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Yahoo settles 'click fraud' lawsuit
Agreement would not limit company's liability, unlike similar Google suit
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SAN FRANCISCO - Yahoo Inc. will consider refunding money to thousands of advertisers dating back to January 2004 and pay $4.95 million in attorney fees to settle a class-action lawsuit alleging the Internet powerhouse has been profiting from bogus sales referrals generated through a sham known as "click fraud."
The agreement, given preliminary approval Wednesday by U.S. District Judge Christina Snyder in Los Angeles, doesn't limit Yahoo's liability — one of several contrasts to a settlement reached in March by online search engine leader Google Inc. to resolve a class-action lawsuit over the same issue.
The settlement also will give Yahoo an opportunity to provide more clarity about one of the most confusing — and potentially disruptive — issues hanging over the rapidly growing Internet advertising market.
As part of the agreement, Yahoo has committed to working with others in the industry to define what constitutes click fraud.
The ruse takes different shapes, but the end result is usually the same: Merchants are billed for fruitless traffic generated by scam artists and mischief makers who repeatedly click on an advertiser's Web link with no intention of buying anything.
Those clicks generate revenue for Yahoo, the owner of the Internet's second-largest advertising network behind online search engine leader Google, as well other Web sites.
Google's financial commitment in its case, overseen by an Arkansas state court, is capped at $90 million. That's a sliver of the $13.3 billion in ad revenue that the Mountain View, Calif.-based company has collected since 2001.
As much as $30 million of the Google settlement could be paid to the attorneys who filed the case.
Although Yahoo doesn't know how much money it will end up refunding, company officials seem confident it will be a relatively small amount. Yahoo's ad revenue totaled $9.1 billion from January 2004 through March of this year.
"We want to keep our advertisers happy," said Yahoo lawyer Reggie Davis. "Whatever credits are owed will be 100 percent forthcoming."
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