Click fraud is an unfortunate byproduct of the pay per click advertising business. Many people with an online business spend large amounts of money on pay per click advertising only to discover that many of the people clicking on their ads weren't really interested in their products or services.

Bogus "visitors" to a pay per click ad represent click fraud. This is a serious scam that threatens the viability of the pay per click advertising business which has become enormously profitable for all of the major search engine operators, namely Google, Yahoo/Overture, and MSN.

Click fraud has different forms, but the end result is generally the same. Advertisers are billed for fruitless traffic generated by someone who repeatedly clicks on an advertiser's ad without any intention of ever buying anything.

The search engine advertising market is currently about $3.8 billion per year and estimates vary widely on how much click fraud is actually going on. Clearly, the search engine operators would like to downplay the extent of this problem. Some industry experts claim that a little click fraud exists but that it is overblown by advertiser paranoia, while others estimate that ten to twenty percent of all clicks are false (made by someone with no legitimate interest in the ad itself).

Virtually everyone involved with pay per click advertising sees click fraud and knows it's there, but no one is quite sure what to do about it.

Both Google and Yahoo/Overture acknowledge that the click fraud problem exists, but claim improved internal controls will prevent the problem from escalating. Their stated position seems to be that they are concerned about click fraud, but that it is not a material issue so far. Both of them are touting their increasing internal actions aimed at detecting and combating click fraud.

Such reassurances from search engine companies certainly aren't surprising, given how much they stand to lose if advertisers cut back on advertising spending. The stakes are huge and the search engine companies are actively involved in public relations campaigns. Industry research firm eMarketer expects $7.4 billion to be spent on search engine advertising by 2008, up from only $108.5 million back in 2000.

The incentives for click fraud have increased along with the money devoted to search engine advertising. Advertising on search engines has turned into a fast-spreading craze as more and more marketers have realized substantially higher returns on search engine ads than on more traditional marketing campaigns conducted through print media.

Most pay per click advertisers set a spending limit and once the spending limit is reached, the ads cease to appear in the search results. Click fraud is a very unethical competitive tactic where someone repeatedly clicks on a competitor's ad until the spending limit is reached and the ad then disappears from the search results. It seems that it's only a matter of time before some advertisers become so exasperated with click fraud that they file a class-action lawsuit against a major search engine.

The success of search engine advertising has substantially raised prices that advertisers pay for top spots. Unfortunately, these higher prices have turned click fraud into a dark little industry of its own. Some crooks have hired cheap overseas contractors to just sit in front of computers and constantly click on targeted ads and others are developing sophisticated software to help automate and conceal click fraud.

If you use pay per click advertising it would be wise to carefully monitor your traffic to determine if you are the victim of click fraud. In any event, it's probably safe to say that pay per click advertisers are going to have to accept a certain level of click fraud as just a cost of doing business.

Kirk Bannerman operates his own successful home based business and also coaches others seeking to start their own home based business. For more information visit his website at Legitimate Home Based Business