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Suit Levels Spyware, Typosquatting Allegations at Yahoo

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.

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." The suit was filed in federal court in New Jersey; a PDF of the suit is online here.

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

"Yahoo ought to settle this case, but they ought never have allowed this problem to fester to the extent that it has," Edelman said in a phone interview. Edelman is a Harvard Ph.D. candidate and well-known spyware expert.

The suit alleges that Yahoo defrauded pay-per-click advertisers who thought they were paying to have their ads displayed alongside search-engine results generated by certain keywords that the advertisers bid on. The complaint alleges that "by placing ads into illegal platforms such as spyware programs, [Yahoo] wrongfully collected high search engine advertising fees for ads that are actually shown in contexts that are worth far less, if anything. It is well known that spyware advertising is much cheaper than search engine advertising."

The complaint continues: "But when Defendants and their syndication partners place class members' ads into spyware, they continue to charge class members full price for those ads, and pocketing the difference between the high fees class members pay and the low cost of providing spyware-delivered advertising."

Among the "spyware vendors" named in the complaint 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.

Martin Fleischmann, president and CEO of MostChoice.com, a national insurance and mortgage lead company based in Atlanta, said his company has been complaining to Yahoo about click fraud for almost three years now. He said MostChoice is constantly receiving "low converting" traffic from bogus search engines and typosquatting sites.

"It has always been a kind of dirty little secret in the industry. I wrote them several e-mail letters the last couple of years saying that these issues were going to come back and bite them because they really get to the integrity of the network," Fleischmann said. "The fraudsters lower the efficiency of the network for all advertisers. Yahoo hasn't had much incentive to go after them too hard since it also makes the company lots of money."

Yahoo did not immediately return calls seeking comment.

If the allegations in the suit are true, Yahoo would hardly be alone in getting its hands dirty by associating with the typosquatting industry. On Sunday, The Washington Post ran a story I co-wrote with Leslie Walker on Google's role in fueling a speculative frenzy in parked domain names, including many that appear to do nothing but capitalize on misspellings of popular brand names.

Yahoo is already battling "click fraud" claims that it overcharged customers for advertising, a very real problem that is costing legitimate online businesses tens of millions of dollars each year by some estimates. One of those suits was filed in California, and the other in Arkansas. The latter suit also named Google, which agreed to pay up to $90 million to settle the case.

The company named as a plaintiff in the suit was Crafts by Veronica, of Newark, NJ. While the case was filed in New Jersey, any Yahoo customer regardless of which state they reside in would be considered a member of the class should a court certify the lawsuit and allow it to go forward.

By Brian Krebs  |  May 2, 2006; 5:36 PM ET
Categories:  Fraud  
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Comments

I posted this yesterday on the IE Flaws issue. Having looked carefully, the tabbed browser is a function of the Yahoo Toolbar which has been installed ... Interesting that the lawsuit would show Municipal Governments (Public Libraries) as an unwitting accomplice in any fraud issue that comes up.

Underfunded Local Municipalities would be on this like "white on rice" as we say in Rural Texas.

=============

bk,

Our Public Library converted to a new IE version, at least it has tabbed browsing so I think it's new. The version is still showing 6...

Anyway, it really messed up the Washington Post Editorial page -- everything is blocked and sequential and it takes several minutes to scroll down.

Just thought you might like to know.

Posted by: GTexas | May 1, 2006 05:29 PM

Posted by: GTexas | May 2, 2006 6:18 PM | Report abuse

Oh yeah, my question:

Is it my imagination or did Yahoo pull a Sony ?

Posted by: GTexas | May 2, 2006 6:22 PM | Report abuse

I recently noticed that a domain name that I purchased from Yahoo (where I have not yet posted a site or a page) has been filled by yahoo with random offers for mortgage brokers and adult education. Yahoo was using a domain I had paid for to monetize my space for their coffers. They never asked permission nor did they offer a rev share. They just did it. So the story doesn't surprise me.

