Pay Per Click (PPC) fraud works by people either repeatedly clicking ads hosted on their own websites in order to generate revenue, or targeting the search terms purchased by competitors with the aim of draining their marketing budgets.
Google (and other advertising firms have been sued over this issue) and as part of a judgment earlier this year, Google agreed to have an independent expert examine their click fraud detection methods, policies, and procedures and make a determination of whether or not there were reasonable measures to protect advertisers. The report of the expert, NYU Information Systems Professor Alexander Tuzhilin, a Professor at NYU is now available.
Obviously the authors of those reports do have a vested interest in talking up the problem. However, it is a real problem and Bruce Schneier (a very well regarded expert of internet technology and security) has a short article in Wired. His comment about a way to solve the problem is to change the rules of the game so scammers had no incentive – Google’s latest cost per action (CPA) ad system is one way of doing this. CPA is where the customer performs a certain action: buys a product, fills out a survey, whatever.
Bruce comments “It’s a hard model to make work” and from a developers point of view I would agree. This sort of tight integration with Google is both harder technically and also gives Google data about your business you may not wish a third party to have. But it might help solve the old problem in advertising. That is the old gag “50% of my advertising is wasted – I just don’t know which 50%”.