With pay-per-click advertising growing at a staggering pace, more and more concerns are being raised about the issue of click fraud and how it will impact the future of paid search advertising. With click fraud estimates at anywhere from 15-40% of the market, the numbers are nothing to scoff at. Even a 15% click fraud rate on a $1000 a month campaign adds up to $150 in lost dollars.

An editorial at CMO Magazine explores the basics of click fraud this week as marketers try to wrap their heads around the extent of the issue and what can be done to combat it.

From the article:

Click fraud occurs when someone clicks on a PPC ad maliciously, without intent to do business with the advertiser. There are two main types of click fraud. In one, a company will repeatedly click on competitors' ads to run up their advertising costs. In the other, an affiliate of an online ad network clicks on ads at its own site to increase its commission. Both people and software are used to click on ads in these schemes.

Marketers should keep a wary eye on the following indicators: visitors who don't stay long on the advertiser's site or don't click around it much; clicks on ads aimed at a U.S. audience from faraway countries such as India or Romania; repeat visitors from the same IP address and hits from anonymous proxy servers; and click-to-sales conversion rates that fall below expectations.