Microsoft Goes After Internet Ad Fraudsters In Court

Microsoft feels it was tricked out of $750,000 in online ad dollars by three Vancouver residents, so it’s suing their pants off and trying to set a new precedent for throwing legal heft around in the digital advertising world.

The complaint stems from car insurance companies,which like all advertisers pay per click on their ads on Microsoft search pages. The companies complained in 2008 that clicks on their ads were abnormally high. Either the ads were suddenly somehow incredibly compelling or something rotten was afoot, the companies figured. Microsoft tracked the pattern of clicks and noticed a parallel in World of Warcraft ads.

Microsoft is stepping up in order to preserve whatever integrity still remains in online search ads, Microsoft lawyers tell the NYT:

“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.”

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.”

You hear that, ad fraudsters? The guy’s talking entire libraries of cases against y’all. So don’t make your day job clicking on search ads unless you feel like paying three quarters of a mill for the privilege.

Microsoft Sues Three in Click-Fraud Scheme [The New York Times]
(Photo: unleashedlive)

Comments

Edit Your Comment

  1. mbd says:

    What fraud? There is nothing illegal about clicking on a link, no matter how many times you do it.

    • deadspork says:

      Huh. That’s ingenious. They probably didn’t have to “click” any ads. They probably just programmed a script to do it for them.

    • B says:

      @mbd: The key word being “you” If you set up a script to simulate somebody clicking on a link repeatedly, that would be fraud.

    • Gramin says:

      @mbd:

      Read the NY Times article. Microsoft claims that Mr. Lam was running or working for low-ranking advertisers (those that appear on the side when you perform a search) and was being paid to click on the higher-ranking ads. These advertisers pay Microsoft per click on their search ads. Mr. Lam was trying to exhaust the advertising budgets of those higher-ranking ads so the lower ranking ads would move up when the higher-ranking advertisers could no longer pay for that position.

      Sounds like fraud to me.

      • nataku8_e30 says:

        @Gramin: Yeah, after just reading the Consumerist blurb, I couldn’t figure out what was going on at all.

        • Gramin says:

          @nataku83:

          Consumerist has a horrible habit of not including the relevant facts in their blogs. They link to the story but don’t read it themselves.

        • Trai_Dep says:

          @nataku83, Gramin: I hear there are these neato things called links which, when clicked, present the reader with more in-depth information. In this fashion, one can read a summary (sometimes with editorial comment added!) then, if interested, read more on the topic.
          I think the idea has moxie and is going places!

          …Now if only there was some way I could take all these photos I have of my kitten then somehow, magically add an ironic, hilariously misspelled phrase on top of it, then share them in some electronic fashion so people in their homes would chuckle and tell their friends. I’d be rich, Smithers, I’d be r-i-c-h!

          • Gramin says:

            @Trai_Dep:

            I’ve heard of those so called links and I often click on them. Perhaps you should direct your comment at the individuals who don’t click through and then post ignorant comments.

            • icruise says:

              @Gramin: The links are fine for in-depth details, but the Consumerist often leaves out the entire point of the linked article. I couldn’t understand what was going on just from reading their “summary.”

            • Trai_Dep says:

              @Gramin: But guys, it’s a moderately complicated fraud to explain, especially if written for people who don’t understand online commerce. How deep to go?
              I can see making the observation that it was an online fraud then leaving the gory details out, since this is available via the link. These sorts of blogs reference stories, they don’t cover them in the journalistic sense, so it’s fine that Consumerist doesn’t get too deep, especially with click-fraud which can be dizzying for the uninitiated.
              I can also see your point as well, but hey, it’s the editor’s call.

              • FooSchnickens - Full of SCAR says:

                @Trai_Dep: What’s complicated about explaining this kind of fraud?

                Watch:

                Three Vancouver residents reportedly tried to fraudulently skew pay-per-click ad results to boost their own business’ ad rankings. By sending top-paying companies’ fees ever higher through the use of automated scripts or robots, they hoped to force those companies to abandon their ad campaigns so that these fraudsters could then swoop in and take over those ad slots.

                See? Two sentences! That wasn’t so hard, was it?

