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May.20, 2010

Microsoft this week filed two lawsuits in federal court in Seattle against alleged perpetrators of a new, technologically advanced form of online advertising click fraud being dubbed "click laundering."

According to Microsoft, click fraud is an online advertising scam that occurs when a person or computer program imitates a legitimate user and clicks on an online ad for the purpose of generating a fraudulent “charge-per-click,” without having any interest in the ad.

Click laundering, meanwhile, is a more advanced form of click fraud designed to outwit fraud detection systems by hiding the origin of fake clicks.

Microsoft's ad platform allows advertisers to pay to have their sponsored text links appear on the company's Bing search engine. The software giant additionally farms out these links to other websites, and anytime a user clicks on the link, Microsoft shares the profit with the publisher of the website on which the click occurred.

The lawsuits name science news website RedOrbit and its president, Eric Ralls, along with other unidentified defendants who Microsoft alleges engaged in click laundering scheme to earn fraudulent ad revenue.

Microsoft said that if the click laundering had gone undetected, advertisers could have been defrauded of hundreds of thousands of dollars.

RedOrbit formerly participated in a beta version of Microsoft's ad platform to earn revenue from ads running on its site. In early-to-mid-2009, RedOrbit began channeling a large number of “questionable” clicks into Microsoft's ad network, according to Microsoft's complaint. Between September and December 2008, RedOrbit received approximately 75 clicks per day on ads placed there. From January to February 2009, however, the number of clicks skyrocketed to 10,000 per day.

“By fraudulently generating a high volume of invalid clicks and by channeling them into Microsoft's ad network, the defendants sought to illegally profit at the expense of advertisers,” Microsoft's complaint states.

In a statement sent to SCMagazineUS.com, RedOrbit said it has never engaged, assisted in, or condoned click fraud.

“We are disappointed that Microsoft has made these completely baseless allegations and intend to defend against them vigorously,” RedOrbit's statement read.

Additionally, Ralls told SCMagazineUS.com on Thursday that Microsoft never compensated RedOrbit for the clicks in question.

“We never got the money for it,” he said. “When this happened, we fully cooperated with them and turned over our log files to be completely open and help them determine what happened.”

Click laundering often involves the use of malware that delivers rogue search results to trick users into visiting websites where they unknowingly click on advertisements, Tim Cranton, associate general counsel, Microsoft Digital Crimes Unit, wrote in a recent blog post. The malware impersonates legitimate search engines and offers fake domains that offer no relevant content. When a user opens one of the links and clicks around on the page, they are actually clicking an ad and an advertiser is charged for each click.

Additionally, some of the fake domains include IFRAMEs that cause users to unknowingly visit an ad, Microsoft said. Those who engage in click laundering also can disguise the origin of fraudulent clicks to make it appear that a user intentionally visited an ad.

“Just like money laundering, in which the origins of ill-gotten gains are disguised as legitimate income, clicks from automated programs or virus-ridden computers are dressed up as real clicks by real customers, i.e., clicks that advertisers pay for,” Cranton wrote.

Microsoft is seeking unspecified damages. No court date has been set.