Click Fraud worries Small Business advertisers, particularly due to the often small monthly budgets involved.  They often worry that their competitors will click their Sponsored Listings repeatedly until the daily budget expires.

To watch out for Click Fraud, keep an eye on your web logs and look for repeated visits from the same IP address or range of IP addresses.

it is possible to exclude IP addresses and ranges by going into the Tools option in AdWords, and then choosing IP exclusion.  I am careful to do this even at the first visit when I see someone clicking the advert and immediately bouncing off.  To me this suggests a competitor who cannot even be bothered to stick around....

There are packages available to track Click Fraud, the one I use and recommend is AdWatcher.  This is an excellent tool but the disadvantages are the time taken to set it up.  Each destination URL (landing page) for every advert, must be entered to the AdWatcher to their system, and they will give you an alternative URL that must be entered to Google.  Note this does NOT affect your quality score, or Google's ability to detect the landing page.

Having fully tested AdWatcher, I noted that for one client's campaigns, one particular competitor seemed to have nothing better to do than sit for hours each night typing in difficult keyword permutations and clicking the adverts.  What I am delighted to report, is that Google did not charge me for a single one of these clicks.  Their automated systems had in fact ALREADY identified this was a fraudulent IP address, and filtered every single click out.

Another advantage of using AdWatcher is the ability to redirect those who click more than a set number of times (I chose 3 times in 48 hours) to a fraud tracking page.  This explains that they are costing you money and if they are a genuine customer, could they please bookmark the page instead.

Overall, I was delighted to note that Google's tools are in fact detecting and preventing Click Fraud.

Please note that there are other categories of Click Fraud that tend to affect larger competitors, with automated systems clicking adverts across the world.  This is not usually an issue for the Small Business owner.