          • nataku8_e30 says:

            @Trai_Dep: I clicked on the link as well. My main issue is that the consumerist text actually does not make any sense if you read only that. It should probably be a summary of the issue, but instead it leaves out critical information necessary to understand what this story is even about.

          • FooSchnickens - Full of SCAR says:

            @Trai_Dep: That’s all well and good Mr. Snarky McSnarkerson, but when you have to click through to that external article to even know WTF this article is talking about kinda defeats the purpose.

            You speak of a summary somewhere on this page pertaining to the aforementioned linked article, but all I see is out of context blabbing that made no sense whatsoever UNTIL I looked at that article.

    • Cant_stop_the_rock says:

      @mbd:
      How is it not fraud? They used deception to cause Microsoft and the advertisers to believe that interested parties were clicking on the ads, and the result was that the advertisers lost a lot of money. That’s fraud right there.

      Feel free to mangle my words and set up strawmen, but judges aren’t stupid. These guys are going down.

      • Gramin says:

        @Cant_stop_the_rock:

        I agree. It’d be different if it was Microsoft v. Google. But this is Microsoft v. Little Guy. Microsoft is willing to spend more than that little guy company makes in a year to win this lawsuit. I also doubt they’re willing to settle.

        Microsoft wants to change the economics of fraud by increasing the cost. Settling the suit doesn’t create legal precedent. Winning this case will send a warning shot to any other would-be internet ad fraudsters.

        • Megalomania says:

          @Gramin: Yeah, no way will Microsoft settle this. The money is irrelevant to MS (in that quantity, at least). It’s about setting a precedent and telling everyone who would say that “it isn’t fraud” yes, it is fraud, it is illegal, and it has consequences.

        • Trai_Dep says:

          @Gramin: “Microsoft v. Little scheming, thieving, stealing, fraudulent guy.”
          There, fixed!

  2. mgy says:

    What if some random guy just clicked on those ads all day without getting paid for it? Can he be held liable?

    • Gramin says:

      @mgy:

      Depends on the motive. A bar fight that becomes a murder is different than the pre-meditated killing of someone. But, according to the NY Times Article, there was financial incentive. He was either running or working for some of the lower-ranking insurance companies.

      • varro says:

        @Gramin: If the sleazy guy was working for an insurance company, why doesn’t Microsoft go after the company who hired him?

        Oh, and would anyone else like to see a catfight between Progressive’s Flo and Erin Esurance?

        • There's room to move as a fry cook says:

          @varro: The guy is not “working for” an insurance company (Company A). He has his own website and gets commission from Company A if someone enters their contact information into his website (“enter your info for an insurance quote”). He is sending fake traffic to Company B in an attempt to drive up their advertising costs & reduce their advertising with the result that his site ranks better in the paid search engine results. Company A has nothing to do with his behaviour & didn’t know about it. I doubt they would condone his tactics.

    • Loren Fisher says:

      Bill and Steve both maintain their own blogs about widgets. Both bloggers use advertisements on their pages. Bill doesn’t like his competitor, Steve, so he goes onto Steve’s blog and repeatedly clicks on his advertisements for several hours per day every day for several days.

      Steve ends up with a notification from his online advertiser that he has been terminated from the advertisement program due to suspicious clicking activity. Steve asks to know more about the incident, insisting that he knew nothing about this, but the online advertiser is unconvinced. After all, playing dumb like that is exactly what a ‘scammer’ would say.

      Due to lack of advertising revenue, Steve is forced to shut down his entire blog site.

      Months later, Steve finds out what Bill did and decides to sue Bill. Will Steve be liable to Bill? Steve could just play dumb too and claim that his clicks, although excessive, were legitimate because, he claims, the advertisements were very targeted to his interests and he was compelled to click on many of them…

      • Andrey Goder says:

        @Loren Fisher: He could claim that, but would probably lose in court. Considering he’d have to click it thousands of times, which vastly exceeds any reasonable amount of clicking.

  3. faintandfuzzies says:

    Its the companies fault for presenting the ad. If they don’t want it clicked, then don’t advertise!

    • Gramin says:

      @faintandfuzzies:

      Huh? That’s your logic? That’s like saying “If you don’t want your car stolen, don’t have a car.” An individual or company can’t use malicious means to force their competitors into paying exuberant costs.

