. Based on economic
analysis of PPC budgets this is es'mated to bring global annual losses to marketers of $23.7 Billion by theend of 2020.2 These invalid clicks are driven by many diﬀerent sources, from standard web crawlers, tomalicious bots, click farms, ad-fraud schemes and even compe'tor clicks with the largest spending
enterprise accounts hit hardest by sophis'cated invalid click fraud.
In line with what we have seen in other digital industries, we fully expect the number of invalid clicks toincrease due to rising sophis'cated aNempts by fraudsters to hijack PPC budgets. Research has shown that
inbound marke'ng strategies such as PPC work well, and as such, this sector is experiencing robust growth.
There are various forecasts for growth in the PPC sector, but conserva've source cites growth of 10% thisyear3 . With this con'nuing growth and barring eﬀec've controls, the cost of invalid PPC traﬃc will only
con'nue to rise with high-spending PPC sectors par'cularly aﬀected. The 14% invalid click rate across
campaigns is a global aggregate across sectors, including eCommerce, educa'on, legal, travel and medical(set out in detail below). The percentage of invalid clicks found in each sector's PPC campaigns is based on
the latest economic analysis, drawing upon sector level detec'on of invalid ac'vity and interviews with PPC
prac''oners.

1 Global Spend Source: hNps://magnaglobal.com/magna-adver'sing-forecasts-winter-2019-update/2 This assumes that global spend of 2019 of $144 Billion will increase by 17.3% for 2020 or $168.9 Billion

3 Marke'ng Charts, December 2019, drawn from About the Data: Figures are based on WARC data from theirInterna'onal Ad Forecast and Ad spend Database2

Invalid Click Costs 2019, and 20202019
$20,160,000,000.00 Total PPC Invalid Click loss (global)$7,700,000,000.00 Total PPC Invalid Click loss (US)2020
$23,786,000,000.00 Total PPC Invalid Click loss (global)$9,060,800,000 Total for USA in Invalid Clicks

The State of Economic Loss from Invalid Clicks Globally
Global Sector market losses in 2020
2020 Global esGmates of sector based on U.S. sector composiGon*

Sector% Fraud

Av costper clickfor sector(Googlesearch)Ecommerce/Retail*

9.67%

$0.88

$0.29

$85,394,400,000.00$40,135,368,000.00$3,881,090,085.60

Educa'on** 30.46%

$1.74

$0.40

$5,794,620,000.00$2,723,471,400.00$829,569,388.44

Legal***

13.45%

$5.88

$0.60

$3,049,800,000.00$1,433,406,000.00$192,793,107.00

Medical^10.19%

$3.17

$0.37

$4,086,732,000.00$1,920,764,040.00$195,725,855.68

Tourism/
Travel^^16.84%

$1.55

$0.24

$33,139,126,800.00 $15,575,389,596.00

Av costper click(Googledisplay)

Digital Spending
2020

Average PPC of 47%

Loss to Fraud$2,622,895,607.97* Retail, eMarketer, July 2019** Educa'on Sta's'ca, September 2019*** Legal American Bar Associa'on Journal April 1 2017**** Medical, eMarketer, July 2019 Search Spend***** Tourism/Travel eMarketer, July 2019****** Finance eMarketer, July 20193

2020 US Sector Market Losses from invalid clicks
Av costper clickfor sector(GoogleAds)
search)Av costper click
GoogleAds(display)

Digital Spending
2020 USA.

