According to an article in Excite, a class-action lawsuit has been filed against Google, Yahoo!, AOL, Lycos, AskJeeves and other search engines regarding click fraud and collusion. Lane’s Gifts & Collectibles LLC from Texarkana, Arkansas lead the plaintiff team in the lawsuit.
The story first broke through the Wall Street Journal yesterday and today they have an article titled ‘Click Fraud’ Is Costly for Web Outfits, which states that as much as 20-percent of the clicks on paid advertisements may be front those not interested in the product. According to Excite, “The suit concerns a growing search-industry problem of “click fraud,” in which someone clicks on online ads with ill intent. Advertisers generally pay Google, Yahoo and others based on the number of times people click on their ads displayed alongside Web-search results, with each click costing roughly 50 cents on average. By repeatedly clicking on the ads, or using software programs to automate the clicking, fraudsters can run up ad charges for rivals.”
Besides the click fraud charge, which is no small matter, the larger issue in my humble opinion is the charge of conspiracy and collusion of price fixing between the search engines. If this allegation of collusion turns out to be true, this may be a huge setback for the search engines named in the suit as far as advertiser loyalty and customer loyalty. This will also open up the advertising dollar door in a big way for Microsoft’s MSN search engine, which was not named in the lawsuit. MSN is currently using Yahoo!-Overture (YO!) paid advertisements along side their search results but are developing their own advertising technology in order to get away from the dependence upon YO!.
Because brand loyalty is so big on the Internet this lawsuit may just be to the search engines what the after hours trading scandal was to the large mutual fund companies. Many loyal customers fled the scene of the crime when the after hours trading scandal was announced. If the allegations against the search engines are not true, then let’s hope the damage to these companies stays to a minimum. No matter what happens, though, this lawsuit is sure to bring up a few surprises to the general public. So stay tuned.
