A hybrid pricing mechanism for solving the click fraud problem in AdWords auctions

Click fraud is a serious threat to the keyword advertising industry. In this paper, we designed a hybrid pricing mechanism in which an advertiser can submit both her bids for a click and for an impression. When the real click-though rate does not exceed the predefined click-though rate she pays according to pay-per-click model, otherwise she pays according to pay-per-impression model. We proved that the hybrid pricing mechanism is resistant to click fraud and compared the search engine's revenue in original AdWords auction mechanism and in our improved auction mechanism.