Interesting click fraud article

[paul]

A few years ago, Diane Frerick and Kevin Steele, co-founders of Karaoke Star, a Phoenix-based karaoke equipment seller, were on their way to $3 million in annual revenue.

They owed much of their success to paid search advertising on Google and Yahoo Overture. By bidding anywhere from 40 cents to $3 for keywords revolving around karaoke (such as "karaoke player" or "karaoke song"), Frerick and Steele were able to generate $6,000 a day in sales from $2,000 in advertising, and were watching business grow at a brisk clip -- 35 percent a month compared with the year before. They dreamed of becoming the Home Depot of karaoke.

Then, in the summer of 2003, things came crashing down. Suddenly, the number of clicks on certain keywords jumped from 200 to 800, forcing Karaoke Star to burn through its advertising budget, but $2,000 in advertising yielded just $3,000 in sales. "Our orders went up thousands a day but our bills went up thousands a day," Frerick said. "The increased business cost more than it was worth."

Karaoke Star was a victim of click fraud, a web phenomenon that has been attracting increasing attention...

More here.

Paul
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[finstar]

That's a pretty frightening story, and leads me to wonder just how much have the search engines gained out of this 'click fraud' phenomenon?
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[adigaskell]

It's always going to be hard to prevent, especially for high value keywords because just a few clicks a day will mount up to a fair chunk over the course of a year so your competitors can do a reasonable amount of damage pretty easily. The example in the article only got caught because they went too far with it and did lots of false clicks per day.

I wonder what is stopping the search engines using a more appropriate compensation system such as pay-per-sale or pay-per-lead?
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[adigaskell]