An economic model of click fraud in publisher networks

Click fraud occurs when a Web user clicks on a sponsored link with the malicious intent of hurting a competitor or gaining undue monetary benefits. Advertisers and the media accuse search engines of not doing enough to curb this practice. This paper develops a game-theoretical model of click fraud in a publisher network that sheds light on the economic trade-offs search engines face. On the supply side, search engines try to create incentives for publishers to generate clicks honestly and to reward honest publishers who generate legitimate clicks. The negative strategic effect of undercounting invalid clicks deters the search engine from undercounting. Since better filtering is beneficial to search engines, publishers, and advertisers, search engines have an incentive to invest in filtering technology.