Click fraud has become a major concern. When Google places an ad for a company w

Question

Click fraud has become a major concern. When Google places an ad for a company with its search results, the company pays a fee to Google each time someone clicks on the link. That's fine when it's a person who's interested in buying a product or service, but not so good when it's a computer program pretending to be a customer. An analysis of 1200 clicks coming into a company's site during a week identified 175 of these clicks as fraudulent. If a company pays Google $4.50 for each click, give a confidence interval for the mean cost due to fraud per click.

Explanation / Answer

Normal approximation to the binomial calculation:

Standard error of the mean = SEM = x(N-x)/N3 = 0.010

= (1-CL)/2 = 0.025

Standard normal deviate for = Z = 1.960

Proportion of positive results = P = x/N = 0.146

Lower bound = P - (Z*SEM) = 0.126

Upper bound = P + (Z*SEM) = 0.166

At 95% CI is [0.126*4.5 to 0.166*4.5]

$ 0.567 to $0.747

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