Average PPC of 47%

Loss to Fraud

Ecommerce/
Retail*
9.67%

$0.88

$0.29

$32,844,000,000.00$15,436,680,000.00$1,492,726,956.00

Educa'on**

30.46%

$1.74

$0.40

$2,228,700,000.00$1,047,489,000.00$319,065,149.40

Legal***

13.45%

$5.88

$0.60

$1,173,000,000.00$551,310,000.00$74,151,195.00

Medical^10.19%

$3.17

$0.37

$1,571,820,000.00$738,755,400.00$75,279,175.26

Tourism/
Travel^^16.84%

$1.55

$0.24

$12,745,818,000.00$5,990,534,460.00$1,008,806,003.06

Finance^^^15.21%

$3.72

$0.72

$7,624,500,000.00$3,583,515,000.00$545,052,631.50

Sector% Fraud

Sector Spotlights
eCommerce - $3.8 billion globally lost to invalid clicks; US Loss $1.4 billion
In the largest eCommerce sector, at least $3.8 billion is expected to be lost globally on PPC campaigns alone
by the end of 2020. This is based on around 9.7% invalid clicks discovered across mul'ple eCommerce
campaigns. In one case analyzed, a fashion retailer was running their PPC and shopping campaigns acrossFacebook, Bing Ads, YouTube, Instagram, Snap and Amazon, with an average CPA of $12. Here, 12% of all
clicks were invalid (non-human, fraudulent or with no purchase inten'ons). The company found such invalid
clicks across all campaigns: Bing, Snap, Amazon, Facebook and Instagram. Looking at individual popular
keywords, "men's jacket" saw a 56% invalid click rate, "shoe coupon" a 52% invalid click rate, and "Asics
New", a 48% invalid click rate.
The problem of bots aNacking lead opportuni'es and sales for ecommerce companies is well established.
Online retail loss from invalid clicks is sizable even set against an industry in which global web sales
amounted to a staggering $3.4 trillion in 2019. Such invalid click ac'vity can cause havoc across anorganiza'on, severely disrup'ng lead genera'on and sales processes. In one lawsuit, Ticketmasteracknowledged that the cost of bots restric'ng other customers use of the site through their abusive conduct,using number and leNer generators to gain access to events posed a huge problem for the business.
Nevertheless, the 'cke'ng giant argued that accessing more than 1,000 pages of the site and making morethan 800 reserve requests in a 24- hour period, made poten'ally bad actors liable for damages in theamount of twenty-ﬁve cents ($0.25) for each page request or reserve request. In total, they claimed a loss ofover $5000 in a one-year period. This sits alongside wider costs including "’several damage assessments,

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designing of new security features, and diverted resources to combat defendants’ unauthorized use of
Ticketmaster’s website and mobile plaEorm.’’ 4

Global Travel: $2.6 billion globally lost to invalid clicks in 2020; US Loss $1 billion
In the travel sector, at least $2.6 billion is expected to be lost globally on PPC campaigns by the end of 2020,
based on around 17% invalid clicks discovered across mul'ple campaigns. This assumes an expected spendof around $15.6 billion on social and search PPC spend in the industry by the end of 2020. In one example,
provided to researchers, PPC campaign managers, found many top travel keywords, displaying very highclick-through rates (CTRs) but low acquisi'on rates. Researchers found that 24% of the top travel company's
keywords regularly generated invalid clicks. These invalid clicks came from two primary sources: web
crawlers and compe'tor clicks. The invalid click rates for each par'cular keyword ranged from 5% to 90% insome cases.

The challenges for Enterprises and PPC spending
Domains that spend the most on AdWords (Google Ads)
Rank

DomainMonthly Budget

1

amazon.com$31.4 M2

info.com$20.1 M3

consumersadvocate.org$12.7 M4

homedepot.com$6.81 M5

smarter.com$6.72 M

Given the scale of spending on large campaigns the poten'al for fraud losses is enormous. Amazon ranks top
for Google Ads spending ($31.4 million a month), with other campaigns such as Home Depot spendingaround $6.8 million a month.5 There is inevitably a greater level of complexity when it comes to complex
organiza'ons. In the U.S., complexity is one of the principal reasons why in 2014 it is es'mated that
Medicaid (with an annual spend of $597 billion) made $17 billion in improper and or fraudulent
payments6.In the words of PPC expert, Ted Ives," Enterprise Search Engine Marke'ng (SEM) campaigns are
exci'ng to design and execute; budgets are large, and there are numerous customers to sa'sfy byconnec'ng them with the informa'on they need via a myriad of keywords and ads. However, enterprise SEM
campaigns tend to grow over 'me and become very messy and diﬃcult to manage." We found for instance
4 Ticketmaster L.L.C. v. Pres'ge Entm't W., Inc. hNps://casetext.com/case/'cketmaster-llc-v-pres'ge-entmt-w-inc
5 Data from Spyfu, accessed February 2020
6 2MEDICAID: Key Issues Facing the Program GAO-15-677: Published: Jul 30, 2015. Publicly Released: Jul 30, 20155

