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Yahoo! Sued Over PPC Ad Placement

Jason Lee Miller
Staff Writer
Published: 2006-05-04

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Yahoo!'s got some splainin' to do after a lawsuit filed in New Jersey alleging that the search marketing company not only charged premium PPC rates for ads appearing on spyware, typosquatter, and parked domain sites, but also pumped up the volume of ads served to boost financial reports.

But that's their prerogative right? Not so, says Newark-based Crafts by Veronica whose suit is being considered for class-action status. By violating promises of ad exposure on popular, high-quality sites, the suit accuses Yahoo! of breach of contract, unjust enrichment, civil conspiracy and violation of the New Jersey Consumer Fraud Act.

The suit claims Yahoo! partnered with well-known and investigated spyware companies like Intermix and Direct Revenue to serve up advertising at a premium cost to advertisers (spyware advertising is much cheaper than pay-per-click). From the suit:

"By placing Class Members' ads into illegal platforms such as spyware programs, defendants wrongfully collect 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.

"But when Defendants and their Syndication Partners place Class Members' ads into spyware, they continue to charge Class Members full price for these ads, and pocketing the difference between the high fees Class Members pay and the low cost of providing spyware-delivered advertising."

Other points of contention involved ads appearing typosquatter sites and parked domains. The plaintiffs use the example of Expedia.com to make their case:

"Take for example Yahoo's advertising customer Expedia.com. A user intending to visit the Expedia web site might mistype it as 'expedai.com.' At 'expedai.com,' the user sees a list of ads provided by Defendants, including an ad for Expedia, along with other customers of Defendants. If the user clicks the Expedia ad, the user is taken to the true Expedia site, which is where he or she wanted to go in the first place-without clicking an Expedia ad-and Expedia has to pay defendants a PPC fee."

But perhaps the most interesting allegation is that Yahoo! increases advertising to the channels at choice moments, manipulating "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."

"We're not going to comment on this matter other than to say that we plan to vigorously defend our position," a Yahoo representative told CNet.

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About the Author:
Jason L. Miller is a staff writer for WebProNews covering technology and business.

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