It's more of a problem on the content networks and parked domain pages then the search networks.
It is something to keep an eye out for though.

It's always gonna be a problem in one way or another, but the better ad networks have complex algos to help prevent it.

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Some click frauds are not possible to detect. When your competitor use proxy, go to your page, check few pages then leave - this is what normal customers are doing. There is no algorythm to prevent this.

that's good to know...

I've never found click fraud to be a big problem.

On the search network, it's not a problem at all. Seriously, you really think there's people simply doing queries and clicking on your ads, all day every day, to run up your costs? Waste of time and money. Besides, it can only help you with better quality, although lesser conversions. Also, the search engines are pretty good at detecting that sort of thing.

On the search network, the problem might be of a site owner telling friends to click ads. That sort of behavior can be detected to some extent and the site owner banned. Site targeting helps and removes unwanted ad display on questionable sites such as parked domains.

OK I see. But is it the same case with Yahoo? Anyone knows?

If someone wants to be malicious, I don't think they'll stop at Google. They'll do the same to Yahoo, MSN and everybody else they can think of. It's just that there's more advertisers on Google (with good reason) and their content network is bigger.

Google is definitely the leader in everything PPC, including detecting and correcting click fraud. They have the resources. But Yahoo and MSN are no slouches either. They also want to protect their brands and take click fraud very seriously.