Traffic distribution partners willing to eliminate competing affiliates on a search engine network are rumored to have used click fraud warfare, or clickware. Other fraudsters, in an attempt to hide their activity, are generating bogus impressions, bogus clicks and also bogus conversions. To get undetected, they keep their CTR and conversion rates to more discrete - yet still too high - levels.

On the other side, many companies are changing their employee internet usage policy for increased security. This means that sometimes, a same company or government agency uses spoofed IP addresses or one IP and one same browser shared by 50,000 employees. This can cause fraud detection systems to fail and generate many false positives, thus inflating fraud numbers. As far as organic search is concerned, I would be worried by individuals who have been banned by Google using the same technology that get them banned to eliminate their competitors. This and other schemes have the potential to reduce search results relevancy, already low in some categories such as mortgages. However search engines will fight back with more advanced relevancy algorithms. This is actually one of the priorities for MSN and many others.

On the positive side, I see that some search engines are taking the click fraud issue seriously. Over the long term, I believe that the concept of click fraud will be replaced by the much more meaningful concept of click quality. True click fraud is illegal clicking worth investigating by the SEC or FBI because of potential connections with international crime, shareholder fraud or terrorism funding. It represents a small but potentially fast growing percentage due to the technical expertise of these groups. From a click scoring viewpoint, extremely poor clicks account for 10%, very poor clicks for 10%, poor clicks for 10%, and less than average clicks for another 20% of all clicks. Correctly identifying these click segments using an appropriate click scoring system is of critical importance to increase ROI. Sophisticated keyword selection systems should automatically buy dozens of thousands of under-sold keywords and automatically set ads on Google and Yahoo, ideally three ads per keyword. Ebay and Amazon have yet to substantially improve they automated bidding tools though.

On the long term, advertisers will get smarter. Increased PPC with increased fraud and thus lower ROI or even negative ROI can not be sustained over the long term. I believe that the future will eventually bring better fraud detection and increased ROI – possibly with higher PPC - thanks in part to more knowledgeable advertisers and better relevancy algorithms.