Marketers beware: the ever-expanding pay-per-click arena is attracting plenty of unscrupulous players. Click fraud, once considered a minor inconvenience, has become a major concern for advertisers and search marketers. Estimates of advertising dollars lost to click fraud run as high as $500 million per year.

Click fraud occurs when a person or computer program clicks on a PPC ad for the purpose of generating an improper charge. While computer programs, usually employing on-line robots, or bots, are hard to detect, illegitimate clicks made by workers hired to "click out" the competition are even more elusive.

A competitive spirit is behind some of the unethical behavior. Companies will click on a competitors ads to chew up his advertising budget or drive him out of a particular keyword market. Businesses with small budgets that bid on high-priced keywords especially are vulnerable: if a $40 keyword gets only one fraudulent click per day, the business stands to lose $1,200 per month - possibly their entire PPC budget.

Publishers and search-engine partners engage in click fraud to grab some easy money. Since these companies earn a percentage of PPC revenues from the sites they own and operate, they can make significant profits by piling up additional clicks on their own sites. Not surprisingly, schemes motivated by direct financial gain often involve a high degree of organization and sophistication.

No one has a quick fix for click fraud. Some activity is big enough to hurt a competitor or two, but too small to be statistically noticeable. New and better prevention and detection software comes to market all the time. For instance AdWatcher, a leading on-line monitoring service, offers a product called Fraud Blocker that sends warning messages to Internet locations logging an unusually high number of visits to their clients site. While not foolproof, telling the fraudulent clicker his activity has been detected and reported is a powerful deterrent.

However, high-volume, computer-driven scams remain sufficiently random and seem to have the upper hand - at this point. Compounding the problem, search engines, who have more control over PPC technology than anyone, have little incentive to detect or prevent fraud. They do investigate fraud reports and attempt to match the reporter's data with their own to confirm it; however, their list of "alternative explanations" can be lengthy.

Despite the difficulties, PPC advertisers can watch for signs of click fraud, including:
Multiple clicks from a single IP address;
High click volume at a particular time;
Unusually high search activity on an expensive keyword, and
Clicks from parts of the world where business is not conducted.

Marketing lobbyists are fighting at the federal level for tighter policing of click fraud, but the effectiveness of potential legislation, if or when it occurs, is unknown. In the meantime, advertisers should connect with search-marketing firms that monitor their PPC data carefully and stay current with developments in fraud and fraud-prevention technology.