Click Fraud Cloud Still Hangs Over Internet AdvertisingClick Fraud Cloud Still Hangs Over Internet Advertising

Click fraud isn't growing, yet there's no sign it's diminishing. The number of invalid clicks for online ads averaged 13.8% in the third quarter of this year, a touch less than the 14.1% recorded in the second quarter and on par with the 13.7% seen in the first quarter, according to Click Forensics.

Among high-priced search keywords--over $2 a click--the fraud rate rose from 20.2% in the second quarter to 20.9% in the third. Click Forensics says high-priced terms often make up the majority of an advertiser's budget.

The big search engines--Google and Yahoo--insist that click fraud is a manageable problem and that companies like Click Forensics have a financial interest in exaggerating the extent of click fraud.

If Click Forensics' numbers are to be believed, Google and Yahoo come out looking pretty good compared to their competitors. The click fraud rate at Tier 1 search engines (11.9% for Google and Yahoo) is significantly lower than at Tier 2 search engines (23.2% for Ask, Lycos, and MSN) and at Tier 3 search engines (25.6% for Dogpile and Mamma).

Meanwhile, the average cost for the top pay-per-click terms across the five largest advertising segments--retail, financial services, health, technology, and entertainment--declined in the third quarter to $3.92, down from $4.51 in the second quarter and $4.75 in the first.

But with the holidays approaching, the cost of popular keywords may rise as advertisers try to drive sales.