      • Cant_stop_the_rock says:

        @Gramin:
        I think… hope… he’s joking

      • faintandfuzzies says:

        @Gramin: Yes, that is my logic! Personally, I can’t stand ads, pop-up or embedded. They are very distracting from why I’m really at a site.

        If companies are worried about people being malicious, then they need to think of another way of collecting payment for advertising.

        Of course, the companies that are complaining are the same one that load our systems and software full of crap to sell more crap! They really have no right to complain.

        Sorry if you don’t like my logic… but then again, its ‘my’ logic and we dont have to agree.

    • Trai_Dep says:

      @faintandfuzzies: Likewise, if my supermarket didn’t want me to shovel that 5lb steak down my pants, why’d they leave it out on the shelves? Silly, silly grocers!

  4. ArcanaJ says:

    Fraud? Please. That’s like saying, “That guy watched our TV commercial too much! Those things cost money to produce! Sue him!”

    Yeah, good luck with that, Microsoft.

    • Gramin says:

      @ArcanaJ:

      My money is on Microsoft. They’re too big for these people to handle. And though Microsoft is only suing for $750,000, I’m sure they’re willing to spend more than that to get the point across.

      Moreover, it is fraud. Read the NY Times article. This individual was attempting to exhaust the advertising budgets of competitors via exuberant clicks on advertisements. Furthermore, he either owns or was being paid by the smaller companies to do this. That’s fraud.

      • vladthepaler says:

        @Gramin:

        Consider a similar situation: a company puts out a stack of 10,000 paper flyers, and someone takes all of them in a deliberate attempt to waste the company’s advertising dollars. In no way is that fraud. The person is not deceptively claiming to represent 10,000 people, he’s not taking the flyers on the promise of redictributing them to the whole town, etc. He’s just taking them; deceit isn’t an element of that action. Though if the flyers weren’t left out in public for people to help themselves to, it might be theft.

        Or, let’s say that Consumerist has a direct competitor, and that competitor hires someone to reload the Consumerist website thousands of times, in attempt to increase their bandwidth costs. Consumerist’s admins might block that person’s IP address from accessing their site, but again, there wouldn’t be any fraud claim. Loading a web page simply isn’t a deceptive activity. Waste is not the same thing as fraud.

        • Gramin says:

          @vladthepaler:

          But when it includes financial burden and monetary compensation, it’s fraud. This isn’t a case of a company losing 10,000 flyers that have already been paid for. Rather, each time this individual clicked on the ad, the ad company has to pay.

          Microsoft attempted to block the ad “clickers.” However, they continued to get around Microsoft’s blocks to perpetrate fraud. This is a legal grey area and Microsoft is trying to define it a bit more. I agree with Microsoft. And they’re going to win.

          And it’s nice to see Microsoft backing up these advertisers. They alerted Microsoft to an increase in clicks and an investigation began.

          • vladthepaler says:

            @Gramin:

            No. By definition, fraud involves deception. There’s nothing deceptive about clicking on a link repeatedly.

            I don’t see how it’s relevent whether the ad company pays for the advertising prior to distribution (as in flyers) or after distribution (as in web ads). Surely you’re not trying to claim there’d be less damage to the advertising company if only they’d paid up front for their web ad.

            I’m not saying that there’s nothing wrong with the actions alleged, I’m just saying that it doesn’t make sense to call the act fraud.

            • Jaynor says:

              @vladthepaler: Good point – I always mail back postage paid envelopes from unsolicited snail-mail specifically to financially impact the offending company (I generally send them empty… or filled with grass clippings). They have to pay to retrieve the mail, at which point they gain the bonus of fresh-cut grass smell… but no customer.

        • Cant_stop_the_rock says:

          I think a lot of people aren’t reading the article because you have to login to read it. Just google the title (Microsoft Sues Three in Click-Fraud Scheme) and click the link to the article on Google/Google News. No login required.

        • Andrey Goder says:

          @vladthepaler: Well it would probably be theft to take all 10,000 flyers.

      • ArcanaJ says:

        @Gramin:

        My mistake! I only skimmed the article the first time through. I was under the impression that it was only a theory on the part of Microsoft and that they had no proof.

