Online retailer Bigreds.com is suing Yahoo for $1 million (£500,000), alleging that it was overcharged almost that amount because it was the victim of click fraud.
New York-based Bigreds, which sells collectibles online, said between 2002 and 2006, it used Overture Services, a pay-per-click advertising service that was acquired by Yahoo in 2003. Bigreds said it was charged more than $936,000 between 2002 and 2006 for the number of clicks that Bigreds ads received on sites affiliated with Yahoo and Overture.
Bigreds seeks more than $1 million in damages and penalties.
Pay-per-click advertising is a system where advertisers pay an agreed-upon amount each time a user clicks on their ads in the search results.
Yahoo did not respond to a request for comment.
Bigreds said Overture created an affiliate programme that allowed Web site owners to link to Overture's keyword search results. Those Web site owners would be paid a commission on the clicks generated to the affiliates and Overture would charge Bigreds and other advertisers for the traffic their ads received on sites affiliated with Yahoo and Overture.
In the lawsuit, filed earlier this month in the U.S. District Court for the Eastern District of New York, Bigreds claimed that the sources of the clicks were not from legitimate users, but were fraudulent clicks from affiliate Web site operators looking to increase their commissions.
According to the lawsuit, Yahoo and Overture knew about the alleged fraudulent clicks in 2006 but did nothing about it even though the companies had the technology to remedy the situation. According to the lawsuit, Overture offered Bigreds $17,000 for admitted "bad clicks" billed to the company from April 28, 2006, to June 28, 2006.
"These clicks were not actual traffic, but were fraudulent clicks," Bigreds said in the lawsuit. "Affiliates of Overture used software programs, employed people, and/or directed people other than actual customers to click on plaintiffs links from keyword search results."
Bigreds claimed that Overture had the ability to "tell what was bad, who conducted the bad click, where it came from, what keyword was involved and generally had superior technology and access to records in its dominion that enabled Overture to determine what persons or entities or affiliates were involved."