June 29, 2006

Yahoo announces that it has reached an important settlement agreement with Checkmate Strategic Group that will clarify its click fraud protection efforts, and offer more transparency to its advertisers in the future.

Yahoo knows that its customers and the industry as a whole have many questions and concerns about click fraud, as it relates to the litigation that Yahoo itself and other search engines have been engaged in over the past few years. The company says it is pleased to take a leading role in addressing this issue.

When Yahoo Search Marketing (formerly Overture) created the PPC (pay-per-click) search advertising model in 1998, one of the very first challenges it identified was the potential for users with bad intentions to click on specific listings with the sole purpose of generating a charge to the advertiser, better known as click fraud.

To better address this challenge, Yahoo quickly established a system of proprietary technologies and committed its people in protecting its advertisers from click fraud and other traffic quality-related issues.

Since 1998, Yahoo's Clickthrough Protection (CTP) system has run 24 hours a day, using search and click stream data to identify suspicious clicks and remove them from its billing system. During that period, Yahoo's system has identified and has successfully prevented billing advertisers for literally billions of clicks.

This includes click fraud as well as other clicks that Yahoo believes shouldn't be billed to advertisers. For example, blocked IP addresses, double-clicks, back browser clicks, etc.

Yahoo's settlement with Checkmate Strategic Group
Yahoo and Checkmate Strategic Group have been engaged in a class action click fraud lawsuit since June of last year. To help the Plaintiff's counsel and their experts better understand what Yahoo does to protect its advertisers, the company invited them to its headquarters to analyze firsthand Yahoo's proprietary Clickthrough Protection system in action.

The visit to Yahoo's premises also allowed to interview its team members, review Yahoo's filtering data and determine for themselves whether the company is truly meeting that commitment.

After this thorough review, the Plaintiff's counsel and their experts determined that Yahoo has in the past and continues to operate a click protection system that goes above and beyond what is necessary to address recent industry estimates about click fraud.

Overall, Yahoo is pleased with their finding, as it validates the effectiveness of its system. Yahoo also added that it recognizes that some advertisers may still have questions about certain clicks and that many advertisers want to hear more from Yahoo, with respect to click fraud and related issues.

To address such potential issues, both parties have agreed to the following settlement terms:

• Yahoo will offer advertisers a one-time extended claims period during which advertisers can submit click fraud claims for clicks dating back through January 2004. If Yahoo's investigation team determines that a credit is due that was not given previously, it will issue a 100 percent credit, which can be used in which fashion the advertiser wishes to use it. This claims process will be overseen by a retired Federal judge.

• Yahoo will appoint a Traffic Quality Advocate who will be dedicated entirely to addressing advertiser concerns about click fraud and traffic quality issues. This advocate will serve as the internal voice of the advertiser within Yahoo on these matters.

• To ensure that the advertising community has ongoing visibility into Yahoo's Clickthrough Protection system, Yahoo will host a panel of individual advertisers at its CTP headquarters once a year. During these visits, the company will allow advertisers to review its systems, meet with the CTP team and provide feedback on how it can continue to enhance its approach to fighting click fraud.

• Yahoo will work with a reputable third party toward building industry-wide efforts to combat click fraud, including development of industry-wide definitions of click fraud and a comprehensive lists of identified bots.

• Yahoo will commit technical and human resources to build a Traffic Quality Resource Center, which will provide advertisers with more detailed information about traffic quality issues (including click fraud) and solutions via FAQs, advice columns, best practices guides and additional access to analytics tools.

In addition, to provide advertisers with even more of the transparency for which they've been asking, Yahoo is also committing to the following efforts that go beyond the requirements of the settlement agreement:

• Yahoo will provide advertisers who submit click fraud or traffic quality-related inquiries with a time by which they will receive the results of Yahoo's investigation or, if the investigation is particularly complex, a status update.

• To provide advertisers with more clarity around refunds for click fraud and other traffic quality issues, Yahoo will include additional detail in advertiser refund notices.

Yahoo is pleased with this important settlement because it not only validates the strength of the search marketing industry and the effectiveness of its system, but also it allows the company to move forward in working more closely with its advertisers and other partners across the industry to fight click fraud.

Source: Reggie Davis, Associate General Counsel, Yahoo Inc.
and John Slade, Sr. Director, Yahoo Clickthrough Protection,
from Yahoo's press release.