Microsoft Lawsuit Targets Advertiser Click Fraud

Competitive click fraud perpetrators beware. Microsoft has taken notice and is deploying legal and PR muscle to give all those tempted to engage in competitive click fraud (and, for that matter, publisher click fraud) pause.

The company this week filed a fascinating click fraud lawsuit against advertisers (both individuals and their business/corporate entities) who allegedly used competitive click fraud to give them an unfair advantage in the PPC (define) search advertising market, specifically adCenter.

When a massive corporation initiates a lawsuit whose damages are less than $1 million, one can bet there are significant strategic reasons for the lawsuit and that the lawsuit’s ROI (define) isn’t the primary motivator. Clearly in this case, Microsoft will spend heavily to prosecute this civil case in the hopes of setting some legal precedents, as well as making a PR statement. I’ll address the strategic issues later; first, a few more details on the differences in this case.

Most earlier click fraud legal activity and litigation were focused on network click fraud, in which a publisher or subpublisher affiliate of the search engine’s contextual or search network used bots, automated means, or even offshore workers to create inauthentic clicks to receive a percentage of the revenue the search engine collected from the advertiser. In this instance, the advertisers allegedly used proxy servers to disguise clicks as originating from diverse sources, when they were actually automated clicks from a small number of sources or a single source.

Most unsophisticated competitive click fraud results from one advertiser clicking on another advertiser’s listings or ads. This tends to limit the level of fraud because even the most rudimentary filters catch this kind of behavior and can automatically credit back inauthentic clicks almost immediately.

However, when proxy servers are used on a large scale, it’s more difficult to find the advertiser’s patterns to perpetrate click fraud. In actuality, the advertiser fraud perpetrated in this case wasn’t nearly as sophisticated as it could have been. Understanding the level of sophistication possible in advertiser click fraud brings to light the importance of shutting down the problem now through aggressive legal and enforcement efforts.

Interestingly, when I was active with the Interactive Advertising Bureau, I helped craft the IAB Click Measurement Guidelines. The guidelines sought to define a billable click to simplify reconciliation between advertisers, networks, publishers, and agencies while also providing a solid framework by which fraudulent click creation could be addressed legally and contractually. While this lawsuit doesn’t specifically reference the IAB guidelines (at least I didn’t notice such a reference in the complaint), the complaint clearly focuses on inauthentic clicks as the clicks being used to defraud Microsoft and attempting to defraud other advertisers.

While this abuse of proxy servers to generate fraudulent clicks is significant in its brazenness and aggressiveness, it’s unlikely to be the only instance of this type of click fraud that Microsoft (or, for that matter, the other engines) has been tracking. Which brings us to the strategic nature of this lawsuit and the many things it accomplishes simply by being filed:

• Increases small-business awareness of adCenter. Small businesses hate competitive click fraud and mainly use Google. What a handy way to get small businesses interested in adCenter (if you’re a U.S. advertiser interested in adCenter and haven’t gotten around to opening an account, my latest book, “Search Engine Advertising” comes with a $200 adCenter new-advertiser coupon).
• Builds trust in adCenter among advertisers. Microsoft isn’t a big syndicator of its listings in comparison to Google or even Yahoo, so publisher click fraud isn’t a big factor yet. But by going after advertiser click fraud, Microsoft has set the general tone for its auction markets as one where it intends to police click (and impression) quality and authenticity.
• Shows it’s willing to go after international perpetrators. The defendants live in Canada and have U.S. companies.
• Illustrates that Microsoft is willing to take a loss on litigation to police fraudulent activity. Even a small lawsuit can easily cost $1 million.
• Allows Microsoft to highlight that advertisers were credited for the invalid clicks. Although we don’t know how quickly after the fraud this occurred.
• Sends a message to others perpetrating click fraud (advertiser or publisher). Microsoft is letting them know they could end up dealing with the rather litigious Microsoft legal department.

You might think these advertisers were clever in perpetrating their click fraud to burn out their competitions’ budgets. However, any form of invalid clicks pollutes the marketplace, and I applaud Microsoft for taking action (even though it’s likely already gotten more than $1 million in free publicity from filing it).

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