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Microsoft’s click fraud suit applauded by Internet advertisers

The impact of Microsoft’s lawsuit against a trio suspected of carrying out a massive click fraud scam remains to be seen, but experts who follow online advertising welcomed the action and voiced hope that the case would deter people who routinely manipulate clicks on Web ads.
Microsoft this week filed a civil lawsuit in the US District Court for Western Washington outlining a “complex scheme believed to have impacted advertisers of auto insurance and the online role playing game, World of Warcraft,” the company said in a blog entry.
By filing the suit, the company aims to seek an injunction that would stop the activity, recover damages and send a message “both to perpetrators of fraud and to the online advertising community that Microsoft does not tolerate click fraud and will take action to protect its network and advertisers,” Microsoft said in a statement.
Microsoft’s lawsuit sheds light on a problem that’s bedeviled the industry for years, said Steve O’Brien, VP of marketing for Click Forensics, a pay-per-click traffic quality management and click fraud prevention service provider.

“This case is great news for the industry,” he said. “It puts a face on click fraud and provides a tangible example of the type of damage click fraud can inflict on online advertising campaigns.”

About one in every seven clicks on an advertisement is estimated to be bogus, according to Click Forensics.

“I can’t predict what impact this case is likely to have, but we’re in full support of Microsoft’s efforts, and anything to combat click fraud,” said Jeremy Fain, VP of industry services at the Interactive Advertising Bureau.

Microsoft’s complaint alleges that officials, during a year-long investigation, gathered substantial evidence that implicated three Vancouver, BC residents in a complex scheme involving competitor click fraud. It occurs when a perpetrator repeatedly clicks on a competitor’s ad — or uses an automated program to do the clicking —in an effort to deplete the competitor’s advertising budget, lower the placement of the competitor’s ad while bumping up the placement of the perpetrator’s own ads for the same keywords. Gaining better ad positioning may lead to better user traffic and possibly greater revenue for the perpetrator without the perpetrator having to pay a higher bid price for the keywords.

In 2008, a number of auto insurance advertisers complained to Microsoft that traffic to their ads was spiking suspiciously. Microsoft’s investigators found searches for keywords like “auto insurance quote” had risen sharply, while clicks to the advertisers appearing at the top of the paid-search results listings for those terms were unusually high. The company also discovered a similar pattern of activity related to ads for the World of Warcraft game.  From a third party, Microsoft found out an advertiser for World of Warcraft keywords was also being paid to direct traffic to auto insurance sites.

Microsoft officials theorize the advertiser, who is one of the three defendants named in the lawsuit, was running or working for low-ranking sites that took potential client information for auto insurers. He directed traffic to competitors’ Web sites so they would pay for those clicks and use up their advertising budgets quickly, which let the lower-ranking sites that he sponsored move up in the paid-search results, according to the complaint. By Microsoft’s estimate, the scheme netted the defendants about $250,000.

Microsoft issued nearly $1.5 million in advertising credits to the auto insurance and World of Warcraft advertisers who were impacted by the fraudulent activity, according to the complaint. The company is seeking at least $750,000 in damages.

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