Microsoft has filed two federal lawsuits in U.S. District Court in Seattle against perpetrators of what it is calling click laundering.
The lawsuits were filed against Eric Ralls, president of a company called RedOrbit Inc. and several 'John Does' whom Microsoft hopes to identify as part of the legal process of discovery, according to TechFlash.
Click fraud typically occurs when a person or computer program imitates a legitimate web surfer and clicks on an online ad for the purpose of generating a fraudulent charge-per-click, without having any interest in the target of the ad's link, explains Tim Cranton, associate General Counsel, Microsoft Digital Crimes Unit, in a blog post.
By contrast click laundering is more advanced form of click fraud designed to circumvent fraud detection systems by hiding the origins of fraudulent clicks - that is, laundering them through apparently legitimate intermediaries, he said. One form, for instance, involves malware that delivers rogue search results - returns search results adulterated with useless parked domains. The unwitting user opens one of the parked domains, clicks a link or two, realizes it’s not what he or she is looking for and closes the window, says Cranton.
But "what seems like a harmless digital dead end is, in fact, a laundered ad click that appears legitimate to an ad platform provider such as Microsoft but offers no value to the advertiser who would be charged for it."
In the complaints Microsoft filed this week, the perpetrators could have defrauded advertisers of hundreds of thousands of dollars, he said.
'Real Purchases'
Microsoft is not the first to notice that click fraud is becoming ever more elaborate. Ben Edelman, a Harvard Business School professor has established that some perpetrators of click fraud now can not only simulate clicks on an ad - but also are able to seemingly generate a 'real' customer purchase on the advertiser's website.
Edelman focused his research on Google specifically. This is how the fraud works, according to his blog: spyware on a user's PC monitors the user's browsing to determine his or her likely purchase intent. Then the spyware fakes a click on a Google PPC ad promoting the exact merchant the user was already visiting.
If the user proceeds to make a purchase - which is reasonably likely for a user already navigating to the merchant's site - the merchant will naturally credit Google for the sale.
"Furthermore, a standard ad optimization strategy will lead the merchant to increase its Google PPC bid for this keyword on the reasonable - albeit mistaken - view that Google is successfully finding new customers. But in fact Google and its partners are merely taking credit for customers the merchant had already reached by other methods."
Much of the culpability for this fraud, Edelman says, can be attributed to a search engine that Google uses to broker ads. In the scheme that Edelman tracked, these ads were passed on to more than seven other shady affiliates that perpetuated the fraud through the search engine. Among other measures, Edelman is urging Google to cut its ties with this search engine as well as make restitution with affected advertisers.