Posted by: Bruce Carlisle | May 2, 2006 9:50 PM | Report abuse

All this sort of thing makes me recall a quote I read some weeks back.

"Man's mental and moral growth has not kept pace with his technical and scientific advance."

-- Sri Swami Sivananda

And that by someone who died in 1963. It makes one wonder!

Posted by: Steve | May 3, 2006 1:16 AM | Report abuse

Hmmm. Yahoo! is selling domain names and then populating the "under construction" pages with ads?

Are they sharing the ad revenue with the owner of the domain? If not then they should be forced to pay.

I find it interesting that so many programs you update are now trying to force the Yahoo! tool bar onto your browser.

Just try to update Adobe Acrobat and see if it is not added to the list of updates by default. You can remove it, but there is no mention that you don't need it. An earlier version of the updater had a selection panel with the names of the programs to be updated at the left. Clicking on Adobe Reader automatically pushed the Yahoo! toolbar and another package onto the right hand column, where it would be downloaded.

I choose ONE item. I get THREE items and have to remove them, but the removal was not as simple as clicking a remove button. It seemed that almost any action caused those other two items to appear in the download panel again.

Perhaps Yahoo! should learn from the antics of AOL and Real. People do not like to be manipulated. I used to trust Yahoo! but given a number of recent tricks I do not and I will not buy from them.

Remember when Yahoo! informed all of their subscribers that their accounts had been updated to the default settings of "we will send you all the junk e-mail your mailbox can hold"? Of course, you could opt out again, but it would take several weeks for that to become effective. They made a LOT of enemies with that one.

Real Player installs all sorts of feeds and features you don't need, and which drag the machine to a crawl. It also messes up your file associations if you remove it. It also tries to update itself frequently. Real Player is banned from our household network.

AOL tries to sell you the world in one fell swoop instead of building your trust and then netting a satisfied customer. Attempts to cancel AOL's ISP services have been problematic for years, owing to their rewarding customer service representives who save the customer. This is often done by not submitting a cancellation request. The agent gets a bonus and the customer gets irate.

Some 90 days after I let my subscription lapse I received a notice advising that I was on Time Magazine's automatic renewal plan and thus I owed them money to continue my subscription. I never signed up for that plan. I always paid ahead for a year at a time in one payment. I had dropped the subscription and they stopped sending magazines.

It seems that Time was sued successfully for coercing subscribers to renew using these very tactics. Time is affiliated with - you guessed it - AOL. It's AOL Time Warner.

Perhaps that explains a recent bill I receive from AOL to renew my account with them. When I called they could not tell me much about the account except that I had one. I have NEVER EVER been an AOL subscriber. This happened about a month before the Time "bill" came in. Hmmmmm.....


If Yahoo! wants to play ball this way then I do not need to deal with them any more. That's too bad for them, because until recently I was telling people they were trustworthy. This latest fiasco is the icing on the cake. Yahoo! is not in the same league as AOL or Real Player, but they are starting to head in that direction.

Posted by: Backup Bob | May 3, 2006 1:53 AM | Report abuse

What a joke. The lawsuit has so many false claims it's not even funny. First of all, expedai.com is not a parking page. Someone forwarded it to a legitimate parking page. Second, the lawsuit states of parking pages:

"These sites appear if users incorrectly guess, mis-remember, or otherwise mistype a domain".

That statement is flat out false. Direct navigation to parking pages is a legitimate source of web traffic. When someone guesses at a domain name for a relevant topic they are not "mistyping" a domain.

If you care about this issue, read more here:

http://domainnamewire.com/2006/05/03/yahoo-is-wrong-target-for-typo-squatting/

Posted by: Andrew | May 3, 2006 10:12 AM | Report abuse

I disagree with Andrew that parking pages that leverage (misspell) a well known trademark are legitimate. These sites are unjustly milking the goodwill that the trademark owner has created. In the Expedia example, isn't this site really functioning as a paid spell checker for someone who wanted to go to Expedia.com.

