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Yahoo Search Marketing Pay Per Click Advertising Forum

Class Action Suit Filed Against YSM
Allegations of Spyware-Fueled PPC Fraud

 11:37 pm on May 2, 2006 (gmt 0)

Potentially more explosive is the plaintiff's claim that Yahoo regularly uses its relationship with adware and typosquatting sites to gin up extra revenue around earnings time, alleging that the company is conspiring to boost revenue by partnering with some of the Internet's seamier characters. From the lawsuit:

"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."

Washington Post report here [blog.washingtonpost.com].

PDF of Lawsuit here [washingtonpost.com].

[edited by: werty at 2:39 am (utc) on May 3, 2006]
[edit reason] Fixed Landing URL [/edit]



 2:39 am on May 3, 2006 (gmt 0)

Great find MB! And this comes right on the heels of another recent article (2006/04/30) from the Washington Post...

The Web's Million-Dollar Typos

"It seems very hard to reconcile Google's support of this activity with their "Do No Evil" motto," said Ben Edelman, a researcher at Harvard University who has done extensive research into advertising on unused domains.

PPC Abuse is finally getting the attention it deserves.

Of the 30 million dot-com names registered worldwide last month, more than 90 percent were dropped, according to domain name registrar GoDaddy.com. As a whole, the Internet has only 54 million active .com and .net addresses, according to VeriSign Inc.


 4:10 am on May 3, 2006 (gmt 0)

I don't know. If I were given the wrong directions (i.e. they were spelled wrong) and then when I got there the gas station attendent told me the "right direction" I might be indebted to him for a buck or two.


 4:18 am on May 3, 2006 (gmt 0)

"then when I got there the gas station attendent told me the "right direction" I might be indebted to him for a buck or two. "

Uh... since when has a gas station attendant asked you to pay him a buck or two for the right directions? If he did, you'd never go back there again, and you'd probably tell his supervisor about it.

My biggest issue with this is the alliance with adware firms. Didn't Yahoo get in bed with Gator some time ago? This could be an explosive issue... I have reason to believe, from personal experience, that this goes beyone Yahoo. If Yahoo is dirty some of the other smaller PPC networks (not going to name any names here) are black.


 4:29 am on May 3, 2006 (gmt 0)

One of the attorneys of record in the case, Ben Edelman...

Ahh, so he's putting his mouth where his writing has been. Very, very interesting.


 4:30 am on May 3, 2006 (gmt 0)

I complained to GoTo about this stuff years ago.
Little gratification, any price in dollars will be just a slap on the hand compared to the money they made. For sure this will make Google to take a closer look at some of their operational divisions.


 4:40 am on May 3, 2006 (gmt 0)

. . the plaintiffs aren't ready to divulge the source of their information on the conspiracy allegations, adding that the information would come to light at trial if Yahoo decided not to settle the case. (From the article)

Come to light at trial? No, methinks it must come to light during pre-trial "discovery", otherwise it will be barred from admission into evidence at trial .

I've been waiting for the PPC partnership to get buggered for allowing trademark typosquatters into the direct navigation mix. For too long certain entities have defended their actions on the claim that "there's simply too many domains for them to analyze each for trademark violations". In many cases that rationale was humbug, albeit there is a large swath of domains potentially subject to a claim of trademark infringement that would/might not stand up in court. For example, someone selling family crests might do business under Crest.com or Crests.com and survive a trademark challenge, but the domain registratnt better not advertise toothpaste. Ditto, if Crest.com was parked.

Quite some time ago I suggested in a domain forum that the first typo-squatting/PPC broadside would likely come from a much typo-abused corporate entity such as Diney, I mean Disny, no no I mean Sisney, no Dismey . . . I suggested that it might be more efficient for a company, such as Disney, to go after the PPC providers - who enabled the monetization of trademark infringements - instead of filing multiple WIPO or NAF complaints. I also suggested that another route that might bring about a housecleaning could be a complaint filed with an agency such as the FTC. It looks like I was wrong, but no matter, Elliot is as likely as Disney to get the job done. Elliot is the FTC personified.

The nice thing about typo-squatting housecleaning efforts is that it should improve both the performance and perception, and therefore the value-in-use, of the remaining parked domain portfolios - the one's that truly are generic, i.e., not trademark typos.

Stay tuned. I suspect the next round of significant/sustained abuse will be corporate entities employing the WIPO/NAF process to engage in reverse domain hijacking efforts of domains that truly are generic and put to such use.


 5:50 am on May 3, 2006 (gmt 0)

Somebody needs to file a suit like this and go for broke, no settlements. If the engines are able to settle and get away with offering settlements like this:

For all eligible invalid clicks, we will offer credits which can be used to purchase new advertising with Google. We do not know how many will apply and receive credits, but under the agreement, the total amount of credits, plus attorneys fees, will not exceed $90 million.

there is no real incentive to do anything about it and it's only the lawyers that win. They probably get cash, doubtful that the lawyers will also get paid in free clicks from Google for that one. It's like MSFT losing a lawsuit and giving the winning party a bunch of Microsoft software to satisy the judgement.


 6:22 am on May 3, 2006 (gmt 0)

They'll settle for a couple million, keep it hush-hush, and move on. I would be surprised if their stock moved more than a few pennies over this (if that), especially given how quite a few analysts have been talking about Yahoo being a great buy as of late. Numbers are fantastic and growth is continuing.


 6:39 am on May 3, 2006 (gmt 0)

I'm all for cleaning out typos and trademark infringements from domain parking but I think it would be incredibly complex.

There are many different trademark systems in place in many different countries around the world, and not all of them are set up to allow electronic searches by third parties. Add to that the fact that most trademarks are limited to specific industries and the lists of industries can also vary between countries. Then there are multiple languages, pending applications, etc.


 1:37 pm on May 3, 2006 (gmt 0)

>> the information would come to light at trial if Yahoo decided not to settle the case.

now that's an easy few mil for the lawyers out there. Damn!


 5:37 pm on May 3, 2006 (gmt 0)

How about a simple agreement not to place ads on any parked domain? That would be a completely satisfactory resolution of that issue, for me.

Regarding the spyware collusion ... drop that like a bad habit and we're good to go.

See? It's not so tough to figure out what's the right thing to do.

But who will be responsible for any judgement should MS buy Y? Hmmm.


 10:19 pm on May 3, 2006 (gmt 0)

<<<<especially given how quite a few analysts have been talking about Yahoo being a great buy as of late. Numbers are fantastic and growth is continuing>>>

I am not sure if you base your growth on questionable traffic sources it's all that great and predict a great future


 4:02 pm on May 4, 2006 (gmt 0)

Consider... as this Yahoo lawsuit breaks (as the advertising world wakes up to how they've been being played by distributors of CPC ads)... Nextag's involvement with WhenU.

Yes indeedy. It's not limited to traditional search engines.

The below entry resulted in calls from a few CEOs (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 rear. It's not limited to "traditional" search engines... it's widespread.

What's stoping advertisers from going after NexTag? Nothing IMO. They already hate them too (who cuold like somone who does nothing but help consumers play the price shopping game?).



 6:57 pm on May 4, 2006 (gmt 0)

I applaud Ben Edelman for going after yahoo, although I will be dissappointed if he settles.

Based on my figures Yahoo owes me a refund of about $50k over the last year and a half, and I seriously doubt this class action suit will recovered 1/100th of that amount. Of course, when you try and contact Yahoo about this, they simply reply with "we can not go any further then 95 days", that of course is a bunch of BS.

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