The Google click fraud settlement is in the news again today. I've heard about it before, but I didn't realized the extent of the problem. According to various articles, the fraud rate is anywhere from 12% to 35%. I didn't realized it was so high. With the fraud rate so high, I can't help but wonder about the future of Adsense, YPN and MSN adCenter. If the current publisher/Google split is about 70/30, Google would lose money if the fraud rate is 35% (assuming Google has to credit the advertiser in full, which I don't think will happen). So, down the road, I would not be surprised if Google started deducting money from publishers as a reserve for fraudulent activities, which means less money for us (duh).
Even though some companies do click on their competitors's ads to drive up costs, it appears most fraudulent activities are actually conducted by publishers themselves (source: cnet). Apparently, some publishers have resorted to click farms (paying people to click on ads for hours), clickbots (software programs written to automate ad clicking), or botnets that hijack numerous machines for purpose of click fraud. So, because of a few greedy publishers (by few, I mean relative to the total number of publishers), the rest of us might have to suffer.
So, is there a solution to the problem? It appears not. Even if we went back to the cpm model, fraudulent activities could occur with that as well. In fact, I think that was a problem when the banner ad went mainstream. Of course back then, most fraudulent activities were limited to competitors on mainstream sites. Now, thanks to Adsense, there has been an explosion of advertising supported sites — some of which are operated by shady people.
