An interesting question came up on the Marketing Profs a few days back.
What is Click-through Fraud, and what are the ways in which we can prevent it?
A little research from my side did give an insight into the topic. Here is the thread.
Category: Pay-per-click (PPC) Advertising
Click-through Fraud is a major bottleneck in traffic Measurement on your website. The Search engines set up programs, or hire third-party vendors to automate clicks and surfing on your website, thereby increasing the hits on your site. This fabricates the numbers, giving the impression to the client that his website is being sourced and marketed well by the Search Engine.This increases the revenues for the Search Engine, which is paid on a per-click basis, which in turn, shares the revenues with the third-party contractors.
The prevention Mechanisms are similar to Credit-Card Industry mechanism, wherein Any Fraudulent Transactions trigger a tag against the Transaction, which is stalled and later, investigated for.
One can measure the clicks vs. Sales ratio over a period of time. Also, the pattern of the click-throughs is studied - wherein if a pattern appears with clicks made at regular intervals from the same location (every 2-4 seconds), a flag is set indicating the source to be suspicious, and suspends it position!It is a slightly difficult task, since human clicks can also be sometimes marked suspicious owing to different clicks from different parts of the world at the same time. Identification of the host IP would help here.
A Google Search for Click-through Fraud led me to an insightful article published last year on ZDnet.com
Few take-aways from this article -- 20% of the Advertising expenses still go towards unknown consumers.
Sources of Fraud:
(i) "bots" or programmed robots
(ii) hired workers
Another Link given by another Expert is also helpful - Check it here. But most of it is covered by ZDnet.com.