        Because just clicking to test the boundaries/limits of a system (which is what I thought was originally going on) may be annoying and it may be expensive, but that in and of itself is not fraud.

    • John Henschen says:

      @ArcanaJ: Not at all. If television advertisers were paying per television that aired a commercial, then yes, what you say would be true. But internet advertisers pay per click. It would be akin to having a display at a store and one person walking by and taking all of the free samples. Is that right? No. Is that illegal, no, not yet. Microsoft’s aim is to make that type of thing have a legal precedent, which it doesn’t now.

    • Snarkysnake says:

      @ArcanaJ:

      It’s Fraud . If two parties agree to an action that harms the person or interests of a third party, they have comitted conspiracy to defraud.

      The only chart in this post . See if you can follow.

      Mr. Lam (Robo Clicker)+ Lower Ranking Advertisers Vs.

      Big spending advertisers that want real clicks .

      That’s the fraud.

    • SacraBos says:

      @ArcanaJ: Apples and Oranges. The two mediums don’t compare that way.

      This is more of a “pay per lead” style of advertising. The insurance company paid for 1000 leads, and the fraudster sent him hundreds of bogus leads – and was paid by other insurance companies to create these bogus leads.

      If you were a company and bought a list of names/addresses of potential clients, then find out that 75% of them were made up by someone, that would be fraud. This is very much like that.

    • EarlNowak says:

      @ArcanaJ: Not to mention they’re suing three canadians in US Federal court.

      Good luck getting them to defend a lawsuit in another country, guys!

    • Megalomania says:

      @ArcanaJ: A much less asshole-ish and much more accurate analogy – “Competitors paid people to call our toll-free line and hang up so that we would have to pay for the calls and no longer offer them to legitimate customers”.

    • 2 replies says:

      @ChuckECheese:
      Bill gates doesn’t work there anymore. You should have said Balmer.
      Balmer is MUCH more intimidating. I’m positive, but I don’t thing Gates ever threw a chair at any point in his life.

  5. There's room to move as a fry cook says:

    Websites get revenue when a site visitor clicks on a Microsoft or Google advert on that page. The advertiser (ie insurance company) gets charged per click and the website gets revenue per click.

    The fraud occurs when the website generates fraudulent clicks (often thru bots) in order to boost it’s revenue. This is against the webmaster’s agreement with the ad network (Microsoft or Google) and most likely meets the legal definition of fraud.

    • dcaslin says:

      @IfThenElvis: Based on Gramin’s description of the article, that’s not what happened here, the sketchy activity wasn’t to gain fake money, it was to cost someone else fake money. If I were Microsoft I’d force all advertisers to sign a contract promising not to meddle with the search statistics in any way. That way they don’t need a precedent, they already have the contract in place. None of this fraud is useful unless you’re already in a contractual advertising relationship w/ Microsoft or someone else.

      • myasir says:

        @dcaslin: If they break their contract with Microsoft, they can go and still do the same things with google, yahoo, etc. By taking them to court, Microsoft is trying to show that there are real consequences for their fraudulent activities.

  6. vladthepaler says:

    I don’t understand how clicking on ad can be fraud.

    • ospreyguy says:

      @vladthepaler: Then you need to read the actual article. The act of clicking was only the method used to commit the fraud.

    • pop top says:

      @vladthepaler: Then maybe you should read the article.

    • Megalomania says:

      @vladthepaler: Have you ever heard of “click fraud”? It’s a term that even Google uses to describe people clicking ads purely for the clicks to register with the advertising system. If Google even suspects you of it, they’ll refuse to pay you money, shifting the financial loss to the end users of AdSense (the website owners who let AdSense ads be put on their sites). Here Microsoft is attacking a root cause rather than just trying to make it less profitable.

  7. Anonymously says:

    My synopsis: It seems as if the defendants are accused of spam-clicking their competitors ads in order to deplete their ad revenue. The defendants got into an arms race with Microsoft, continually evading their techniques to block the click-spamming.

    • There's room to move as a fry cook says:

      Think of typical click-fraud as a referral commission scam. A company gives you a commission for every customer that signs up for their catalog – but you scam them by feeding them thousands of fake names just to get the commission.

