When we think of click fraud, it would help to understand it better if we consider a publicly traded company in the stock market.
If you check out a price or listen to analysts talk, they mention things like "this problem is already built into the price of the stock" and things similar to that.
This is one way that click fraud must be looked upon when engaging its use. Since Google (GOOG) has started sending companies reports on the click fraud concerning their campaigns, not one of them have quit using the service. The reason why is that they understand that click fraud is built into the price, like the problems that reflect the stock price of a company.
It's similar to the use of DVRs and television ads. Most reports are that at least 10% of viewers don't watch TV advertisements because of DVR use. This doesn't include those that may be taping programs 
another way. This is part of the marketing landscape. Even if there wasn't a DVR or way to copy a show, many people use their remote to mute the commercial while its playing and turn it back on when the show returns. It is impossible to measure this part of the equation. In other words it's a part of doing any type of marketing.
Another example would be paying for an outdoor billboard advertisement. While traffic going by it can be measured, it's extremely difficult to get exact figures on its effect.
So when we use Google Adwords, or other advertising methods, we need to not only look at what we are paying per keyword, but also to build into the cost what we project as fraudulent clicks. So if it's costing $1 for each click, look at the percentages that research is showing you are not legitimate, and add it to the cost of doing business.
If your research makes you conclude that it's 20 percent of clicks, then add that to the $1 per click. This will give you a more realistic and accurate way of measuring your campaign.
Of course the bottom line is still how good the campaign is achieving its goals. If after you add the cost of your PPC, and even if it's at a premium and you're still making money or achieving the specific results you're looking for, then it's more a matter of what your ROI is, rather than if it's drowning your business.
Another thing to consider is if you're using the campaign to promote a product or service, you'll need to build the cost of the click fraud into the price of the product or service offered. This will help you to realize your targeted ROI.
Once you get hold of the most accurate cost per click, then it's not that hard to adjust your prices or costs to reflect that reality.
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