E-Commerce Law

E-Commerce Law Briefs: Week of April 21, 2008

Apparantly, we're about to reach the end of the Internet.  Accordingly to AT&T, the Internet's current network architecture will reach the limits of its capacity by 2010.

(Link:  AT&T:  Internet to hit full capacity by 2010 at CNET News)

Sixteen years after the collapse of the Soviet Union, "Web sites ending in the Soviet ".su" domain name have been rising - registrations increased 45 percent this year alone. Bloggers, entrepreneurs and die-hard communists are all part of a small but growing online community resisting repeated efforts to extinguish the online Soviet outpost."

(Link:  Back in the USSR:   Soviet Internet domain name resists death at SilliconValley.com)

An advertiser has sued Google Inc. in federal court in California alleging fraud in connection with Google's AdSense program.  "The plaintiff in the case, David Almeida, had signed up for Google ads to promote his private investigation business in Massachusetts. Because he did not want to buy AdSense ads, Almeida said he left the maximum per-click bid blank, believing 'optional' meant he could opt out of the AdSense program by doing so. Instead, it turned out the AdWords bid applied when he did not exercise that option, and he should have put 'zero' into the box to opt out, said his attorney, Brian Kabateck. "

(Link:  Google accused of deception in selling AdSense keyword ads at washingtonpost.com)

eBay has sued Craigslist for "unfairly diluting" its interest in the community ad site. 

(Link:  EBay sues Craigslist ad website at BBC News)

Website’s Hosting of Pay Per Click Advertisements Satisfies Interactivity Requirement for Personal Jurisdiction

Last week, in Chicago Architecture Foundation v. Domain Magic, LLC, 2007 WL 3046124 (N.D. Ill. 2007), the United States District Court for the Northern District of Illinois denied a Motion to Dismiss for lack of personal jurisdiction, holding that pay per click advertisements found on the Defendants’ website made the site sufficiently interactive for the court to exercise personal jurisdiction over Defendants.

Common Issues Facing E-Commerce Businesses

Issue # 7: Pay Per Click Advertising and Click Fraud

The amount of money spent on Internet advertising has grown steadily since 2002. As companies devote more and more of their advertising budgets to this emerging medium, they are confronted with the reality that not every "click" for which they are paying is the result of an action by an interested, potential customer.

Click fraud is a growing concern among Internet advertisers involved in the various pay per click (PPC) advertising programs sponsored by popular search engines. Recent cases filed against Google and Yahoo have heightened awareness of the problem as third-party vendors rush to monetize a solution. In the end, click fraud, which results in 14 to 30 percent of all clicks of PPC advertisements, is a problem inherent to the advertising model.

The sponsors of PPC advertising programs actually profit from click fraud; unless the click on an advertisement is obviously fraudulent (as defined in the terms and conditions applicable to the specific PPC advertising program), the PPC program sponsor gets paid for the click, whether it resulted from the actions of an interested consumer or not. As long as the problem does not cause the PPC advertising sponsors to lose revenue, they have very little motivation to address the concerns of advertisers.

Though an Internet advertiser may not be able to eliminate the effect of click fraud in PPC advertising, a company can reduce or manage its risk by:

• Understanding the Effect of Click Fraud on the Company’s Specific Advertising Plan. Some commentators have argued that click fraud is far less of a problem than generally believed and that it is unfair to expect Internet advertising to guarantee a certain Return on Investment (ROI). They point out, quite correctly, that no other form of advertisement guarantees that it will be viewed by an interested potential customer. However, many businesses and individuals expect their dealings on the Internet to differ significantly from their experience in other mediums of communication. In any event, a business embarking on a PPC advertising campaign must ensure that it can absorb the cost associated with wasted or fraudulent clicks.

• Carefully Reviewing the Terms and Conditions Applicable to the PPC Advertising Program. Most PPC advertising programs have terms and conditions that expressly address the issue of click fraud, detailing how the program sponsor identifies fraudulent clicks and outlining the specific procedure and deadlines which must be met by an advertiser who wishes to challenge the charges associated with certain clicks. An Internet advertiser must carefully review those terms and conditions and compare them to competing programs to fully appreciate the risk associated with a particular PPC advertising program.  This also ensures compliance with dispute resolution procedures that could save the company thousands of dollars of advertising expenses.

• Considering the Use of Third-Party Programs to Quantify and Resolve the Problem. Some third-party vendors advertise software designed to identify fraudulent clicks. The use of that type of software may give the Internet advertiser the information it needs to address the loss associated with click fraud through the PPC advertising program’s dispute resolution procedures or legal action.

Previous Posts in this Series

Issue # 1:  Protection of Domain Names

Issue # 2:  Protection of Original Website Content

Issue # 3:  Website Terms of Use

Issue #4:  The Potential for Universal Jurisdiction

Issue # 5:  E-Mail Marketing and Managing Risk Under the CAN-SPAM Act of 2003

Issue #6:  Keyword Advertising and the Effect of Trademark Law

"Common Issues Faced by E-Commerce Businesses" is a seven-part series appearing each Tuesday afternoon on E-Commerce Law. Readers are reminded that all of the information on this site is provided for informational purposes only and is not intended to be a substitute for legal counsel. No one should act or refrain from acting on the basis of any content included on this site but should instead seek the appropriate legal advice on the particular facts and circumstances at issue from a properly licensed attorney.

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