Yahoo! PPC Fraud on Trial


The Washington Post has a scathing article about a recent class action lawsuit against Yahoo! for click fraud in association with spyware and adware companies.

A class-action lawsuit filed Monday against Yahoo! Inc. and group of unnamed third-parties accuses the company of engaging in "syndication fraud" against advertisers who pay Yahoo to display their ads on search results and on the Web pages of partner Web sites. The suit claims that Yahoo displayed these advertisers' online ads via spyware and adware products and on so-called "typosquatter" Web sites that capitalize on misspellings of popular trademarks or company names.

Worse yet, the suit claims that Yahoo! pours on the click fraud traffic when they are worried that they are not going to make their quarterly numbers.

"Not only have Defendants turned a blind eye to abuse of their [pay-per-click] advertising system, but Defendants knowingly have manipulated that system for their own benefit, by increasing the volume of improper advertising displays during financial reporting periods when Defendants were at risk of failing to meet investor expectations."

The lawsuit PDF is online here.



Duh, what took so long?

I have been complaining about it dating back to the GoTo years, and it has been generally ignored.

Doubt if it will actually impact their bottom line, but I am happy that the general online advertising public might now become aware of it.

unjust enrichment, civil conspiracy, breech of contract....

It all sounds good until you realize that these "class action lawsuits" end up paying lawyers millions and plaintiffs pennies. Take a second look at where the unjust enrichment" is.

Click fraud's evil twin

The example in the complaint is classic. Essentially this site and Yahoo! are creating a paid spell checker for consumers who can't type, all at Expedia's expense. Is this the best way to connect buyers and sellers? Hardly.

Let's start by making the system transparent. My guess is that most visitors looking for wouldn't click the paid link if they saw how much Expedia was getting charged for the link. They would go in and retype the name in their browser.

At the end of the day, until we deal with the underlying misalignment of incentives between advertisers and intermediaries and make the system transparent to users, this kind of thing will go on and morph into new forms. You can fight crime with policing and lawyers, but you won't get rid of it as long as there is $ to be made.

We are working on a new advertising model that will eliminate click fraud and I'm sure many others are as well.


Let's start by making the system transparent. My guess is that most visitors looking for wouldn't click the paid link if they saw how much Expedia was getting charged for the link. They would go in and retype the name in their browser.

And let consumers see the true cost of that car they are buying from the dealer. And let the consumer see the true cost of that dental work. And place the "actual cost" on every UPC sticker so educated consumers can be better customers. Puhleeeeeze.

This is silly.

Not Nonsense

I disagree John. The better analogy is a stock broker. Would you rather buy stocks from a broker that discloses to you that he/she is making a commission on certain stocks or one that hides this fact (or better yet one that isn't biased by a commission)?

And when I buy a car or a product, I understand that someone is making money. It is directly reflected in the price I pay and competition drives the inefficient providers out of the market. Just like these landing pages would be driven out of existence if people knew what was going on. The difference is that consumers don't know this is going on because it is hidden.

I agree with that

I agree in concept, but practically it just ain't so. As Aaron frequently reminds us, there is always some one making money. Just because you don't know about it (or they don't disclose it) doesn't mean it isn't there. Sometimes it is quite the opposite: where there is trust (perhaps as a result of disclosure laws) there is exploitation.

That stock broker example... have you ever worked on Wall Street? Until you've been on the inside of the office chatting about a dog stock about to tank, while the broker next to you pitches client after client to unload that same stock before it does tank, (to get his special incentive), you may not appreciate the lack of transparency in your regulated environment.

I agree competition drives the less efficient providers out of the market. I don't agree it is based on efficiency at the consumer pricing level... that's nonsense in all but the most commoditized markets. The competition is usually within the system or distribution channel, where costs and profits are spread around (or not). Don't try and tell me the car dealership makes the bulk of his profits selling cars at $600 over invoice. He makes X times that by simply switching your financing towards his partner banks, Y times that or more on the $80 oil changes and odometer-triggered "service required" lights, Z times that in model/package arbitrage moving cars between dealers, etc etc etc.

Where does SEO extract value? It all depends on the project, as every top SEO knows and not every top SEO client knows.

