Click fraud, the illicit manipulation of keywords-based advertising, is not something new in the Search Engine arena. We have heard numerous reports of one company clicking on a rival's search engine ads to drive up its costs. Who is watching whom? What are the measures being taken against this rising web epidemic?

Click fraud literally means fraudulent clicking of ads resulting in the exhaustion of the advertiser's ad budget. From a user's point of view click fraud can be explained as an Ad that does not contain the information that was indicated in the ad copy. Thousands of websites are running AdSense, which appear in the paid results for important queries. Considering the present trend of irrelevant results, if a user clicks on the paid ads, thinking them to be relevant, he finds himself on a site with more irrelevant ads.

Search engines are encouraging user's to click on deceptive ads to enhance their revenue. Click Fraud is not just about advertisers, its about users as well who are lead to deception for petty financial interests. Normally, an advertiser is charged by the number of clicks recorded by a website or advertising network that sells the space. But when click rates are inflated by fraudulent means, then websites such as Google, Yahoo and others end up charging inflated rates.

The search engines say they are limited in their efforts to combat the perpetrators, but skeptics argue that it is in their best short-term financial interests to drag their heels in fixing the problem. Two years ago, Google's chief financial officer, George Reyes, told investors that: "Click fraud is the biggest threat to the internet economy".

The problem questions the credibility of paid-search advertising - the fastest-growing form of online-ad business generating about $5bn a year in revenue. The search engine companies have tried to downplay the size and seriousness of the problem by insisting it affects only a fraction of advertisers. But there is a catch: nobody seems to know how pervasive the fraud is.

Click fraud takes different forms, but the end result is usually the same: Merchants are billed for fruitless traffic generated by scam artists and mischief makers who repeatedly click on an advertiser's Web link with no intention of buying anything.

According to studies $100 to $400 of every $1,000 (spend on advertising by clients) stems from click fraud. If these estimates are true than search God Google might be on the hook for $1 billion to $5 billion in advertising refunds. That works out to between ten and forty percent of Google advertising revenue which as it turns out stems directly from fraud.

How much of Google's overall revenue was made fraudulently is unknown and Google is dead silent about it. This may not continue for long, Click fraud will definitely degrade the goodwill of search engines. This should be the warning bell for any investor who is about t to buy shares of any internet search engine, especially Google. The new breed of "networked click-fraud bots" could massively slice off Google's soaring share price.
With Google trading at 31 times 2007 earnings, the expectations from the market and investors has increased thus pressurizing the pay-per-click model of Google to maximize revenues. Online advertising accounts for some 99% of the company's gross revenue. At this stage, any disruption to the paid-search revenue stream that fuels Google's shares can lead to hazardous consequences.

According to a report published on wired.com website, “The other enabler for the explosion of spam content and click fraud is Google's roughly 60% stranglehold on Web search, which gives it a pretty effective monopoly. That's why I find the "self-correcting market" arguments regarding click fraud more than a tad naive. Markets don't correct without competition and information, and I don't think there's enough of either here to make a difference. Yet.”

There are bloggers and duplicate content sites hosted to maximize this click fraud profit on a regular basis. Bogus ad click or fraudulent clicking is tarnishing the image and return of profit margin for both service provider and seeker.

The problem is of grave concern and needs immediate concern. As summed up in the above article:

"The amount of click fraud is difficult to quantify; estimates of the proportion of fake clicks run from as low as 1 in 10 to as high as 1 in 2. In a widely cited recent study, MarketingExperiments.com, an online marketing research outfit, reported that "as much as 29.5 percent" of the clicks in three experimental PPC campaigns on Google were fraudulent. Whatever the exact figure, click fraud has become pervasive, and Google, Yahoo!, and the other major PPC firms have found themselves caught in a game of cat and mouse with its perpetrators. Even as the search engines shore up their defenses, click scammers are becoming more sophisticated, increasingly deploying complex software to disguise the origins of clicks. For now, the search companies and many of their clients maintain that the problem on their networks is under control. But some observers, like Holcomb, believe that click fraud is "a billion-dollar mess" that "has the potential of destroying the entire industry."

Do search engines need more transparency in resolving click fraud?