Click-Fraud and Google ad-words?

I'm not really a blogger, but this is something i felt i needed to go out and get a 'real people' feed back on. See, as a newcomer to the online business it was a shock for me to hear that something like 1/3 of my pay-per click budget is going down in fraudulant clicks and my traffic becomes stronger not because of my service popularity but because of malicious activity from some people who are eating up my ad dollars!
ok..breath..is there anything i can do to prevent this, I mean i read couple of articles online and it gave me an idea of few independent companies who are doing something about it but is there anything I can personally do to get my advertising ROI a jump and protection?

You cannot do much on your side, it is mainly the job of the ad network provider to fight against fraudulent webmasters. And they surely do so (guess they are using statistical information and heuristic methods to differ between valid clicks and fraud ones). But I doubt that they will make their methods publicly known - for good reason.

In case of AdWords, Google usually requires one or two payment periods (months), before they grant back some money to you (I think it should appear under "Service adjustments", but it is a while since I last used AdWords). At least, it was my experience.

Personally I find the risk of abuse being much higher when placing your ad at the "content network". Webmasters of any kind may want to increase their income by pushing their own ad clicks with certain illegal methods (even facing the risk that they will be excluded from the network). On the other side, you earn much more traffic when placing your ads on the content network as well. Hard decision.

My best advise to give: When preparing a new campaign or advertisement, be as specific as possible and not as broad as possible. For example, don't write "We sell cars", but "Michigan's best Nissan car dealer". Or if you ship your products only within the USA, then you may exclude your ad being shown outside the United States.

We found that when creating a campaign for a specific product only, more sales are generated and so consequently the abuse risk is much lower.

The last point of Marc's is key. My experience dictates that many fraudulent clicks come from overseas.

The best you can do on your side is to micro-manage your CPC Campaigns (micro-manage with time, keywords, and geography). It is burdensome, but that is why there are plenty of agencies and the job market is great for SEM professionals.