Click fraud cost internet advertisers $800 million last year, according to a study by Outsell Inc. Around 15% of all clicks on click-through ads were bogus (or rather, according to the article 14.6% of clicks were “believed by advertisers to be fraudulent”). As a consequence, advertisers are cutting back on spending, causing lost business of about $500 million for Google and Yahoo in the US.

Some bloggers now spell the end of pay-per-click advertising. I think that might be a false conclusion.

First, 15% bad clicks mean there are still 85% good ones. As long as you know that, it’s easy to calculate your real cost for click-through advertising. Just add to your cost per click to compensate for the bad ones. It might still be a good deal.

Second, what Yahoo, Google and others need to continue to do is to admit there is a problem and to develop effective means of detecting fraud. And compensate advertisers that have become victims of click fraud.

It’s reasonable to assume the 15% is caused by just a few publishers – not evenly spread over all publishers. Those few bad apples are probably quite easy to find. Not every system with security problems has to go down, as long as you manage the risk. Just ask the credit card companies.

Third and last; there might be other reasons to suspect programs like Google’s Adsense are dying. Publishers report decreased earnings from contextual pay-per-click programs, making them less attractive than other types of advertising.

One reason for this is that a lot of clicks coming from publishers are out of curiosity, whereas searchers click out of genuine interest. That would lead advertisers to opt out of having their ads on third party sites, as some have noted. In the end, publishers get paid less because there’s less competition for their clicks.

So, pay-per-click contextual advertising on publisher sites might be dying – slowly. But not primarily from click fraud.