Microsoft sues two brothers, mother for online ad fraud

Microsoft is suing two brothers and their mother in Vancouver, B.C., for $750,000 on allegations that the three engaged in online ad fraud to boost traffic to their auto-insurance and "World of Warcraft" Web sites.

The civil case, filed Monday in U.S. District Court in Seattle, is the software company's first-ever lawsuit involving a case of suspected click fraud.

Microsoft attorney Tim Cranton said it should be taken as a sign that the company plans to play a lead role in policing online advertising.

"Part of our responsibility as an industry leader is to bring enforcement in this area," said Cranton, associate general counsel for Microsoft. "What we've seen in this particular area of online advertising is there is a significant amount of fraud."

According to Microsoft's complaint, Eric Lam, his brother Gordon Lam and their mother Melanie Suen used click fraud to increase their rankings on Microsoft's search engine Live Search, which has since been upgraded and rebranded Bing.

Gordon Lam declined to comment on the lawsuit.

In search-engine advertising, companies bid for sponsored placement on the top and right sides of the page that lists results from a user search for, say, "auto insurance." Each time a user clicks on one of those sponsored links, the advertiser pays Microsoft. The cost per click ranges from 5 cents to hundreds of dollars, depending on the desirability of the search term, according to court documents.

In click fraud, a person or computer program repeatedly clicks on a link without any interest in the Web site the link leads to. This action can be used to exhaust the ad budget of a competitor, and to lower that site's placement in the sponsored area.

"There seems to be an expectation that it's just part of doing business," Cranton said.

Click Forensics, which monitors online advertising traffic, reported that 13.8 percent of online-ad clicks in the first quarter of 2009 were fraudulent.

According to the court documents, the Lams and their mother engaged in click fraud in spring 2008 for advertisers who paid for placement for the search terms "auto insurance" and "WoW," short for the online game "World of Warcraft."

The Lams' Web site, WoWMine.com, sells virtual gold that can be traded in the online game. The virtual gold is used to advance in "World of Warcraft," and the game's developer does not support the selling of gold in online markets.

Microsoft investigators believe the Lams used the increased traffic they gained from auto-insurance searches to gather quote requests, which they sold to an insurance lead generator.

One auto-insurance company suspended its advertising with Microsoft because of the fraud, according to the complaint. Microsoft said in court documents that it credited nearly $1.5 million to advertisers to compensate for the alleged fraud.

According to the documents, Microsoft linked the fraud to the Lams, who advertised under U.S., Hong Kong and Canadian companies called UMGE and Super Continental.

Sharon Pian Chan: 206-464-2958 or schan@seattletimes.com