About Pay Per Click Advertising Model 

In case you are not aware, those sponsored ads that you normally see on the right hand side of a search engine results page are called Pay Per Click (PPC) Ads.

In fact, this is one of Google and Yahoo!s' major source of revenue. Google call its PPC ad program "Google Adwords". Yahoo! call their program "Yahoo! search marketing". Formerly, its called Overture which Yahoo! bought over. With PPC ad model, search engines are able to distribute these ads through their search and affiliate network.

The main difference between these ads and conventional banner advertising is that, advertisers only need to pay when someone clicks on their PPC ads. Comparatively, this is much more cost effective and accurate as clicks can be measured and performance can be tracked. Whereas banner ad impressions may be derived from a group of untargeted visitors. Google provides very comprehensive tools and reports for their Adwords advertisers.

Click Fraud Problem..

However, the problem comes when PPC Ad clicks are not genuine. Click frauds can be generated from 3 sources:

a) Your Competitors - If your competitors do not like you (of course they dun =), they will want to click on your PPC ads to deplete your advertising budget. If there are over 1000 employees in the competitor's company clicking on your PPC Ad every day, can you imagine how much that you are going to pay?

b) Adsense Advertisers -  When using Google adwords, we normally leave out "content network" option to minimize click fraud. There are webmasters who likes to click on PPC ads [sometimes they use robots] that are displayed on their website to make money unethically. While this violates Google's terms of service when these webmasters sign up as adsense advertisers, Its not possible for Google to check on the great number of violators.

c) Automated clicks generated from software -  In fact, there are robots that can be used to click on ads repeatedly. But normally, these will be more easily identified and stopped by search engines. Sometimes, people are actually paid to click on those ads though.

While it looks like click fraud problem cannot be avoided, search engines are not stupid too. Google and Yahoo! claim to have proprietary technology to help them identify click frauds. We do not know exactly how this is done. But they also have a team dedicated to fight click fraud by observing visitor behaviour, Ip tracking and other measures. The fact that they can remain in business illustrates that PPC works and click fraud is still under control.

 What you can do:

There are tools that you can use to minimize click fraud, such as conversion tracking. With Adwords, we can identify any potential click fraud and notify Google. If they find that the click is not genuine, we will not be billed. Their team will also carry out investigations. There are also various tools developed to identify and minimize click fraud.