Click Fraud Class Action Against Google & Yahoo!

Click fraud is a type of internet crime that occurs in pay per click online advertising when a person, automated script, or computer program imitates a legitimate user of a web browser clicking on an ad, for the purpose of generating a charge per click without having actual interest in the target of the ad's link. Click fraud is the subject of some controversy and increasing litigation due to the advertising networks being a key beneficiary of the fraud.

Pay per click advertising or PPC advertising is an arrangement in which webmasters (operators of web sites), acting as publishers, display clickable links from advertisers, in exchange for a charge per click. As this industry evolved, a number of advertising networks developed which acted as middlemen between these two groups (publishers and advertisers). Each time a (believed to be) valid web user clicks on an ad, the advertiser pays the advertising network, who in turn pays the publisher a share of this money. This revenue sharing system is seen as an incentive for click fraud.

The largest of the advertising networks, Google's AdWords/AdSense and Yahoo! Search Marketing, act in a dual role, since they are also publishers themselves (on their search engines). According to critics, this complex relationship may create a conflict of interest. For instance, Google loses money to undetected click fraud when it pays out to the publisher, but it makes more money when it collects fees from the advertiser. Because of the spread between what Google collects and what Google pays out, click fraud directly and invisibly profits Google.

Disputes over the issue have resulted in a number of lawsuits. In one case, Google (acting as both an advertiser and advertising network) won a lawsuit against a Texas company called Auction Experts (acting as a publisher), which Google accused of paying people to click on ads that appeared on Auction Experts' site, costing advertisers $50,000[3]. Despite networks' efforts to stop it, publishers are suspicious of the motives of the advertising networks because the advertising network receives money for each click, even if it is fraudulent.
In July 2005, Yahoo settled a class action lawsuit against it by plaintiffs alleging it did not do enough to prevent click fraud. Yahoo paid $4.5 million in legal bills for the plaintiffs, and agreed to settle advertiser claims dating back to 2004 [4]. In July 2006, Google settled a similar suit for $90 million [5][6].
On March 8, 2006, Google agreed to a $90 million settlement fund in the class action lawsuit filed by Lane's Gifts & Collectibles. [7]. The class action lawsuit was filed in Miller County, Arkansas by Dallas attorneys, Steve Malouf, Joel Fineberg, and Dean Gresham. [8]