Yahoo Sued for Fraud

In a story that's burning up the blogs today, Yahoo has been accused of syndication fraud and typo-squatting by net activist Ben Edelman. Edelman filed a class-action lawsuit in New Jersey court this week, naming the Yahoo-owned Overture pay-per-click service as one of the sources of the fraud.

Syndication fraud takes place when advertisers pay a premium for ad placement on highly targeted sites and search results, then their ads are served to low-traffic and low-relevance pages or served by spyware pop-ups. Automated systems can surf these pages and drive up click traffic, creating artificially inflated click-through data.

This is slightly different than click fraud — the practice of using spyware and other black box methods to automatically surf sites in order to drive up traffic and ad revenues.

Both practices are believed to be common among companies that are falling short of investor expectations and need to show that their ads are being clicked on more often. The end result is fraudulently inflated advertising costs and strained ad budgets for marketers.

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