in large enterprises companies disclosing aﬃliate fraud—hosts of aﬃliate networks aNemp'ng to take credit
for thousands of clicks on a regular basis. This creates a dangerous situa'on where companies are duped bybusinesses they are transac'ng with. For instance, Uber found a huge case of aNribu'on fraud, in which
Kevin Frisch, former head of acquisi'ons at Uber, turned oﬀ two-thirds of the ride-hailing giant's $150m
spend to aNract new drivers, seeing no change in the number of app installs, and revealing huge spend on
poten'ally fraudulent partners. There is also a tendency to throw good money arer bad bots. The prac'ce ofremarke'ng or retarge'ng—the tac'c of serving targeted ads to people who have already visited or acted onyour website—is oren merely a reconnec'on with bot networks, incen'vizing further invalid clicks to a site.

6Techniques used by fraudsters
The overall techniques used can include compe'tor clicks (this typically involves compe'tors ea'ng up yourad budget by mass clicking on ads and forcing the hisng of budget caps early on in the day). It can also
include clicks by automated clicking tools (such as bots) robots or other decep've sorware such as
malware, alongside botnets (a number of Internet-connected devices, each of which is running one or morebots used to steal data, send spam and ﬁll in forms). Bots in themselves account for approximately 45% of all
web traﬃc 7 and account for a large scale of click fraud. In many cases, enterprises have reported having up
to 70%-90% of clicks turning out to be bot clicks.8
Google, by far the largest player in this market, takes a proac've approach to mi'ga'ng invalid clicks,
inves'ng heavily in trying to ﬁlter them out and issuing refunds to customers for invalid clicks which they
weren’t able to catch. However, Google (along with other prominent PPC plaEorms) remains a massive
target for millions of hackers and fraudsters worldwide and as a result is unable to prevent all instances ofinvalid, non-human and fraudulent clicks. This has led many to seek out a proac've solu'on protec'ng theircampaigns across plaEorms on which PPC ad dollars are spent.
Growth of New PPC Pla`orm spending Leading to a rise in invalid users
The rise in spending across new plaEorms brings with it a wave of new types of invalid clicks. While thedominance of Google and Facebook for ad spend is well-known, Amazon has risen with 12% of the searchmarket and 4% of the total digital adver'sing market, from almost nothing two years ago.9 Other popular
plaEorms targeted for PPC dollars include Bing, Yahoo, Facebook, Baidu, Snap, TwiNer, Amazon, andLinkedIn. For instance, Kevin Lee, Execu've Chairman and Founder of Didit, and a recognized expert in PPC
has pointed out that LinkedIn has sent out refunds to mul'ple par'es for "external en''es that are
genera'ng invalid clicks on ads served on LinkedIn." 10 As a general point, compared to other sectors, online
adver'sing is less regulated and less interconnected, crea'ng a breeding ground for fraud. Online adver'singhas created a situa'on in which the situa'on and interests of many par'es are not aligned, and there is liNle
to disincen'vize fraudsters.

7 What’cha Goin to do when the bad bots come for you? MaN Toomey, Aberdeen Research, April 11, 2017.
8 Marketo Engage: Message Board Bot or Not? – Are you suﬀering from ‘bot clicks’? Accessed February 2020
9 Magna Adver'sing Forecasts winter 2019
10 hNps://www.clickz.com/does-linkedin-have-an-invalid-click-problem/46111/

