Click fraud auditing firms can't count, according to a report issued Tuesday by Google.

"We've seen media reports and data from consultants that didn't make any sense," says Shuman Ghosemajumder, Google's business product manager for trust & safety. "And we wanted to know why. So the report that we published today details the flaws that we found that explain these discrepancies. We're publicizing this information because we want to help the consulting firms fix these problems and make advertisers aware of the kind of distorted data they may release."

The 17-page report, released at a panel discussion at the Search Engine Strategies conference in San Jose, Calif., claims that third party click auditing companies report fictitious clicks--clicks that were never made on Google AdWords ads--in their click fraud audits and thereby inflate the number of clicks and the click fraud affecting advertisers.

In a blog post about the report, Ghosemajumder writes, "A rigorous technical analysis by Google engineers has found fundamental flaws in the work of several click fraud consultants--flaws that help explain why widely quoted estimates of the size of the click fraud problem are exaggerated."

Click fraud occurs when someone, directly or using click-automation software, clicks on an online ad for a purpose other than inquiring about goods or services. Advertisers are required to pay for clicks unless the clicker's intent can be shown to be illegitimate.

Click fraud isn't easy to prove, however, because search engines have been reluctant to disclose internal data for fear that it could be misused. "Our overriding concern in terms of sharing information in this area has been to not provide information that those who are trying to commit fraud would be able to use against our systems and against our advertisers," Ghosemajumder says. "But we've also been looking at ways to be able to share more [information]."

Until recently, Google has had something of a schizophrenic response to click fraud. Google CFO George Reyes has called click fraud "the biggest threat" to the Internet economy. On the other hand, Google CEO Eric Schmidt has called click fraud "immaterial."

In late July, Google finalized a $90 million settlement announced last March in a lawsuit brought by Arkansas merchant Lane's Gifts & Collectibles, a resolution seen as favorable to Google by legal experts.

Schmidt's recent statements about click fraud suggest greater willingness to confront the issue. "In Google's case, we worry about this a lot and we have a number of technical engineers who think that this is great fun to try to go ahead of this and get ahead of it," he said at an economics conference at Stanford University in March.

Google's recent actions have taken a similar tack. Last week, the Internet Advertising Bureau announced that it was forming an industry-wide Click Measurement Working Group to establish guidelines for measuring clicks on Internet ads. Among the companies participating in the initiative are Ask.com, Google, LookSmart, Microsoft, and Yahoo.

The week before that, Google introduced an "invalid clicks" reporting tool to make some of its click data available to advertisers.

The report Google issued on Tuesday stops short of accusing click fraud auditors of deliberate wrongdoing. "We're not making any kind of determination about what internal factors have led to this occurring," Ghosemajumder says. "We're disturbed and concerned that very basic checking of the information in the reports would have revealed these huge discrepancies to them. And the fact that they haven't made these basic checks is very troubling."

Ghosemajumder contends that inaccurate click auditing hurts advertisers by making them adjust their ad campaigns based on erroneous data. The Google report is highly critical of the methodology used by click auditing companies. It says that Google has communicated its concerns to advertisers but has elicited little interest in examining potential auditing problems.

Tom Cuthbert, president and CEO of Click Forensics, one of the companies singled out by Google in its report, says he hasn't had time to review the report in detail and thus can't comment on Google's analysis. But, he says, "We stand by our numbers."

Click Forensics has said that roughly 14% of clicks are fraudulent. Google says that figure is unrealistic. Ghosemajumder declined to offer a more accurate average figure.

Catherine Tucker, assistant professor at the MIT Sloan School of Management, contends an average number isn't particularly helpful because the incidence of click fraud is likely to vary with the value of the keyword purchased by the advertiser.

Tucker expects shortly to receive data from Click Forensics to study click fraud in greater depth. Having not yet received the data, she says she's unable to evaluate it in light of Google's report.

In a separate report on Google's click fraud countermeasures for the Lane's case, Alexander Tuzhilin, professor of information systems at New York University, observed that Google employs four separate approaches to catching click fraud: pre-filtering, online filtering, automated offline detection, and manual offline detection. These efforts, Tuzhilin concluded, are reasonable.

"This is an issue that we have taken very seriously and we recognize it's something we need to be able to manage effectively," Ghosemajumder says.