Microsoft files suit for faking clicks on Web advertising

Microsoft filed two click-fraud suits Wednesday, pursuing operators that allegedly generate fake clicks on Web advertising to make money from advertisers that pay per click.

One suit was filed against Eric Ralls, president and founder of Dallas science-news site RedOrbit; the other was filed against several John Doe defendants, website operators anonymous to Microsoft. The cases were filed in the Western Washington District of U.S. District Court.

"We can either take aggressive steps to stop fraud or we can look the other way and make money from it," said Brad Smith, Microsoft's general counsel, at a news conference Wednesday. Both the Web operators and the search engine can profit from click fraud.

Microsoft filed its first click-fraud lawsuit, against a Vancouver, B.C., mother and son, in June 2009 and recently settled that case for an undisclosed sum.

"We do not nor have we ever engaged, assisted in, or condoned click fraud," said Ralls, who started RedOrbit in 2002. RedOrbit is a small company and the site gets 3 million visitors a month, he said. "We are disappointed that Microsoft has made these completely baseless allegations and intend to defend against them vigorously."

Microsoft sells online-ad space to advertisers through a service called AdCenter. The lawsuit alleges that RedOrbit participated in its AdCenter beta and disguised clicks going to other sites as clicks on ads sold through AdCenter and which appear on RedOrbit's site. Microsoft calls the practice "click laundering." The company accuses the anonymous defendants in the second lawsuit of the same practice.

Microsoft said it became suspicious of RedOrbit after the clicks on the site went from 75 per day to 10,000 per day between January and February 2009. Ralls declined to comment on specific allegations in the lawsuit.

"Kudos to Microsoft for stepping up and filing multiple lawsuits," said Ben Edelman, an assistant professor at Harvard Business School, who researches online business. Edelman participated in a news round-table Wednesday where Microsoft announced the suits.

"We want advertisers to know when they advertise on our network, we stand behind them," said Microsoft's Smith. "When a criminals looks at [ad] networks, they will look at which companies have the will and the means" to take them down, he said. "We are demonstrating that we have the will and the means."

In 2006, Google was sued for click fraud. In a proposed settlement, the company agreed to reimburse advertisers who paid for false clicks up to $90 million total. The company said then that it catches most invalid clicks through filters before an advertiser is ever charged for them.

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