      In this Microsoft case the perp is not getting a commission but is feeding a competitor thousands of fake names so that they waste their money by making and mailing thousands of catalogs to fake address.

  8. Cant_stop_the_rock says:

    I wonder sometimes whether the victim has any impact on people’s reactions to articles. If this weren’t about Microsoft, I wonder how many people would think there is nothing wrong with what these guys did.

    • myasir says:

      @Cant_stop_the_rock: While it’s microsoft who’s suing the perps, the real victims are the insurance companies that were being defrauded. Consumerist should try to make that more clear.

    • Megalomania says:

      @Cant_stop_the_rock: Microsoft is getting PAID money when these people do this. However, they are refunding their customers (advertisers) because the advertisers got nothing for their money due to these people. Microsoft is taking a stand on behalf of all companies in online advertising to ensure that their customers are not cheated.

  9. ChuckECheese says:

    How about if banner ads just tell us how many times to click? They could put an instruction on it like,

    “One click per person, please, under penalty of Bill Gates.”

  10. sanjsrik says:

    Can this article be any more poorly written? WHO is MS suing? WHY are they suing them? WHAT are the facts of the alleged fraud?

    For gods’ sake, Consumerist, try and actually read the articles sometimes before you post them.

  11. mrgenius says:

    Seems to me that a better solution would be to change the methodology on how MSFT chooses to be paid ad revenue. It’s friggin MICROSOFT for goodness sake… you would think between a couple MBAs and a few programmers they could come up with an algorithm more robust than “click the flashing target, get CASH!”.

    I still don’t see the legal fraud here since it was a third party with no agreement with either the advertiser or MSFT. Sound to me like they just have a very easily manipulated payment plan. They could always just charge per ad based on page views like newspapers do with circulation.

    • There's room to move as a fry cook says:

      @mrgenius: I keep trying to find real world equivalents. If Target puts out a rack of advertising flyers and a Walmart employee comes and grabs them ALL – is that illegal?

  12. eskimo81 says:

    After reading the source, it makes more sense. The summary found here doesn’t give all the details. Basically, this is what happened:

    Company X hires Microsoft to Advertise, agrees to pay $x for each click a user makes.

    Company Y is a competitor to Company X, and hires Microsoft to do the same thing, but pays less and gets a lower ranking page.

    Company Y hires Fraudster B to make Company X’s ads go away.

    Fraudster B has a script that gives Microsoft the appearance that millions of different people are clicking on the ads for Company X, when really no person is clicking them, just a bot.

    Microsoft charges Company X for the bot clicks, Company X runs out of advertising dollars, and their ad disappears.

    Company Y now has their ad at the top of search.

    That’s how the scam was designed to work. But Microsoft caught on and figured it out. Microsoft has now refunded $1.5 million to advertisers who were mistakenly billed for fake clicks, and is sueing Fraudster B.

  13. sonneillon says:

    Let’s sic microsoft on a group of people everyone hates and is most likely committing faud. I’m ok with this.

    I am also ok with siccing AT&T on robocalling companies and google on email spammers.

  14. Garbanzo says:

    Sometimes I click (once!) on ad to punish the advertiser for poor choice of search keywords. If I search for “women’s clothing stores ” I don’t want ads for men’s stores or stores in New York (*without* on-line sales!). My hope is that paying for clicks that don’t lead to sales will teach them to be more intelligent with their keyword bidding. My friend who works for a search engine was horrified, though; he says it just feeds bad data into the algorithms that decide what ads to show. I still want to punish them for cluttering my results, though.

  15. mac-phisto says:

    i suspect this will result in a major shift in how advertising works on the tubes. i remember the glory days when banner ads would generate as much as 25¢/click. i had a friend in college that made a good chunk of money by creating a webpage with a few dozen ads, going into the computer labs late at nite & clicking on every link on his site from every computer.

    it’s b/c of people like him that ad revenue is so piddly today & it’s b/c of people like the lams that it will soon no longer be a viable income source for many sites.

  16. jdmba says:

    I would assume 100% of ad clicks would be fraud. Why on EARTH would you click on a web ad?