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June 30, 2006

Yahoo! Settles Click Fraud Lawsuit

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Advertisers who found Google’s $90 million click fraud settlement insulting may or may not want to read through the terms of Yahoo!’s new settlement deal.

A Los Angeles judge approved a preliminary settlement Wednesday that has Yahoo! paying out $4.95 million to cover advertisers’ legal expenses and extending its click fraud review period from sixty days to two and a half months. And that’s it. They haven’t agreed to refund any of the advertisers’ money, give them credit for confirmed fraud or make any amends in any way. They just promised to look over complaints on an individual basis.

The suit was first brought by the Checkmate Strategic Group in June 2005 and this settlement could release Yahoo! from any liability in the Lane’s Gift’s & Collectibles, LLC case.

In addition to the cash refunds, Yahoo! says they will:

  • Appoint a Traffic Quality Advocate to address advertisers’ concerns about click fraud and traffic quality issues.
  • Host a panel of individual advertisers once a year to review its systems, meet with the clickthrough protection team and provide feedback.
  • Work with reputable third parties to create an industry-wide definition of click fraud, a comprehensive list of identified bots.
  • Commit technical and human resources to build a Traffic Quality Resource Center to provide advertisers with information regarding traffic quality issues, best practices guides and additional access to analytics tools.

The smaller Yahoo! settlement differs from Google’s in both size and scope. Where Google is offering users $60 million worth of advertising credit, Yahoo! is offering a potentially limitless cash refund to all advertisers they feel suffered as a result of click fraud. Of course, that’s the slightly unsettling part: it’s up to Yahoo! to determine who has and has not been affected. No conflict of interest there.

But Yahoo! isn’t worried. The engine’s reps say their click fraud system has already identified and not billed advertisers for billions of clicks. They’re confident the payout won’t be too arduous thanks to all the “safeguards [they] already have in place”.

The settlement fills me with a healthy dose of skepticism. I know, you’re shocked, but with Yahoo! determining who does and does not see a cash refund, what incentive do they have to really dig and investigate advertisers’ claims? And their certainty of a reasonable payout makes me even more nervous. Shouldn’t they wait for the claims to come in before making statements like that?

Yahoo! lawyer Reggie Davis told reporters it was in Yahoo!’s best interest to keep advertisers happy and that “whatever credits [were] owed [would] be 100 percent forthcoming”. Then, John Slate, Yahoo!’s Senior Director of Product Development, told the same bunch of reporters Yahoo! has always “prefer[ed] to err on the side of its advertisers”.

Fine, then why isn’t a third party ruling over these claims? Why is Yahoo! acting as judge and jury?

I guess that’s not entirely fair. MarketingVox reports all claims submitted to Yahoo! will be “subject to review by a retired federal judge who will oversee the refund process“. My next question: who is Judge Taylor and what, if any, is his connection to Yahoo? I’m not planting conspiracy theories, but I think its vital information.

Maybe advertisers will get to learn about Judge Taylor when their lawyers meet with Yahoo’s clickthrough protection team. Yahoo! has extended an invitation to the plaintiff’s attorneys and experts to meet with its team to help familiarize them with the controls Yahoo! has in place to prevent click fraud.

I’ll be interested to hear advertisers’ response to this settlement over the coming days. Can they really be happy with Yahoo! only having to promise to review their claims? Wasn’t it Yahoo!’s inadequate response that triggered the class-action lawsuit in the first place? Or is Yahoo!’s promise for a more vigilant future enough to satiate them? This seems like another non-decision if you ask me.

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