In the next few pages, I'm going to walk you through what click fraud is, how to identify it and how to stop it. However, if you're not sure of the basics -- not sure what paid search marketing is in the first place -- please skip to the "About paid search" page of this In Focus, then come back.

Let me open with a hypothetical -- but very realistic -- example of why you should take click fraud seriously.

An online retailer selling consumer electronics noticed something interesting about his search campaign one Monday morning. In the last month, his top earning terms like "iPod Nano" have gone from an average $2.00 per click to well above $5.00. His conversion rates, usually in the 1.5 to 2.5 percent range have dropped below .05 percent. Search activity for less than popular targeted terms like "iPood Nannu" have gone from 12 to 15 searches a month to almost 500, and those terms have skyrocketed from five to 10 cents per click to almost $3.00 per click with almost no increase in sales over the previous 30 days.

What happened? The most likely explanation is that a competitor started clicking on our online retailer's sponsored search ads over and over and over in order to drive his costs up, drain the amount of money he can spend on search, and open up those key search terms for his own business.

The takeaway: No other aspect of this retailer's business has changed. Yet in a month’s time, his search marketing costs have increased by more than 500 percent and his sales have plummeted from $16 million a month to just under $2 million.

Click fraud can cost you a lot of money.

Next: What is click fraud?