One of the biggest issues facing the paid search industry is the amount of "click fraud" that occurs. It's a well known problem, and many advertisers chalk up click fraud as an expense, just like retailers chalk up shoplifting as an expense. Many of the paid search companies will refund some money to advertisers when they discover click fraud, but apparently those advertisers don't think enough is being done. A group of advertisers has sued all the big names in paid search and are trying to get it turned into a class action suit. If the case does go ahead, it could represent serious problems for the paid search companies -- as it's tough for a court to force them to stop people from clicking fraudulently. Of course, the problems with click fraud tend to be more focused on contextual advertising sites, rather than search sites itself. On search sites, the main reason for click fraud is generally to drive up expenses of a competitor, depleting their advertising budget. On third party content sites, though, the incentive is often to make money for the content provider. If this case does actually get somewhere, it seems likely that some of the paid search/contextual ad network companies will start to shift away from pay-per-click to other performance metrics, such as impressions and pay-per-action.
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