If this whole system was transparent (and web users actually knew that the site owner was charging a fee each time they clicked) I wonder how many users would simply retype the correct spelling their browser.

In the case of generic-word landing pages (e.g., cellphoneplans.com), the site may help a user narrow his/her choices, but are the links on these pages the most relevant? Do users really know these sites are optimized to get them to click on the highest paid link rather than help them find exactly the product they are looking for? I think these sites function as slick commissioned salespeople:

http://www.jellyfish.com/blog/2006/05/01/parked-domains-googles-army-of-cheesy-salespeople/


Posted by: Mark McGuire | May 3, 2006 11:04 AM | Report abuse

If Dante were alive today and writing 'Inferno', he'd have a special rung of Purgatory for those operating typo domains that leech off a related brand's value. The scene would likely involve a man who is perpetually hungry because he has ravenous tape worms that eat nearly all of the food that he consumes off of the plates of others (he has no plate himself, having been banished from the table for 10,000 years).

-Chris Zaharias

Posted by: Chris Zaharias | May 3, 2006 11:31 AM | Report abuse

Mark, I'm not saying that typos of trademarks are legit, I'm saying typing in a domain is legit. Going to America.com is legit. Going to CellPhone.com is legit.

As for "and web users actually knew that the site owner was charging a fee each time they clicked", if they took the time to read what it says at the top (e.g. sponsored results) they'd clearly know these were paid.

Posted by: Andrew | May 3, 2006 11:40 AM | Report abuse

Our company uses Overture (Yahoo) and also Google for advertising with keywords. I am unhappy with the affiliate partners that they work with. Looking at some of our logs we were receiving referals from a porn site. I couldn't tell if it was coming from Yahoo or Google, so I stopped the advertising with one engine and then the other. The referals stopped when I stopped Google. According to Yahoo, even if I'm getting referals from a porn site, it doesn't mean I'm getting charged for it. Even if that is true, I don't like that our company is popping up in inappropriate sites that have nothing to do with our business.

FWIW, Yahoo is much more customer driven, focused and responsive. Google is the pits for customer service.

Posted by: Anonymous | May 3, 2006 12:32 PM | Report abuse

i understand this is ben's first case. go get 'em Ben.

Posted by: alan | May 3, 2006 12:59 PM | Report abuse

Yahoo! is fully aware that this is happening. Ben Edelman has been in contact with them for several months.

Posted by: CPCcurmudgeon | May 3, 2006 1:15 PM | Report abuse

Posted by: wyrmrider | May 3, 2006 1:24 PM | Report abuse

We have used Overture / Yahoo since it was GoTo. A very long time, our ROI has completely fallen off due to the LARGE number of flicks we get from LOW quality partnerships sites that send completely unrelated, unqualified traffic. As well we have noticed the same exact clicks to our account through the mistyped domains, parked domains and the spyware. I for one am very happy to see that someone is doing something about this finally. Yahoo should be held accountable for this. They claim "qualified buyers" Targeted marketing". Bunch of bull if you ask me. We have lost literally thousands upon thousands of dollars due to click fraud. As well we are a US advertiser and our traffic (85% plus) is coming from low quality click partnership sites from foreign countries. Yahoo's solution to this - "Although our current partnership sites are supposed to advertise within the US, we have NO Way to stop the foreign traffic at this time" "We are currently working on this issue, but have no time frame of when a new platform will be introduced"

I hope the class action suit gets the attention it deserves and that We the advertisers, finally get some of our Out Of Pocket Expenses returned. This is a huge problem and needs to be addressed.

