Click fraud is a real problem for advertisers. Not many deny that. But just how big of a problem is it? If you listen to companies providing PPC advertising services, it’s manageable. They’ve got things under control.

But a click fraud ring recently uncovered by click fraud monitoring firm Anchor Intelligence may lead you to believe otherwise. The size of this ring is remarkable: it employed over 1,000 people, 10,000 websites and 200,000 IP addresses. All told, Anchor Intelligence reports that it generated $3m worth of fraudulent clicks in a two week period of time before it was discovered.

TechCrunch has the details of Anchor Intelligence’s discovery and reports that the click fraud ring, which was based in China, has been shut down. Nobody knows how long it had been in operation and nobody has been arrested. The ring was dubbed DormRing1 “because it was centered in dorms at technical universities in China such as the
Shanghai Technology Institute
“.

Such a click fraud ring is no surprise if you follow the undercurrent of the internet’s criminal underground. Botnets are just about everywhere you turn and clever criminals have no shortage of ways to use them to make money. Big money.

PPC ads are an obvious target and while DormRing1 was shut down because its operators got a little too ambitious, there can be little doubt that conservative criminals are operating in a far more subtle manner, slowly separating advertisers from their money a little bit at a time in a distributed fashion. It’s no different than stealing pennies from tens of millions of bank accounts.

DormRing1 hints at the breadth and depth of the online networks criminals can build today and so long as the most sophisticated of them are disciplined enough to stay below the radar, the scourge of click fraud will be an endemic part of the PPC market. Maybe on the surface that’s not a huge problem. After all, well-managed PPC campaigns can be highly effective and drive significant ROI — click fraud or not.

But complacency is the last thing that’s needed here. Advertisers can’t assume that they’re not being cheated and that PPC providers are effectively looking out for them. Some proactive effort to mitigate click fraud is often advisable. And PPC providers, whose financial interests are in some ways more closely aligned with online criminals, shouldn’t dismiss the potential aggregate effects (and risks) of criminals who are becoming bolder and more sophisticated all the time.

Photo credit: Davichi via Flickr.