What is the World’s Largest Fraud?

Hint: it’s not Bernie Madoff.

I saw a press release today from ClickForensics proclaiming their most recent statistic that 17.1% of all pay-per-click advertising is click fraud.  So what does 17% mean in terms of dollars?  That’s hard to say, but if we assume the global pay-per-click market is equivalent to the global search market which JP Morgan estimates as an $83 billion market in the 5 year period of 2003 through 2008, then that could mean there has been $14 billion of fraud during that period.  Odds are it is even more since if you’re going to commit click fraud, you probably would stay away from cheap key words (otherwise it would be like robbing a bank and taking the 5 dollar bills).

I’ve been hearing about click fraud for a while, notably the case of Michael Anthony Bradley who in 2004 was caught red handed trying to extort $150K from Google (to not publicly release his click fraud software) and then the case was mysteriously dropped.  The rumor at the time was that Google did not want to publicize the fact that they have click fraud.  Two years later, Google paid a $90 million settlement in a class action case.  Google has remained relatively quiet on the whole issue, although about 2 years ago they did give a brief explanation of what they call “invalid clicks” which they claimed to be “less than 10%” in total but a paltry 0.02% after their filters.

Even if Google’s numbers are correct, that has grave implications for the rest of the industry (particularly those without the systems and processes of Google).  What’s more, to my knowledge there has never been an independent verification of any of these numbers (even ClickForensics has an ax to grind).

With a potential fraud this big (in a few years, it will be bigger than the $50 billion attributed to Madoff) it would seem there is a need for congressional hearings on this topic.  What do you think?  Am I missing something?