Or have they found some bug in Adwords whereby they get an ad with their URL displayed for free and do not pay for clicks because the landing page does not exist?
I would say that the best bet is that your ip has been blocked by your competitor which could lead you to getting a 404 page.
why are you clicking on their ads anyway? ;)
seems to be missing the www and hence when clicked you get a 404 page
That's a pretty bad server setup if that's the case. Try viewing the site by clicking the ad from home or through a proxy. Also, make sure the adwords ad doesn't have a typo.
Funny if it does have something wrong and actually delivering a 404 to every click. I can hear them now... "This adwords is crap. We're spending a fortune on clicks and there are no additional sales!" :)
My guess is that the advertiser doesn't realize their ad isn't working. Imagine a person with thousands of affiliate accounts and millions of keywords not managing them properly.
Hey get into the good side of this guy or gal let him know they are geting killed maybe you could ask for a link from his home page for some valuable information..or just be nice and let him know.
How I found out a competitor called us up and told me. This was about a year or more ago.