You might know that Google is being sued over click fraud.  The plaintiffs are seeking class-action status, claiming that Google is too tolerant of click fraud in the AdSense and AdWords pay-per-click advertising systems.  The truth is that despite Google's current efforts, they are certainly making money off of click fraud.  Of course no one is really sure how much, and that is a big part of the problem.  Google regularly credits advertisers but does not provide details on when and how the fraud was detected.

The issue that should concern advertisers is that it is not in Google's best interest to detect as much click fraud as possible.  Google only needs to detect and credit for enough fraud to pacify advertisers that are paying attention and address the fears of prospective advertisers.  Of course if fraud gets bad enough a critical mass of advertisers will bail out and the pay-per-click model will go the way of banner ads.

I did some exploratory work this year on click fraud detection using both client-side and server-side techniques.  I can assure you that it is a not simple problem to solve with technology if the bad guys are smart (or populous and distributed).  And when fraud goes undetected it is the advertiser pouring money down the drain while Google and/or the content publisher cash in.

For now we just have to accept that click fraud is a cost and risk for online advertisers.  In the future I expect to see a lot more cost-per-action (CPA) advertising options (pay-per-conversion, pay-per-sale, pay-per-lead, etc.).  The online advertising industry has a few technical and trust issues to work through to really make CPA work but we will get there.  Strong messages from advertisers like the AIT / Click Defense lawsuit are likely to drive reforms in the system that will take us in the CPA direction.

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