Just as banks and credit-card companies routinely file lawsuits and press criminal charges against those who counterfeit money or use unauthorized credit cards, Microsoft has filed a lawsuit against three Canadians it accuses of the 21st-century equivalent: namely. “click fraud.” In the same way that cash — followed by checks and credit cards — were the currency that made capitalism function, the currency that drives value for giant Web businesses like Microsoft and Google is clicks.
According to Microsoft, its first-ever click fraud lawsuit was filed against a family from Vancouver — Eric Lam and Gordon Lam (who are believed to be brothers) and Melanie Suen (believed to be their mother) — because they engaged in repeated click-fraud attacks against online ads related to auto insurance and the multiplayer online game World of Warcraft. The company is asking for an injunction forcing the three to stop the behaviour, and is also asking the court to award it more than $750,000 in damages.
The crime itself isn’t nearly as straightforward as counterfeiting money or stealing credit cards. Click fraud involves rigging online advertising through the use of software scripts or other nefarious schemes such as “click farms,” and in a case like the one against the Lams, it involves jacking up the number of clicks on a competitor’s ads so that they have to pay more — since keyword-related search advertising such as that offered by Google and Microsoft is priced through an auction process. The more clicks, the more you pay for your ads.
Microsoft says in its suit that it had to pay some of its advertisers $1.5 million in ad credits in order to compensate them for the actions of the trio. The company is asking for an injunction as well as more than $750,000 in compensatory damages. Ironically, before it identified the Lams as the source of the click fraud, Microsoft says that it actually gave the family an advertising credit to compensate them for the click-fraud that was occurring.
“By engaging in a widespread scheme that generated invalid clicks on links to online ads that were displayed in response to search requests on Microsoft’s network, defendants disrupted the advertising campaigns of their competitors, obtained increased user traffic for their own ads at a much lower cost than they could have otherwise, and caused substantial damage to Microsoft,” the lawsuit alleges.
The software giant describes how it spent more than a year tracking the clicks on certain types of search-related keywords in markets such as auto insurance, and noticed that there were “a large number of exact match-type keywords being searched, and within a short period of time, the top sponsored site results were being clicked, which indicated that automated or ‘click farm-generated’ click fraud was occurring on the Microsoft network.” One of the difficult things about such a case is proving that the clicks were actually fraudulent, rather than just a coincidence.
Both Microsoft and Google (which has a dominant share of the market for online keyword-related advertising) have been on the other side of a click-fraud legal case in the past. In 2006, Google had to pay $90-million to settle a class-action suit launched by advertisers who claimed that they paid too much for their online advertising, while Microsoft has been sued for something very similar.