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Interviews with PPC Experts
PPC experts interviewed cite the vital importance of ending PPC fraud, as part of a wider and more strategic
goal of op'mizing campaigns. Wil Reynolds, founder and VP innova'on at Seer Interac've, with 21 years of
doing search and with clients from Asos, to BBVA Compass and Harvard University, recently found that
invalid or fraudulent traﬃc comprised 30% of the money spent on the overall search partner network. The
ability of new invalid clicks to assert themselves was discussed by Francis Shovlin, who said the incongruous
clicks were new to him even arer 12 years in the ﬁeld. In other reported cases, fraudsters have demand
bitcoin in exchange for a promise not to ﬂood publisher’s ads with bot and junk traﬃc that may force
Google’s automated an'-fraud systems to suspend a user’s AdSense account for suspicious traﬃc. Jonathan
Kagan, VP of Biddable media at MARC USA, a leading adver'sing agency with more than $350 million inbillings and 250 employees, says that despite Google having "the best track record for ﬁnding it retroac'vely
and credi'ng for it" he has seen fraud on campaigns "on and oﬀ for the past 16 years". He says: "In one
example, there was a town 40 miles north of Winnipeg, with a popula'on of less than 2,000 people, but wesaw more than 2,500 clicks over a 30 day period coming from the town, which we didn't even target to startoﬀ with. For compe'tors, we were able to do page customiza'on based on geo targets and crossed it with
Google Analy'cs source/medium, to realize it had to come from the compe'tor's oﬃce”.
Senior PPC specialist Rob Lewis, at Candour has implemented hundreds of successful campaigns. He says
[there was one] "client they had spent half a million pounds on conversions which it turned out didn't
generate any actual leads at all, it was just spam when we inves'gated the actual leads from their customer
rela'onship system. It was just ﬁlled with gobbledygook essen'ally." He adds: "spammy traﬃc oren headstraight to the ‘Thank You’ page arer arriving on the site without any intermediary steps and this ispar'cularly so if there's no capture form in place, and the user doesn't have to ﬁll in all of the details on ourcontact form. It may be that they're just literally scouring the website for a Thank You URL and headingstraight there as well."Adaeze (Dezie) Okpoebo, Lifecycle marke'ng manager at NASDAQ-listed sorware company LogMein adds
that bot clicks in par'cular caused "many issues" not least "sales reps following up on false leads, and badand misleading repor'ng." This demonstrates the company-wide damage caused by the click fraud problem.

Conclusion: PPC The Next Step for AcGon and Transparency in AdverGsing
The online adver'sing industry has previously raised the problem of ad fraud in tradi'onal CPM campaigns.
However, almost no aNen'on has been paid to rising PPC fraud, as detailed in this paper. This is despite thefact that globally, paid search remains the most-used digital adver'sing format aNrac'ng 47% of total digital
ad revenues, with Google search alone worth $98 billion in 2019. In the case of cost-per-thousand (CPM)
fraud on display, low cost CPM rates on ad buys have become dangerous and suﬀused with fraud. In theformer case, coali'ons of top companies with mul'-billion-dollar adver'sing spend including Unilever, GSK,
and Accenture have urged urgent ac'on to stop ad fraud in campaigns.11 Now CMOs and PPC experts areseeking to cleanse their PPC campaigns with equal vigor, which as we have seen will see marketers lose
$23.7 Billion by the end of 2020.

11 The Drum, 22 November 2019, Conscious Advertising Network recruits from GSK and Accenture to combat ad abuse

8The turning of aNen'on to the rise of the PPC fraudster comes as spend con'nues to grow in this sector of
digital adver'sing. Internet traﬃc funneled through pay-per-click adver'sements brings approximately 50%
more lead conversions than organic web traﬃc. Google has said that businesses make an average of $2 inincome for every $1 they spend in Google Ads. Other plaEorms are also picking up larger PPC spend.
However, as adver'sers con'nue to spend big on search and social PPC campaigns, invalid traﬃc will
con'nue to become more prevalent. As has been shown in other areas of online adver'sing, fraudsters
con'nue to target ad budgets, where they can enjoy extremely high returns with almost no risks of beingcaught. It is incumbent on the fast-growing and successful marke'ng industry to op'mize its results bytackling the threats of sophis'cated and widespread click fraud perpetrated by determined and malicious
bad actors.

About the Author
Professor Roberto Cavazos, Execu've in Residence at the Merrick School of Business at the University ofBal'more, has over 25 years' experience in economic analysis,
sta's'cal & data analysis, project and program management and policy, and technology with extensive
experience in fraud analy'cs and analysis for government and private sector organiza'ons.

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