Click Fraud: The Business of Cyberstealing

It's that time of year, when Santa is making his list and checking it twice. Like Santa, millions of Americans are checking their lists too -- and then heading to the Internet to do more and more of their Christmas shopping.

Retailers, giddy with the prospect of more online business, try to get customers' attention and have turned to Yahoo or Google for help with Internet advertising.

But many businesses have found that advertising on the Net can be an expensive prospect, especially if they fall victim to a criminal practice called click fraud.

When online retailers want to advertise on Web sites that appear on Google or Yahoo, they set up advertising accounts with a set amount of money in them. Every time someone clicks on their ads, a little bit is taken out of the account and goes directly to either Google or Yahoo, or a portion of it may go to the site that hosted the ad.

Click fraud occurs when people click on ads with no intent of becoming customers. Their only interest is in generating clicks so that money moves out of the advertiser's account.

An estimated average of 14.6 percent of the clicks advertisers are billed for are fraudulent, according to Outsell Inc., an information industry research group.

Outsell estimates that click fraud is a $1.3 billion problem: $800 million wasted on fraudulent clicks plus $500 million no longer spent on pay-per-click online advertising.

Though it hits small businesses with small advertising budgets the hardest, even the host companies like Google, Yahoo and other search engines are threatened by savvy computer users, like Michael Andrew Bradley, looking to exploit the online advertising system.

Bradley allegedly planned to blackmail Google, the Internet search engine and online media empire. He is accused of building software that would make advertisers pay for fraudulent clicks on their Web ads that he planned to unleash across the Web.

That is, he allegedly would unleash it unless Google paid him $100,000 to keep his weapon off the cyberstreets.

But Bradley was nabbed before he could carry out the plan he's accused of hatching. He was arrested in May 2004 and later released on a $50,000 bond, with the condition that he refrain from using any computer or the Internet and avoid all contact with Google employees.

One potentially key piece of evidence is a video tape of Bradley on a visit to Google's Mountain View, Calif., headquarters. During a March 10, 2004, meeting with Google, Bradley demonstrated his click fraud software, dubbed "Google Clique," and demanded the cash that would stop him from releasing it.

"Why am I so confident this works?" Bradley wrote of his product, Google Clique, according to the indictment. "Because I was personally invited to visit Google and demo the software for them.

"They were very nice to me and we sat down and I did the demo of Google Clique. … They found Google Clique to be a serious threat to their company," the 2004 indictment quotes him as saying.

Google filed a criminal complaint against Bradley, who was subsequently indicted in California for extortion and mail fraud. He was charged with 11 criminal counts, each one carrying a maximum penalty of 20 years in prison and a fine of $250,000.

The Charges Dropped

But last month, seemingly out of nowhere, the case against Bradley was tossed. Why were the charges dropped after a one-year investigation and more than two years of legal wrangling since his arrest?

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