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Class Action Accuses Yahoo of Bilking Advertisers by Click Fraud

Class Action Accuses Yahoo of Bilking Advertisers by Click Fraud
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May 3, 2006 9:57 AM PDT    Text size: 
NEWARK, N.J. — Yahoo has been hit with a federal class-action lawsuit alleging that the search engine fraudulently bills customers for pay-per-click ads by counting clicks improperly and that it places ads on “typosquatting” sites.

Initiated by Crafts by Veronica of Newark, the complaint says that Yahoo promises to put ads in “highly targeted” websites, then enters into syndication agreements to place them on sites that are randomly selected.

The suit, filed in U.S. District Court in Newark, N.J., further says that Yahoo promises not to place its customers’ ads “in pernicious spyware programs, [but] defendants have done just that, and have charged their advertising customers for every click made on spyware popup ads.” The suit names Yahoo, as well as subsidiary Overture and John Doe “syndication partners.”

“Instead of safeguarding against such abuse, finding such practices and diligently putting a stop to them, defendants have actually engaged in such abuses,” the suit says.

Among the spyware vendors named in the suit as partners in Yahoo's ad program are Direct Revenue and Intermix, two companies recently sued by New York Attorney General Eliot Spitzer for violating consumer protection laws.

The suit includes examples of customer ads shown on typosquatting sites, such as “Expedai.com,” a “parked domain,” which includes a Yahoo ad for the real Expedia.com. Expedia would be required to pay Yahoo and the owner of that typosquatted domain a hefty fee each time someone clicks on the Expedia link on that site.

The claim further contends that plaintiffs oftentimes are forced to pay high “sponsored search” prices even when they receive less valuable “content match” advertising places.”

“Defendants pay their syndication partners to show advertisers’ ads in contexts that the advertisers never agreed to or contracted to pay for,” the suit says.

Among the spyware vendors named in the suit as partners in Yahoo's ad program are Direct Revenue and Intermix, two companies recently sued by New York Attorney General Eliot Spitzer for violating consumer protection laws.

The class-action suit includes examples of customer ads shown on typosquatting sites, such as “Expedai.com,” a “parked domain,” which includes a Yahoo ad for the real Expedia.com. Expedia would be required to pay Yahoo and the owner of that typosquatted domain a hefty fee each time someone clicks on the Expedia link on that site.

Yahoo already is challenging “click fraud” claims that it overcharged customers for advertising. One of those suits was filed in California; the other in Arkansas. The Arkansas suit also named Google, which agreed to pay up to $90 million to settle the case.

Plaintiffs attorney Lisa J. Rodriquez of Donna Siegel Moffa and Yahoo officials did not immediately respond to XBIZ by post time.

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