This article is in the current issue of Wired (I love how Wired gives access to published articles online). It is a pretty interesting read about click fraud and how it is affecting online advertising.
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."There are two different reasons the article lists for click frauding. First is to drive competitors out -- if competitor X has $2000 allocated per month for ads, then competitor Y can click 200 times on competitor X's ad. This will not only remove competitor X's ad, but it will also drive down the cost for competitor Y to run an ad with the same targetted words. Second is to get money -- a person will start a webpage, put affiliate ads on it (you know, like AdSense), then click away at the ads themselves. The money per click is split between Google (or whatever affiliate ad provider) and the webpage person. There are even click farms with people clicking ads around the world. That is just plain wrong. Click frauders are just as bad as, if not worse than, spammers.