Click Forensics reports click fraud rates hit 17.1% in 4Q08, versus 16.6% in the same period in 2007.

According to CEO Tom Cuthbert, three components contributed to the rise: more dollars filtering into pay-per-click (PPC); increased competition in the click firm industry; and rises in cybercrime and botnet activity resulting from the poor economy.

The average click fraud rate for PPC ads across major sites like AdSense and Yahoo Publisher Network hit 28.2%, down from 28.3% in 4Q07.

31.4% of all click fraud traffic came from botnets, up from 2007's 22% and 28% from 3Q08. And in the month of December, the highest percentages of click fraud originating from outside the US included Canada (7.4%), Germany (3%) and China (2.3%).

Cuthbert also pointed to the resurgence of click farms.

"Google, Yahoo and others are doing what they can to protect advertisers, but this is an arms race," he stated somberly. "We're at the early stages of identifying these issues, and unfortunately it will only get worse."

He added that additional "industry cooperation" is necessary to lower click fraud rates.

Last year search giant Google partnered with Click Forensics to maximize click quality reports in its pay-per-click campaign tracking.