Brands Have Had Enough. They’re Suing Over Ad Fraud.
Ad fraud is a type of online advertising scam in which perpetrators click on ads without having any actual interest in the products or services being advertised. By repeatedly clicking on an advertisement that compensates publishers on a Pay-Per-Click (PPC) basis, the fraudster can potentially accrue large sums of money. This can be done by a bot, a malicious publisher, a competitor, a former employee, etc. at the expense of the advertiser.
Ad fraud has become increasingly prevalent in recent years as online advertising has grown in popularity. This type of fraud is difficult to detect and even more difficult to prosecute, which has made it a major problem for businesses that rely on online advertising for revenue.
In response to this growing problem, some businesses are now suing ad exchanges or individuals responsible for the fraud. These lawsuits allege that the perpetrators knowingly allow scammers to buy ad space and then commit fraud and that they should be held liable for damages caused by the fraud.
Here are some recent examples.
🚨 Uber sued 5 exchanges for fabricating reports to hide fraudulent ads -- and it won
In December 2019, Uber filed a lawsuit against five ad networks – Fetch, BidMotion, Taptica, YouAppi, and AdAction Interactive – and 100 additional mobile companies for allegedly wasting millions of dollars on “low-quality or fraudulent” ads.
The app-based taxi-hailing service has previously filed a similar lawsuit against their Agency of Record, Fetch, but it refiled the suit and added the new ad networks list above which marketing watchdogs have presumed are the sub-publishers that Uber claims its ad networks partnered with to create fraudulent traffic.
According to Uber, its ads were not converting, and after further experimentation, the transport network found that a full two-thirds of its ad budget – $100 million – wasn’t needed. As a result, Uber is seeking unspecified damages from the five ad networks named in the lawsuit.
In January 2021, Uber won a separate lawsuit against Phunware Inc. where their Uber app installations were largely falsified. Here’s direct quotes from the lawsuit (bold emphasis is our own).
As confirmed in discovery, most of the Uber app installations that Phunware claimed to have delivered were generated by a fraudulent process known as “click flooding,” which reports a higher number of clicks than those occurring.
Two former Phunware employees had conducted an internal investigation discovering that Phunware had falsely billed Uber for ad clicks they did not deliver. But Phunware continued its fraudulent practices. As evidenced in discovery, a widescale culture of fraud continued for many months. For example, in an email sent on Oct. 31, 2016, a Phunware employees wrote: “Guys it’s… time to spin some more BS to Uber to keep the lights on.
To compound matters further, it was discovered that Phunware had placed Uber’s ads on pornographic websites, in direct violation of its contract and advertising standards. Even worse, Phunware attempted to cover this up as well by falsifying reports, which made it appear as if the ads were placed on legitimate, non-pornographic sites instead.”
Uber is seeing first-hand the impacts of fraud on their budgets and is taking aggressive action to fix the problem (you can just use Fraud Blocker to help)
🚨 App developers sued for “click injection fraud”
In August 2019, Facebook filed a lawsuit against two app developers – LionMobi and JediMobi – for click injection fraud. The developers had made apps available on the Google Play store, which infected their users’ phones with malware. This malware worked in the background of the user’s device and clicked on Facebook ads without the user’s knowledge. When Facebook detected the misuse of its Audience Network, the company banned the two developers from using its ads before suing them.
In its lawsuit, Facebook alleged that LionMobi and JediMobi engaged in a “deceptive and malicious scheme” to defraud advertisers. The two companies used software to create fake clicks on Facebook ads and then collected payments from the advertisers based on those clicks.
Facebook estimated that the developers had defrauded advertisers out of “tens of millions of dollars.”
Facebook Ads sued for over-inflated reach numbers due to fake accounts
A group of advertisers sued Facebook in a filed a class-action lawsuit over the social media company’s “inflated” reach estimates. The suit, filed in 2016, claimed that Facebook had overstated its monthly active user (MAU) count by as much as 50 million users. This meant that advertisers were paying to reach a larger audience than actually existed on the platform.
In 2019, Facebook agreed to a $40 million settlement of the suit.
The lawsuit highlights the importance of accurate user metrics for social media platforms. Inflated reach estimates can lead to advertisers paying more than they should for their ads, and this can ultimately damage the platform’s reputation.
🚨 Criteo sues over “counterfeit click fraud scheme”
Criteo, a display advertising network, filed a lawsuit that alleges rival firm SteelHouse (now rebranded as “MNTM”) ran a “counterfeit click fraud scheme.” Criteo says it lost a client after SteelHouse made the shoe retailer TOMS perform a head-to-head comparison between ad tech vendors’ products. Both companies place ads by “retargeting” – dropping a cookie on a user’s browser when they have visited a website.
Criteo’s lawsuit alleges that SteelHouse used “bots and other automated means” to generate fake clicks on TOMS’ ads, which led the retailer to believe that Criteo’s product was less effective than SteelHouse’s. SteelHouse is accused of using the method to fraudulently promote to customers that it “consistently outperformed” Criteo in head-to-head comparisons, resulting in an important business loss for Criteo.
Criteo is seeking unspecified damages from SteelHouse.
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