Microsoft sues for $1.5mn click fraud

Microsoft has filed a lawsuit against three individuals for an elaborate "click fraud" scheme, accusing the group of clicking the ads of rival websites thereby exhausting their ad budgets and boosting the ranking of their own search ads.

Microsoft is seeking at least $750,000 (£456,000) in damages from the defendants, claiming the three set up a number of false companies in March of last year and targeted ads for car insurance firms and the computer game 'World of Warcraft'.

In March 2008, Microsoft received complaints from car insurance advertisers who said traffic to their ads was spiking in a suspicious manner.

Microsoft investigated the claims and found an unusual number of searches for "auto insurance quotes" and a high click-through rate for the top paid search ads.

A similar scheme was being carried out with the keywords "World of Warcraft", Microsoft found.

Microsoft estimates the alleged fraud cost the advertisers in the region of $1.5m.

The company tracked down the source of the clicks and found the lion's share came from two Canadian-based proxy servers.

Microsoft claims that the three defendants set up fraudulent auto-insurance companies or worked with legitimate firms and bombarded the top-ranked ads with clicks, depleting the companies of their ad budgets and sinking their ad placements.

The defendants then placed their own ads on Microsoft's adCenter, which quickly rose in results rankings and were clicked on by actual customers. The group then sold the personal data of legitimate customers to low-level advertisers, Microsoft claims.

The lawsuit is a rare instance of a search engine going after individual advertisers and not the other way around.

Google was one of the first companies to do so in 2004 when it sued advertisers who were clicking on their own AdSense ads to make money.

Microsoft's general counsel Tim Cranton said the case was "significant" despite the relatively meagre compensation the company is asking for.

Cranton told the New York Times: "We have decided to become more active in the commercial fraud area on the enforcement side. The theory is you can change the economics around crime or fraud by making it more expensive."

About one in every seven clicks (13.8%) is fraudulent, according to consultancy Click Forensics, which measures global click fraud rates with its quarterly Click Fraud Index.