Just saw an article in the Washington Post today on Click Fraud. 

"After analyzing where and when each click came from, auditing firm ClickFacts Inc. estimated that 35 percent of the referrals that Radiator paid Google for stemmed from bogus traffic. Likewise, 17 percent of the leads that came from Yahoo search results were illegitimate."

That’s a lot of click fraud - esp if they can prove it to Google’s and Yahoo’s satisfaction. 

Look at it this way, Radiator.com pays 40,000 a month for PPC advertising from Google and Yahoo.  Assuming Radiator spent half of Google and half on Yahoo

Google     $20,000 per month x . 35  = $7,000 overcharge due to Click Fraud.

Yahoo       $20,000 per month x  .17 = $3,400 overcharge due to Click Fraud.

Therefore, 25% of Radiator.com’s PPC budget ($10,400) was wasted on useless transactions.

According to the WP article -

The two most prevalent types of fraud are competitive sabotage — rivals clicking to drive up ad costs for competitors — and affiliate spam — affiliates clicking on ads appearing on their own sites to boost their share of ad revenue from Google or Yahoo.

And here’s an interesting fact that I did not know about:

For $29 or so, anyone can buy fake traffic generator software such as Smart HitBot, Fake Hits Genie and Fakezilla, programs that can send bogus traffic to any Web page or ad.