This is the first decline in click fraude reported by Click Forensics since Q2 2009. As you can see from the chart below, the rate has increased from quarter to quarter:

Click Forensics uses traffic from over 300 ad networks to produce these reports. Here are their key highlights:

• The overall industry average click fraud rate was 19.1 percent. That’s lower than the 22.3 percent reported for Q3 2010, but higher than the 15.3 rate reported for Q4 2009.
• The Click Forensics Malware Lab identified a new malware scheme targeting display banner ads. The sophisticated program performs a pop-up or pop-under and rotates brand advertisers’ banner ads every 10-15 min in an effort to seemingly boost impression figures. Click Forensics researchers are working diligently to quantify the impact of this new scheme.
• In Q4 2010, the countries outside North America producing the greatest volume of click fraud were Japan, The Netherlands, Philippines, Sweden and France, respectively.

For more information, see their Click Fraud Index.

Related Stories:

• Report: Click Fraud Rate Rises to 22.3% In Q3 2010
• Report: Click Fraud Rate Up To 18.6 Percent
• Report: Click Fraud Rate For Q2 2010 28.9%
• Report: Click Fraud Rate At Highest Rate
• Harvard Professor Details New, ‘Insidious’ Form Of Google Click Fraud

Traffic across more than 300 ad networks, as well as billions of clicks from top search engines, comparison shopping engines, social networks, leading publishers and advertiser web sites is reflected in the data.

Countries outside North America with significant CPC traffic producing the greatest volume of click fraud were Japan, the Netherlands, the Philippines and China, respectively. Click Forensics reported that they observed a growing volume of click fraud flow through a more diverse number of sources, including mobile proxies. The company is advising advertisers to be vigilant about the quality of traffic they receive as more ads are placed in videos, social networks and on mobile devices.

For more information, see Click Forensics Click Fraud Index. You can also see more stories like this in the Members Library. Check out the Legal: Clickfraud sections of the Members Library where this story is filed.

The findings of the report said:

• The overall industry average click fraud rate was 18.6 percent. That’s up from the 17.4 percent reported for Q1 2010 and the 12.7 percent rate reported for Q2 2009.
• In Q2 2010, the countries outside North America with significant CPC traffic producing the greatest volume of click fraud were Singapore, Pakistan, Japan, Ukraine and China respectively.

Anchor Intelligence released their click fraud report a couple weeks ago, where they said the rate was 28.9%. As you see, click fraud measurements can differ greatly by source and by definition, so just keep that in mind when reading these studies.

For more information, see Click Forensics Click Fraud Index.

Anchor Intelligence suggests the click fraud rate remains to be high due to a “dramatic growth in botnet scale and volume around the globe as well as the continued exploitation by malicious hosts of security vulnerabilities in the Internet infrastructure of countries such as Vietnam, Australia, and the US.”

It is important to note that these rates are not from search engines, they are from 3rd-party agencies that track click fraud based on their own methodologies. To download the full report go here.

Here are some quick charts and maps:

Back then, Nicole Wong, associate general counsel at Google, told Danny Sullivan that there is really nothing preventing the constant lawsuits over click fraud. However, the last time they were sued was in 2006 so Wong’s approach of making sure their “advertisers are happy” has been working.

“What we will do going forward is to continue to fight click fraud or invalid clicks to ensure our advertisers are happy,” Wong explained in 2006. “We’re getting better at it and we are more proactive than we were when we launched the program. We take that responsibility seriously.”

Google told Mediapost they have yet to be served by the lawsuit and could not comment yet. They did say they “devoted significant resources to protect advertisers from invalid clicks.” He added that the company “will continue to fight click fraud and work with our advertisers to investigate every click fraud claim and credit them retroactively, as appropriate.”

The Plaintiff, Microsoft, “… seeks injunctive relief and damages to remedy Defendants’ fraudulent conduct in perpetrating a sophisticated click-laundering fraud scheme on the online advertising network operated by Microsoft and to protect the integrity of Microsoft’s advertising network against the fraudulent actions of Defendants.”

The Defendant is RedOrbit and several John Does. Eric Ralls, president of RedOrbit Inc. denies these accusations. In a statement made to SeattlePi.com, Ralls says “I did not engage in click fraud. That’s absurd. It’s professional suicide.”

According to the lawsuit, Microsoft defines click laundering as “… herding otherwise innocent individuals to websites where they can be tricked into triggering clicks on advertisements, and using scripts or other methods to alter the information sent, for example, to adCenter.”

In the cases of “Microsoft v. Eric Ralls” and “Microsoft v. John Does”, Microsoft said they noticed “dramatic and irregular growth in click traffic” on two sites within its adCenter network.

Here are some useful charts from the Anchor Intelligence report, but you can download the full report over here.

Postscript: A day later, Click Forensics came out with their Q1 2010 click fraud report. You can download it over here.

Unlike most click fraud, Edelman says this scheme actually leads to sales on the advertiser’s web site — making it harder to identify than traditional click fraud. But if the sale happens, it only happens after the buyer has been passed from site-to-site through a series of affiliates that all take a piece of the pay-per-click fees. As he explains to Forbes,

“The retailer may think it can detect click fraud by a low sales conversion rate,” says Edelman. “But here, the traffic converts. Based on that high conversion rate, they might even decide to raise their bid [in Google's advertising auction system] and have no way to realize that it’s all a ruse.”

Google didn’t respond specifically to Edelman’s example, but the company gave this statement in the Forbes piece:

“A Google spokesperson responded in an e-mailed statement that it’s the company’s policy “to prohibit [advertising] partners from being associated — whether directly or indirectly, intentionally or unintentionally — with parties who buy traffic in ways that cause a poor user or advertiser experience,” and that it responds quickly to any violations of that policy.”

Edelman, it should be noted (as Forbes does), is currently involved in a lawsuit against Google involving the AdWords program; his bio also lists Microsoft as a “representative client.”

Those eligible in the settlement get a refund of $20, whereas the lawyers get $4,170,000.00, plus reimbursement of expenses of approximately $100,000. You can see all the court documents over here and the email sent to eligible advertisers over here.

Finally, if you want to get your $20, you need to submit a claim online by March 22, 2010. If you are not happy with the $20, you can always sue Yahoo directly, but make sure to exclude yourself from this settlement by December 14, 2009.

Click Fraud can be measured on many different levels. Anchor broke out their click fraud rates by two types of “invalid” clicks, “attempted click fraud” which was the 22.9% rate and “innocuous invalid” which was 4.2% rate, a total of 27.1% in invalid clicks for last quarter.

You can obtain the full report from Anchor Intelligence over here. Click Forensics report can be seen over here

Each company has their own data sources, measurements and definitions for reporting on click fraud. Like always, when reporting on click fraud, you need to keep these things in mind.