Over at the Freakonomics blog, they’ve been talking about click fraud. It began with this alarming report that 16.6% of all ad clicks are fraudulent across the industry and that in the case of Cost-per-Click advertisers like Google and Yahoo it was 28.3%. They’ve since followed it up with a post where Google explains that their algorithms are quite good and that they estimate that only 0.02% of clicks that pass through the network are fraudulent.

The challenge for the reader is to determine whether to believe the report of the “independent auditor” ClickForensics who offer third party click validation services and so have an incentive to skew high or to believe Google who, of course, have an incentive to skew low. In the end it doesn’t really matter, as long there is a mechanism to mechanically pay out money for clicks (or displays) there will be an arms race where shady publishers try to game the system.

Guys, this is exactly why we decided to stop selling advertising on these ridiculously open-to-abuse pricing models! There’s a Better Way!

-Tim