What is Click Fraud?

Click fraud is a new type of Internet scam that targets advertising companies rather than consumers. On pay-per-click advertising, a company publishes a small ad in front pages such as Google or Yahoo, which offer an ad service. The ad is displayed for everybody to see, but the company only pays for advertising if a prospective client clicks on the ad. When that happens, the company is billed and Google or Yahoo get a profit. The price is small, sometimes even one penny per click, but when millions of consumers click on the ad every month, the numbers add up.

Click fraud has taken advantage of the pay-per-click advertising programs by republishing the ads in other web pages. While this in itself is not illegal, the problem is that it becomes quite easy for anybody to set up a fake website and publish a list of links or ads; these ads contribute directly to click fraud by allowing publishers, acting as middlemen, to share revenues directly with Google's AdWords/AdSense programs. Most people committing click fraud are operating such a small con that it goes undetected by companies. Those who are truly trying to profit from click fraud may have complex software programs that trick the company into believing the clicks come from different computers or even different countries.

Other forms of click fraud are not directly related to profits. Individuals may use click fraud to cause monetary loses to a competing company or to help a friend who is operating as a middleman to obtain more profits. While there is no direct connection to money in these cases, the person clicking on the ads can be accused of click fraud. Most companies, however, will not go to the trouble of persecuting this, as the court expenses will not justify the nuisance. Class action lawsuits for major loses do happen, however. In 2005, a middle-man company called Auction Experts lost a $50,000 US Dollar lawsuit brought in by Google because of click fraud. Yahoo started a similar lawsuit in 2006 related to its Yahoo! Search Marketing pay-per-click program.