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This is guest post by Francisco Diaz-Mitoma Jr., the CEO of VIRURL.

During the past few months, digital ad companies have been forced to take a hard look in the mirror. Reports from several security companies have pegged that online advertising click fraud is costing advertisers more than $6 million per month. And that’s on the low side when you compare it to other reports that Google’s bot traffic consumes over $1 billion per year.

Click fraud has been around since the beginning

Wherever there is an opportunity to make money, bad actors and click fraudsters are bound to appear. The problem is so big and costs the economy so much that click fraud is actually a felony offense in the United States.

It’s been around a long while.

In 2004, a computer software engineer developed click-fraud software and tried extorting Google unless they paid $150,000, according to the indictment.

In 2009, Facebook — which mostly generates revenues from online advertising — admitted in 2009 that malicious fraudulent clicks had affected their network.

A recent study conducted by London-based dismantled a botnet of over 120,000 machines dubbed “The Chameleon.” The botnet would try to mimic human traffic by creating rollovers on banner ads and in some cases click on the banner ads. The botnet is estimated to have cost advertisers (many of them Fortune 100 companies) more than $6 million a month.

Click fraud is an issue that continuously drains the advertising economy and rewards malicious black-hat scammers. There is no single solution to stopping click fraud but there are multiple ways to protect advertising dollars from being wasted.

Time to take action

The surge in startups around marketing metrics helps to alleviate some of the click-fraud problems online. If you are spending more than a few hundred dollars on any advertising platform each month, it could be a wise investment to hire a freelancer or company to help you through the process.

There are two main strategies to battle click spam and click fraud:

1. Technical: Crosscheck server logs and IP information with known blacklists, proxy lists, and spam lists. For example, Project Honey Pot helps coordinate efforts between domain owners to flag potentially malicious IPs. Again, this is not ironclad protection but may prove beneficial.

2. Analytical: Use your analytics and monitor your success metrics closely. Look at patterns with the traffic to assess whether it is human traffic. Do not obsess over click-through rates. Instead, rank your paid advertising channels by return on investment and then prioritize your spending based on that list. If the traffic peaks and your conversion rates do not hold up, it would be a good idea to cut that paid advertising channel off.

Startups like Kissmetrics, Chartbeat, and Kontagent are paving the way for a better understanding on what your traffic is doing once it reaches a webpage. Services like these help you cut your losses faster from a fraudulent traffic source by allowing you to monitor particular events generated from you traffic. Not only do these services catch bad traffic, but they also help you better understand which paid advertising channels are working best for you.

Better understanding your traffic, monitoring peaks and performance, and tapping into existing blacklists are good safeguards to prevent a massive hemorrhage from your advertising budget.

Brands, agencies, and ad networks must stand together

Click-fraud bots have a severe effect on the economics of online advertising. As CPM numbers are driven up by click bots, the real click becomes more expensive. Even if click bots are tailored to click through on ads, the actual spending customer becomes more expensive to acquire.

Problems with click fraud at major sites points to an industry-wide problem that needs immediate attention. The online advertising industry needs to continue to work together and collaborate on a shared database of perpetrators.

This hard look in the mirror is creating startups and an entire industry around click fraud, better marketing metrics, and real-time behavioral monitoring. This concerted effort will pour millions back into the advertising industry, making advertising more efficient and creating more advertisers willing to open up their wallet.

In the end, it is not only an advertising industry issue. Combating click fraud helps anyone who consumes content online. More real clicks on advertisements will also recalibrate traditional banner ads — making them more efficient and less annoying.

Francisco Diaz-Mitoma Jr. is the co-founder and CEO of VIRURL. VIRURL is a paid content distribution platform with over 115,000 influencers and publishers. VIRURL helps small and large content creators find the right audience.

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