An e-mail was just sent out to advertisers participating in Yahoo! Search Marketing, formally known as Overture, advising of the proposed class action settlement for bidders advertising during the period of January 1, 1998 in July 31, 2006.

Affected bidders should submit the Assertion of Right to Participate in Additional Claims Review Process form by November 20, 2006, indicating that you intend to file a claim form for Yahoo! advertising credits and give up your ability to sue Yahoo! over the subject matter of this case. The Assertion of Right to Participate form is available for download at
www.checkmatesettlement.com.

The Plaintiff Checkmate Strategic Group, Inc. claims that Yahoo! has breached its contracts with Class Persons and committed unfair business practices including improperly collecting revenue by charging and/or overcharging Class Persons for clicks that were fraudulent, click spam, invalid clicks, etc.

The first thing that I noticed is that the settlement is for a period of time which is continuing right up to and beyond the date of the Court Order, on June 28, 2006, proposing the class-action settlement. Although Yahoo! denies any wrongdoing, I have not read that Yahoo! denies that advertisers were charged for click fraud perpetrated by third parties. Apparently, Yahoo! does believe that click fraud occurred because they are settling the claim and apparently, while settlement payments will end on June 28, 2006, the fraud is continuing.

The fact is that while it may be possible to reduce click fraud, it can never be eliminated. According to a C/net News.com article, dated July 5, 2006, “Online advertisers estimate that 14.6% of the clicks on ads for which they’re billed are fraudulent, costing them about $800 million last year.” The article also states “…companies that sell click fraud detection and prevention services have pegged it at 20 percent to 30 percent.”

Google announced earlier this year that it would pay $90 million in advertising credits and attorneys fees to settle a class-action lawsuit concerning click fraud. A lawsuit to block the settlement has been filed by advertisers who claim Google is paying far too little.

Certainly, click fraud can be costly. I no longer bid on keywords, but I had an account with Overture, now Yahoo! The only time I checked on click activity, I found two fraudulent clicks totaling $70. Who knows how much I actually spent on fraudulent clicks.

Two things that you can do to reduce costly fraudulent clicks are to use a click fraud detection company and to limit your advertising accounts to advertising only on the search engines and not on private websites. While competitors may occasionally click on your advertising appearing on search engines, it is very unlikely that a competitor will continually click every day and that type of behavior will likely be caught by Yahoo! or Google. The biggest problem remains with private websites that display your advertising. Some unscrupulous webmasters are smart enough to get around fraud detection methods.