"Let it Happen". That's exactly what Eric Schmidt the CEO of google mentioned during a Stanford University Event last march.

According to Schmidt, Google's auction-based pay-per-click advertising model is inherently self-correcting. Schmidt's scenario for what would happen if Google did not police click fraud and it was "rampant":

Eventually, the price that the advertiser is willing to pay for the conversion will decline, because the advertiser will realize that these are bad clicks, in other words, the value of the ad declines, so over some amount of time, the system is in-fact, self-correcting. In fact, there is a perfect economic solution which is to let it happen.

While I believe in the self-correcting solution would work, it seems that Google cannot 100% eradicate click fraud and they are using this "idea" to justify their lack of success in attacking click fraud.

The effect of this for adsense publishers is that they would eventually get less money than they used to. If their traffic is 1000 visitors a day and they're getting say $100/day, given the same traffic, after it "self-corrects" I suspect we would be seeing an income of about $50-$70 a day depending on the amount of click fraud and "price correction" the advertisers would make.

[via zdnet ]