Advertising Service Negligent in Allowing Click Fraud

This anti fraud case involves a lawyer who signed a contract to purchase pay per click search engine advertising from an Internet advertising service to attract personal injury clients. Potential clients were supposed to search for keywords purchased by the lawyer and then the lawyer’s ad would appear. If a potential client clicked on the lawyer’s ad, the lawyer would be charged by the advertising service. The lawyer soon found that many of the “clicks” that he was charged for were improper. The lawyer found that 20%-30% of the ads that he was charged for by the advertising service were fraudulent. The advertising service still required him to pay for all clicks on his ads, including those that were fraudulent. The lawyer sued the advertising service for breach of contract and negligence because the advertising company charged him for fraudulent clicks and did not take measures to track and prevent fraudulent clicks.

Question(s) For Expert Witness

1. Can a pay-per-click advertising service be sued for “click fraud” and breach of contract if it charges an advertiser for fraudulent clicks?

Expert Witness Response

Pay-per-click advertising is a form of online advertising where visitors to a web page can click on displayed ads (usually in the margins of the page), routing the visitor to a company’s website services. Advertisers pay an intermediary website that publishes their advertisement at an agreed-upon fee for each time the advertisement is “clicked” by a website visitor. Click-fraud occurs when competitors or pranksters click repeatedly on an advertiser’s ad and drive up the advertising costs and discourage the advertiser from advertising. Most pay-per-click advertising services use a contract that charges advertisers for all ‘actual’ clicks but that does not define what the word ‘actual’ really means. Many times, ‘actual’ means fraudulent as well as valid clicks. This exhausts an advertiser’s ad budget and damages the advertiser financially. The advertising service in this case is probably guilty of breach of contract because it billed the lawyer for actual and fraudulent clicks. The advertising service is also probably guilty of negligence because it did not take measures to stop the click-fraud even though the service probably knew it was a problem. The advertising service is this case could have taken steps to prevent click-fraud such as using a software service that monitors traffic in real time by comparing fraudulent activities against typical user behavior patterns. This type of service would have allowed the advertising service to analyze clicks to determine whether they fit a pattern of fraudulent use intended to artificially drive up an advertiser’s clicks. Another technique that the advertising service could have used to prevent click-fraud is offline analysis which allows services to perform click inspection after a click is recorded and allows services to look for patterns of fraudulent activity that may appear over the long-term.