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Checkmate: Yahoo Closes Door on Click Fraud

by Jeff Molander
November 06, 2006

Yahoo! Inc. (YHOO) stands to significantly benefit from a completely un-reported but very real class action lawsuit, Checkmate Strategic Group Inc. vs. Yahoo! Inc..  Ironically, Yahoo! stands to benefit from being sued by its advertisers based on the legal action’s settlement terms… terms that absolve the Web advertising giant of liability for fraudulent, and more importantly “unwanted”, clicks sent to advertisers over the last 8 years.  In return, advertisers’ get the opportunity to ask for credits (to buy more advertising) and these credits may ultimately be denied by the company.

Upon my review of documents obtained from the courthouse, the process to petition Yahoo! for credits is a remarkably laborious one that, in the end, works against tens of thousands of advertisers who purchased click-based advertising from Yahoo! (formerly Overture).  Based on my research, the process is intentionally geared (by lawyers for Yahoo! and for Class) to be a difficult one that not only promises advertisers next to nothing but automatically opts them into the Class without their consent.  As the clock winds down this is looking more and more like a sure thing… a slam dunk for Yahoo! and the Class’s representation… not the Class itself.

$5 Million: A Small Price to Pay
Checkmate, indeed.  You may recall Google’s (NASDAQ: GOOG) “settlement” with advertisers and how it was a raw deal for advertisers.  Even though it was widely perceived by media and advertisers as Google manhandling the click fraud issue.  Just like Google, by setting precedent Yahoo! nabs a ‘get out of jail free’ card. 

Make no mistake, the $5 million Yahoo! will pay to Checkmate Strategic Group is, in effect, a VERY cost effective insurance policy against click fraud concerns that may arise in the future; all while, legally, never admitting fault and promising advertisers not one dime based on my research of court documents.  Some industry insiders are going as far as questioning who is behind Checkmate Strategic Group (read: Are there any ties it may have to Yahoo! itself?).

Letting Yahoo! Walk
The Class (Yahoo! advertisers who have not opted out of this settlement) itself has got to be large.  I’d wager to say it could be up to 95% of all advertisers doing business with Yahoo! given these two facts: 

1) Advertising trade media and bloggers have yet to cover this story and we’re nearing its end;
2) Lawyers representing advertisers have auto-opted them in without asking for consent.

If you’ve paid for advertising on Yahoo between January 1998 and July 31,1006 you’re automatically a part of the Class which effectively voids (releases) the claims of advertisers over an 8 year period.  Again, if you’ve done nothing (that includes not even having heard of this lawsuit) the settlement’s release, in this case, will let Yahoo! off the hook for any fraudulent (or worse “unwanted") clicks it may have sent your way.  Advertisers: You have no further recourse, no refund or guarantee for credit and a claims process that will keep you busy for months… never mind the expense you’ll generate in attempting to claim your advertising CREDITS. 

Want to opt out of the class (retain the right to hold Yahoo! accountable)?  You must do so in writing.  Certified mail, please!  By the way the deadline date has come and gone.

I’ve spoken with numerous search marketing agencies, who manage multiple advertiser accounts, like Rimm-Kaufman Group, who tell me they have advised their clients to, first, seek advise of legal counsel.  Some agencies indicate they have informally (citing a need to talk to a lawyer) advised clients to opt in and out of the Class.  None I spoke to would go on record with details.

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Referenced by: ReveNews - Jimmy Daniels on 11-08-06