A better way

I agree that you may get crappy service from a stock broker or be upsold at a car dealership (and we can find lots of other examples like this in traditional models), but at least you evenually know that you are being fleeced (when the stock crashes or your see a $25 oil change place down the street). And importantly, you then will modify your behavior accordingly. In the domain example, consumers don't realize the unnecessary costs they are creating and thus, the system can perpetuate.

The Internet dramatically lowers information costs and allows buyers and sellers to be connected in a new, measurable ways. Right now the financial model rewards clicks, which doesn't necessarily serve advertisers or consumers very well. There has to be a better way to align the incentives among the three parties involved (the buyer, seller and intermediary that connects them).

Parking Pages

I am okay that Yahoo! runs Search Marketing ads on parking pages. I just want the ability to bid on these separately and/or opt out of them. By lumping them with Search ads is unfair case of syndication fraud.

The biggest ripoff

When I started to check my logs to see where my Adwords clicks were coming from, I was outraged to see a bunch of MFA sites (you know - no content, page full of ads, menu down the side with links leading to more pages full of ads). The conversions were shit. I immediately fired off a complaint letter to Google complaining about these sites which added nothing to an internet users experience, placed an extra click between the user and the information they were looking for and so on and so forth. I asked how I could stop my Adwords ads appearing on sites like this.

Anywho the answer came back that these were parked domains and were part of Google's search network. I was floored. When I signed up for Adwords there was mention of my ads appearing on the search network and names like AOL, Ask Jeeves and Sympatico were mentioned. They never said anything about being part of the Google search network, but there you go, they are apparently Google's 'search partners'. WTF? The only way I can stop showing ads on parked domains is to opt out of the search network.

I wrote back asking how a parked domain can have:

• a header;
• a menu; and
• directories for different categories

(cause to me that makes it a website, albeit a crappy one), and they replied 'the sites in question comply with Google's parked domains guidelines'. This is crap. If people realised who Google chose as their 'partners' then Googles reputation will be tarnished. Talk about a bad neighborhood!

And anyway, how do people get to these sites anyway? I mean, if you are looking for e.g. shoes how do you end up at anyway?

~rant off~

it's called "bundling"

It's called "bundling" and it's a highly-charged issue in other industries. Look at Cable. One side argues that bundling is bad.. let the consumers pick the indivdual channels they want to pay to watch. The other side argues that without bundling, people would never pay enough to support things like PBS and kids edutainment stuff. Good arguments on both sides.

Then the profits come in and the cable companies boast of huge profits due to the "success" of bundling. and people complain that in order to get one channel, they have to pay for a bundle that includes 3 other dog channels. The scam is in the way the bundling supports profits, while the bundling argument supports claims.

Google is just starting to bundle by making parked pages part of the search network. Would you opt-out of parked pages if that was an option? Sure you would.

Just wait until Google starts "optimizing" based on what it knows about your sites from google-analytics. If you claimed your site via your Google account, and they know your stats and profits, why can't they "personalize" your bundling options as to speak? Wait a sec, you though the pull of ads to be dislayed on a given site was *random*? If they know the CTR, the profit potential, and the ad inventory, why would they not "manage" the delivery? There is a very good reason they need to grow the bottom of the AdSense webmaster network.

Only the Beginning

As Nick W. himself reported here nearly a year ago, the advertising world is slow to wake up to the fact that they've been being screwed over by distributors of CPC ads. This one is a long time coming for Yahoo who's love affair with adware is a well documented one.

As for Nick's mention, I am referencing TW's coverage of an item I blogged on: Nextag's involvement with WhenU.

That's right, advertisers partnered with NexTag (comparison shopping) are being delivered via WhenU pops-- many times over the advertiser's site itself when a user navigates DIRECTLY to it.

The below entry resulted in calls from a few VP's (i.e. PriceGrabber wanted to be sure and distance themselves from the practice) and a very irritated WhenU marketing wonk. It relates directly to the transparency issue that is biting Yahoo in the bum. It's not limited to "traditional" search engines... it's widespread. What's stoping advertisers from going after NexTag? Nothing IMO.

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