Ok so here is a quick primer for those of you who’ve been living under a rock for the past ohh…7 years….PPC advertising is when you choose “keywords/phrases,” and then you bid how much you’d like to pay for each click. By paying anywhere from a nickel to a $100 per keyword term, you are essentially reserving ad space on the Search engine page that comes up when someone has typed in that key word. pretty nifty huh?
So when a searcher goes to a search engine and types in one of your keyphrases, your short text ad appears, and if someone click on it your account is then charged. When the click occurs, it takes them to your landing page, peddling your goods and or services. That’s how it’s supposed to work. But thanks to dishonest people, I know, who would have thunk it.. we have something called “click fraud”Click fraud is simply the act of clicking on ads for the direct purpose of costing the advertiser money. It is recognized as the biggest problem today in PPC marketing. According to InformationWeek.com, “60% of people surveyed by the “Search Engine Professional Organization” have stated that fraud is a problem when it comes to PPC advertising”PPC marketing can cost you a lot if you do not administer it right. Bad targeting plus fraud can be a costly problem. The main sources of click fraud are the following four:
1) AdSense
Google Adsense pays website owners to run their Adwords ads and compensates them per click. Google does monitor this and it’s against their terms of service to click on any of the ads on your own site. If they find a publishers doing this, they will lose their accounts, but some may still be clicking under the radar.
2) Competition
Your competitors could be clicking on your ads over a period of several days in order to deplete your ad budget. This way they neutrilize your advertizing campaigns. Don’t think this happens? Think again!
3) Bots
There are those who use automated clicking tools, such as robot programs, to click on PPC listings.
4) Professional Clickers:
In some Asian countries, people are often paid to click on PPC ads for hours. Many don’t know why they do it, and don’t care. The only important issue is that they will be well rewarded for their efforts. If you do a search on any search engine you’ll see plenty of sites offering to hire people for just this purpose. Type in ‘earn rupees clicking ads’ in Google and you get quite a few leads.
Most PPC networks have measures in place to protect you against click fraud. Overture tracks more than 50 data points, including IP addresses, browser info, users’ session info and what they call “pattern recognition.” They have a “proprietary system” in place for detecting fraud and a specialized team that monitors things and works with the advertisers to stop it.
Google offers suggestions to avoid click thru fraud, such as “using negative keywords” to keep your ads from showing up for products and services that are unrelated. They also suggest adding tracking url’s to your links so you can track the traffic coming from Google. If you go through your log files, you’ll be able to see your Google traffic at a glance.
If you suspect fraud, Google asks that you contact them right away, because they have a team of researchers that will investigate. They also take action to block future impressions from anyone they identify as committing click fraud. Like Overture, they also have “proprietary technology” that distinguishes between normal clicks and invalid ones. Google never bills you for any “bad clicks” that are caught by their system. But there have also been instances where Google has missed click fraud, so it is imperative that you monitor your PPC campaigns, unless of course you like paying out the wazoo for useless clicks..
All honest website owners need to be alert to any “suspicious activity” by researching their server logs or stats. If you’re experiencing a lot of clicks and no sales you’ll also want to take a closer look. You need to watch for any spikes in traffic, usually on one keyword or phrase and coming from only one PPC source. You need to measure and track all of your PPC accounts closely.
The bottom line is, you need to be very vigilant of your clicks in any ppc campaign. The more competitive, the more you have to watch. It’s the nature of the beast that anything that can be done to make money without having to work is going to attract the leeches. And what attracts leeches? Blood. So don’t get a ppc nosebleed.
Direct Marketing Observations 
http://adwordseditor.blogspot.com/2007/09/click-fraud.html
read my experience here…
Dan I read what happened and without a doubt, that is a massive example of click fraud. The only problem is trying to convince Google that it occurred. Be cause of the way they define uniques versus clicks versus visits, means that not only are you battling the Monolith known as Google but also semantics. You are armed with some great ammo though. Note: Google does reimburse, you just need to be vigilant. Your data is very compelling though.
Who told you it happens only in Asian countries? There are so many South American and European countries where there hundred thousand jobless literate people are there around, who can do anything for money.
Just do not point at Asians. Refine your knowledge.