Sunnyvale, California — Yahoo Inc. has reportedly settled a class action lawsuit over pay-per-click ads with some of its search advertising customers who were not satisfied about where their ads were showing up sold by Yahoo that wound up in some shady corners of the Internet.
Yahoo has agreed to reimburse with some search marketers refunds of $20 to settle a class-action lawsuit alleging that it served search ads on typosquatting sites, parked domains and other potentially low-quality locales.
“Yahoo! breached its contract with its customers by allowing Yahoo! ads to be displayed in spyware, domain name parking sites (also known as bulk registration sites), pop-ups, pop-unders, and typosquatting sites. Plaintiffs brought claims for breach of contract, unjust enrichment, misrepresentation, civil conspiracy, and unfair business practices.”
Lawsuit administrator Rust Consulting sent an e-mail to members of the group that preliminary court approval of the settlement has been granted and posted copies of court documents here.
Yahoo, back in 2006 was faced with similar lawsuit by a class of advertisers who charged that Yahoo sold them ads that were supposed to appear on “highly targeted” sites and alternatively wound up on sites filled with spyware or run by typo squatters.
If the deal goes through, search marketers who advertised with the company at any time since 2000, and who are no longer in business, would be eligible for the refunds. The agreement calls also would give the plaintiffs’ lawyers $4.17 million in attorneys’ fees and $100,000 in expenses.
Yahoo customers who filed the lawsuit, claimed that when ads they placed through “Sponsored Search” and “Contact Match,” they showed up in spyware, domain name parking sites, typosquatting sites and other undesirable locations on the Web.
As part of the settlement, Yahoo agreed to offer a new filtering option for ads, and to modify how it handles disclosures and click fraud investigations:
Yahoo has also made a commitment to give search advertisers more control over where their ads appear, including the ability to direct whether ads appear on Yahoo-owned sites, such as Yahoo’s search engine, or partner sites where the search ads are powered by Yahoo, such as WebMD.com. Marketers can also choose to have ads appear on both Yahoo-owned sites and partner sites.
Yahoo will create an “Ad Placement Option” for advertisers to guarantee their ads will appear only on sites owned by Yahoo or sites designated as “premium” partners. That feature should appear early next year but Yahoo has a deadline of September 30, 2010, to provide advertisers with that option.
Also, Yahoo will give marketers more information about where their ads are displayed, and will have a submission form that advertisers can use to report concerns about Yahoo’s partners.
Advertisers will also receive enhanced tools for measuring traffic quality and potentially disturbing sites bearing their ads. Yahoo said the deal will still be in place assuming it gets the regulatory approval to outsource its search business to Microsoft. Yahoo plans to retain the right to sell search ads on its sites once that deal is official.
Yahoo renounce any wrongdoing in the case. “Yahoo entered a settlement to avoid costly and disruptive litigation, while at the same time, agreeing to provide additional benefits for its pay per click advertisers,” the company said in a statement.
U.S. District Court Judge Christina Snyder in the central district of California has already given the deal preliminary approval. A final hearing on the settlement is slated for Jan. 11.
Google is also facing a potential class-action lawsuit alleging that the company displayed search ads on low-quality sites, including sites that people reach after they misspell URLs. That case is pending in federal district court in the northern district of California.