Posted June 16, 2009 9:56 am by with 8 comments

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The LawSo you thought the search engines had click fraud under control to a degree? Has Google’s “See No Click Fraud, Hear No Click Fraud” approach made you curious but you just figure its part of the search marketing landscape so get used to it? Well, decision engine pioneer, Microsoft, may have crossed into some uncharted territory by suing a suspected click fraud perpetrator so they now can experiment with the new tagline of “Microsoft: Makers of the Decision Engine for Click Cops Everywhere”.

So what brought this about? The New York Times reports that it is the result of a year long investigation and the end result is

Microsoft filed the civil complaint on Monday in United States District Court in Seattle against Eric Lam, Gordon Lam and Melanie Suen, of Vancouver, British Columbia, along with several corporation names they were believed to have used, and several unnamed parties.

Sucks to be those guys, huh? This is believed to be among the first instances where a search engine is going after a click fraud perp which, in effect, serves as the unofficial whistle blowing on the practice by a search engine. Most, including Google, like to stay mum on this subject and take an “if you ignore it, it will go away” attitude. Microsoft is feeling its oats, however, and trying to break new Internet ground wherever they can, apparently. Will others need to follow suit ? (pun ABSOLUTELY intended)

Microsoft is seeking at least $750,000 in damages based on the speculation that the VBC Gang (copyright please) made in the neighborhood of $250,000 and cost Microsoft up to $1.5 mil in credits due to fraudulent clicks.

Microsoft is taking the high road

“We have decided to become more active in the commercial fraud area on the enforcement side,” said Tim Cranton, associate general counsel for Microsoft. “The theory is you can change the economics around crime or fraud by making it more expensive.”

The IAB is saying this is interesting

Jeremy Fain, the vice president of industry services for the Interactive Advertising Bureau, a trade group, said that Microsoft’s lawsuit was more than a warning shot.

“Legally, if you commit wire fraud or mail fraud, there’s a lot of very stiff penalties for that, where we don’t have a lot of precedents, legally, from an Internet perspective yet,” he said. “It’s really meant to try to create more of a legal precedent, and more of a legal library of cases to draw from in the future.”

Gordon Lam, one of the accused VBCer’s, when reached by phone isn’t saying anything. In fact, he says he hasn’t even seen the suit. Oh sure, Gord, like we believe you!

Apparently the VBC gang was tying in World of Warcraft and auto insurance quotes together. An odd pairing to say the least since most WOW folks either can’t drive or don’t drive because they never leave the house because of the game.

Microsoft didn’t know why someone would be interested in both World of Warcraft and auto insurance ads, though, until a third party told investigators that an advertiser for World of Warcraft keywords named Eric Lam was also taking a fee for directing traffic to auto insurance sites. Investigators figured out that seven different accounts, registered under different individual and company names, were linked to Mr. Lam and two other defendants, Gordon Lam and Melanie Suen, believed to be Mr. Lam’s brother and mother.

Microsoft’s theory is that Mr. Lam was running or working for low-ranking sites that took potential client information for auto insurers. The complaint said that he directed traffic to competitors’ Web sites so they would pay for those clicks and exhaust their advertising budgets quickly, which let the lower-ranking sites that he sponsored move up in the paid-search results.

So what does it all mean? It’s something the courts will need to sort out but Microsoft appears to be serious. As is usually the case it is best to let the lawyer speak on this to wrap it up. So Mr. Cranton in summation ……

Mr. Cranton said that this was not a gigantic case for Microsoft, he said the fraud was “significant.”

“We think there’s a good place for enforcement, basically to say, ‘You think this is a game, cat and mouse, back and forth. At some point, once we figure out who you are, we’re going to hold you accountable for it, it’s going to be expensive, and we’re going to deter you from doing it because you’re ripping off advertisers and people online,’ ” he said.

So now everyone will rush over to the great decision engine knowing that their paid search ads are being policed by the Internet’s finest? Well, there is still that annoying little factor that Google has all the people who want to buy anything over at their house everyday. Maybe the idea that Microsoft is looking to clean up it’s side of the street will be enough for some to take Bing for a spin. Who knows?

  • I think they should go after them and take them down if they can prove the wrong doing. Too many people work hard to grow their businesses online to have this type of activity ruin it.

    Nick Stamoulis’s last blog post..How To Change Your Address (For Google’s Sake)

  • Hi Frank

    I would love to give my 2 cents on the issue. Being one of the first to highlight potential problems with PPC on this very blog. I find it very interesting that the big three have turned a blind eye to this behavior until now.

    Now is where they (the big 3) are finding out that it is costing them money, not making it. When I first wrote about it, they were getting revenue from PPC and therefore, didn’t care. No one could really “prove” click fraud and the CREDITS they gave was a very small percentage of gross.

    That was then. Now, Microsoft has lost $1.25M and they are pissed. I don’t understand how money over ethics makes cents 😉 As long as everyone was getting “free” money from advertisers, no problem. As soon as the situation changes, they call for the lawyers.

    It’s like closing up the hen house after the fox is already inside.

    Perhaps if Microsoft would have thought about click fraud before now, they could still have the 1.25M in the bank.

  • The amount of money microsoft is asking for is massive.

    I don’t know what will be settlement money but if they are serious it will be huge.

    Aditya SEO’s last blog post..How to check for No-Follow and Do-Follow blog

  • Wil

    Yeah,so what does it all mean?The internet is internet,search engines are search engines and they don’t make the law but have influence.
    Everyone is pulling their way and protect their business,including you and all the IT industry.
    How is it that these small marketers are being charged and not the big companies that do the same thing?
    A crook is a crook until he,she,they get caught.And they’re everywhere and in different levels of technology with big corporations as well.
    If you remember Microsoft lost the case about the software monopoly issue.Were they prosecuted and put in jail?
    Biggest spammers that I know of,AOL and Yahoo.Are they being prosecuted?
    Nowadays you have social networks,Facebook,Twitter and others trying to run your life.How dare they?Making their own rules as they go.
    So,in general,if you can buy an army of lawyers,you can do pretty much what you want and infuence the lawmakers too.
    What ethics,what morals,what honesty?

  • As an active advertiser with Adwords and Live Center I’m glad “someone” is doing something in regards to click fraud, it’s just a joke these days that conversion rates go down while the click costs go up. A+ Microsoft!

  • Click fraud is a huge problem and hopefully this case will help clear things up a bit meaning better results for advertisers and online shoppers.

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  • Microsoft lost 1.5M dollars to this before acting. Odd. I suppose, though, that forces them into a pretty large budget to develop anti-clickfraud technology. Losing millions frees up the purse strings to fight it.