Posted by: Terri | May 3, 2006 7:13 PM | Report abuse

If you really want to know where your PPC traffic is comming from, type in your domain name into google. Then click the link that says websites that mention "yourdomain.com". You'll find hundreds of garbage domains displaying your Yahoo ad without anyone actually searching for it. It's a complete fraud. My site winds up on prescription drug domains, porn domains, penis enlargement domains and more. I'm selling books on carpentry and home remodeling, why is my site on this irrelevent junk? Yahoo just claims they're partners and I can't shut them off from displaying my site.

Posted by: Me | May 3, 2006 8:17 PM | Report abuse

After Yahoo has repeatedly identified out human rights advocates to the Chinese Government, is anyone surprised? Yahoo care about dollars, and they'll betray anything or anyone. With Yahoo CEO Jerry Wang fawning to the Chinese Government, he is lucky he already be is not locked up in Guantanamo for High Treason. At the very least, his granting of US Citizenship should be withdrawn.

Posted by: Alistair | May 3, 2006 10:08 PM | Report abuse

The Yahoo lawsuit case is also interesting because Ben Edelman is the co-counsel. Historically, he has been an expert witness/consultant on adware issues. Now he is the attorney filing the suit.

Google recently settled a click fraud case for $90mm, not cash though. Edelman is saying right off the bat that Yahoo should settle, not fight this case. If Yahoo settles, he stands to make 15% as co-counsel on any monetary settlement.

"Yahoo ought to settle this case, but they ought never have allowed this problem to fester to the extent that it has," Edelman said

A bold and either shrewd or stupid move by Edelman. This could blow up in his face considering Yahoo's considerable wealth to fight him. Also, who is this company, Crafts by Veronica and how has Edelman figured out to use them as Plaintiff?

Posted by: Joseph Torre | May 3, 2006 11:35 PM | Report abuse

Just for you to consider as this Yahoo lawsuit breaks (as the advertising world wakes up to how they've been being played by distributors of CPC ads)... were you aware of Nextag's involvement with WhenU?

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 bum. It's not limited to "traditional" search engines... it's widespread.

What's stoping advertisers from going after NexTag?

http://www.revenews.com/jeffmolander/archives/000768.html

Posted by: Jeff Molander | May 4, 2006 11:47 AM | Report abuse

It's about time that someone goes after both Yahoo and Google for click fraud. I have also seen many $$$ thrown away for useless clicks from spyware and empty typo-alike sites. The search engines need to come up with the 'real click' concept - where the advertiser pays only if the click results in a sale. This would practically eliminate the spyware / adware industry overnight.

Posted by: Moike | May 9, 2006 2:48 AM | Report abuse

"Martin Fleischmann, president and CEO" say that they have been complaining to YPN for three years about the problem and low conversion rates. Why did they continue to advertise? This does not make business sense to me.

Posted by: Anonymous | May 9, 2006 9:53 AM | Report abuse

You can turn of syndication of your Google Ads easily. If you think the quality of partner sites is low you can also lower your CPC for partner sites. Yahoo also has separate bidding for content sites.

Posted by: Andrew | May 12, 2006 3:48 PM | Report abuse

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Posted by: oupwyftdq lkfrcyixz | August 4, 2006 7:00 PM | Report abuse

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Posted by: oupwyftdq lkfrcyixz | August 4, 2006 7:00 PM | Report abuse

If you made it this far, you have went through a lot of crap. If you agree to a "per click" contract, that is what you get. If the ROI isn't good enough, you will move to another site. If the click brings a user to your site, there is probably some reason they clicked it. It is your fault you can't sell a product.

Posted by: whyaskwhy | August 21, 2006 9:56 PM | Report abuse

If you got this far, and thought it was a load of crap, then you either cant read, or cant understand what you are reading.
Its answered some of my questions, and addressed some of my suspicions, and identified issues I was not aware of.
I advertise with both Google and Overture then Yahoo.
In the end, from reading this blog, G and Y methods appear to be questionable, even unacceptable, but they do deliver a percentage of on-line sales. Whats the alternative?

Posted by: gk | August 31, 2006 5:17 AM | Report abuse

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