One of the most popular forms of online advertising is in jeopardy of becoming so plagued with fraud as to make it useless to most companies. Advertising a website through targeted listings against specific keywords in a search engine is not a new process, and neither is the fraud which eats up to 20% of the clicks paid for by advertisers. Under this model, advertisers pay a fee to the search engine every time someone clicks on their advertisement, which normally appears alongside or above related search results. This fee may range from only a few cents, up to several dollars for certain market verticals.

Click fraud refers to ‘fake’ clicks on these paid listings, each of which costs the advertiser a small amount. This fraud takes place in a number of ways, the most common of which is to target the listings of competitors and click their advertisements, costing them money. Competitors are said to be paying for either groups of people, or automated software robots (bots) to repeatedly click on the listings, costing the advertiser larger and larger amounts. All of the major search engines which accept paid listings say that they are aware of the issue, take it very seriously, and are aggressively pursuing it, but also concede that it still occurs. A recent article in The Times of India even outlined an entire industry in India, based around employing housewives, college students and some business people who get paid to click on online advertisements.

With the ability for services such as FindWhat results and Google AdSense advertisements to be included directly on other websites, another form of fraud has developed. In this system, website owners are paid a portion of the value of a click which originates from their website. Obviously there is an incentive for the website owner to generate more clicks through the advertisements on their website, which leads some of them to act fraudulently to inflate the figures, and their pay-check.

The first publicized case of click fraud was recorded in 2001, by Jessie Stricchiola, President of Alchemist Media, LLC, a company which specializes in search engine marketing, pay-per-click positioning and search engine optimization. 3 years later, the advertiser-paid search results business is worth around $3 billion dollars, and the problem of click fraud is only getting bigger. Google has even acknowledged that click fraud and other fraudulent behavior are a significant risk to their continued operation and profitability in their SEC filing, leading up to their initial public offering. "If we are unable to stop this fraudulent activity, these refunds may increase," Google said. "If we find new evidence of past fraudulent clicks we may have to issue refunds retroactively of amounts previously paid to our Google Network members." (as quoted in WebProNews)

Although only directly affecting paid listings such as those in the Google AdWords/AdSense programs and Yahoo’s Overture service, the impact of click fraud may become a major issue for everyone. With most search engines deriving their primary income from paid listings, if click fraud turns advertisers off, search engines may soon find themselves without the revenue required to support the expensive business of indexing the Web and handling millions of searches a day.