Los Angeles-based law firm Kabateck Brown Kellner filed a class action suit against IAC property Citysearch, alleging the site charges pay-per-click advertisers for fraudulent clicks. The firm has won similar cases against Yahoo and Google. All the major search firms now belong to anti-click fraud coalitions and make lots of nice noises about the problem. Truth is, click fraud isn't much of one. As Google CEO Eric Schmidt explained during an unguarded moment a couple years ago, click fraud will never be that much of a problem because if fraudulent clicks devalue the worth of click for an advertiser, that advertiser can always pay less per click.

Fraudulent clicks accounted for 28.3 percent of all clicks on ad networks like Google's AdSense and the Yahoo Publisher Network during the fourth quarter of 2007. After some approximations, Freakonomics puts the number of publishers who are theoretically complicit in click fraud as high as 26 million. Which means advertisers need to get over it. Buy ads on a cost-per-action basis, where you only pay when clickers turn into buyers. Or do your own math and discount what you pay for a click accordingly — which is, in effect, what Google, Yahoo, and the like are already doing to publishers. Whining about the problem gives zero ROI. (Photo by Jason Upshaw)

In March 2007, Yahoo named Reggie Davis its vice president of marketplace quality. The headlines hailed him as Yahoo's new "click fraud czar." Tom Cuthbert, president of Click Forensics, a search-marketing researcher, told CNET the move signaled "Yahoo is taking a more honest approach" to fighting click fraud." So what does it say about Yahoo's "honest approach" now that a tipster tells us Davis got the pink slip?

Indian tech magazine Digit ran a cover story this month exposing a critical flaw in Google's pay-per-click advertising model. That's right — click fraud! The report tells the story of an Indian security analyst named Manish Arora who wrote a script to "simulate human behavior" and game Google's click-fraud detection algorithms. The script didn't work.

Google co-founder Sergey Brin agreeing with Eric Schmidt about the "immaterial" click fraud problem, on March 2 (Analyst Day):

A reliable source confirms rumors of Google Wallet. As Wired Magazine put it, this payment system would sidestep click fraud, the major threat to Google's revenue.