Yahoo click fraud initiatives: Exclusive update

Last June, in conjunction with an impending settlement of a class action lawsuit filed in the U.S. District Court in Los Angeles by Checkmate Strategic Group, Inc. alleging breach of contract and unfair business practices, Yahoo made a public commitment to a multi-prong effort to further strengthen its anti-click fraud procedures and enhance click protection communication with advertisers, which I presented in detail.

Six months later, what is the status of the settlement and what progress has Yahoo made in realizing its objectives? To find out, I researched Checkmate Strategic Group, Inc. vs. Yahoo! Inc. and spoke with John Slade, Senior Director, Global Product Management, Yahoo.

WHAT IS THE CASE ABOUT?

According to the Notice of Pendency of Class Action, Proposed Settlement for Court Approval:

Plaintiff Checkmate Strategic Group, Inc., claims that Yahoo has breached its contracts with Class Persons and committed unfair business practices under California Business & Professions Code 17200 et seq., including improperly collecting revenue by charging/and or overcharging Class Persons for clicks that were click fraud, click through fraud, fraudulent clicks, click spam, invalid clicks, unwanted clicks, unqualified clicks, improper clicks, non-converting clicks, inadequately converting clicks, clicks that were not reasonably expected by Class Persons or otherwise claimed by Class Persons as clicks for which Class Persons should not have been charged, and improperly collecting revenue by charging and/or overcharging Class Persons for clicks where users did not actively choose the Class Persons’ listings (“Challenged Clicks”).

Since filing the action, Plaintiff, through Class Counsel, reviewed Yahoo’s billing procedures and Yahoo’s click filtering systems and interviewed key Yahoo personnel. Although Yahoo does not believe it has done anything wrong and continues to deny all claims and allegations of wrongdoing asserted in the Action, Plaintiff and Yahoo agreed to enter into a settlement agreement. If approved by the Court, the settlement agreement will result in dismissal of the case and final resolution of all claims raised.

WHAT IS THE STATUS OF THE SETTLEMENT?

Slade conveyed to me that Yahoo expects final court approval of the settlement soon.

WHAT ONGOING ACTIONS WILL YAHOO BE OBLIGATED TO PERFORM UPON SETTLEMENT APPROVAL?

According to the Notice of Pendency of Class Action, Proposed Settlement for Court Approval:

1) Yahoo shall launch an online traffic quality center, which will be available to its advertisers within 90 calendar days of the Effective Date of the settlement. The traffic quality center will include a resource center which will contain FAQs, best practices documents, traffic quality articles, enforcement guidelines, and an advice column.

2) Yahoo shall designate a Yahoo employee as a traffic quality advocate who will be part of a traffic quality group to fulfill the function of fielding advertisers’ concerns regarding traffic quality, including its click fraud prevention efforts, within 90 calendar days of the Effective Date of the settlement.

3) Within 90 calendar days of the Effective Date of the settlement, Yahoo shall start a program in which it chooses at least three advertisers per year who will be invited to Yahoo to obtain special access to the traffic quality team and additional information with respect to Yahoo’s click protection system, subject to the advertisers’ execution of non-disclosure agreements.

4) Yahoo shall work with third parties in an effort to develop industry-wide standards that define click fraud, set forth standards with respect to the detection of click fraud and provide the public with periodic general evaluations regarding the effectiveness of providers’ efforts to filter and prevent the charging of click fraud to customers.

Slade conveyed to me that Yahoo is diligently pursing realization of the four courses of action that it has agreed to perform under the terms of the proposed settlement.

Slade also indicated to me that he has participated in every meeting of the Interactive Advertising Bureau’s Industry-wide Click Measurement Working Group (see “Interactive Advertising Bureau CEO on click fraud in ‘Real Deal’ exclusive interview”) held to date.

BOTTOM LINE?

Given the 90 day timeframe for action mandated by the proposed settlement and Yahoo’s indication that an Effective Date of the settlement is forthcoming, I project Yahoo will make formal, public announcements of 1) Online traffic quality center and 2) Traffic quality advocate by April 30, 2007.