Google, Yahoo! and other players in the search business have become embroiled in a lawsuit which involves overcharging for pay-per-click online advertising.
The Wall Street Journal says that plaintiffs in the US filed a lawsuit in February alleging that Google and Yahoo overcharge advertisers, and also that they collude with each other, to continue overchargin.
In the pay-per-click model used by Google, Yahoo! and Ask Jeeves , advertisers pay each time a user "clicks through" on an ad listed alongside search engine results. Each click costs on average between €0.30 and €0.50 with more popular keywords costing as much as €10 per click.
Led by an Arkansas company called Lane's Gifts and Collectibles, the plaintiffs want the lawsuit certified as a class action. They allege that the defendants, which include Google, Yahoo!, FindWhat, Ask Jeeves, America Online and Look Smart, improperly charged advertisers for incidents "click fraud".
Click fraud is a growing problem in the search industry. The practice has seen people - such as competitors or unhappy employees - click repeatedly on an ads to run up a bill for the advertiser. This can cost advertisers a lot of money and is difficult to track down.
Google and Yahoo! and other search engines say they have anti-fraud systems in place and that they regularly give advertisers refunds for fraudulent clicks. However, they have been sketchy with details, causing some advertisers to worry that the problem is bigger than they are being told.
Click fraud statistics from Sempo, a non-profit association that works to increase awareness and promote the value of search engine marketing, indicate that advertisers are concerned about click fraud but haven't been able to seriously track it. Between 36 per cent and 58 per cent of advertisers are worried about click fraud but been unable to track its full extent, according to a report by Sempo published in December 2004.
While the majority of the named defendants of the lawsuit have so far declined to comment, Ask Jeeves said in a March regulatory filing that "we intend to defend this lawsuit vigorously".