Yahoo names executive to combat online ad fraud

SAN FRANCISCO (Reuters) - Yahoo Inc. has named a senior executive to lead the company’s efforts to combat click fraud in its Web search advertising business, the company said on Wednesday, in a bid to reassure advertisers.

Comedian Ellen Degeneres does a stand-up routine during the Yahoo keynote address at the 2006 Consumer Electronics Show in Las Vegas in this January 6, 2006 file photo. Yahoo Inc. has named a senior executive to lead the company's efforts to combat click fraud in its Web search advertising business, the company said on Wednesday, in a bid to reassure advertisers. REUTERS/Rick Wilking

Yahoo, the No. 2 provider of pay-per-click ads behind rival Google Inc., said attorney Reggie Davis, a seven-year veteran of the company, will take on the newly created post of vice president of marketplace quality.

The Internet media company also disclosed for the first time that it discards as invalid or of inferior quality 12 to 15 percent of the time Yahoo users click on its advertisements. In cases of invalid clicks, Yahoo does not charge advertisers.

Similarly, Google last month said its computers automatically reject up to 10 percent of potential advertising billings resulting from invalid clicks. How comparable the two figures are is unclear as there is no industry agreement that defines what constitutes an invalid click.

“We need to take some of the inconsistency out of this issue,” said Davis, who, as associate general counsel managing litigation for Yahoo, previously was in charge of defending the company in click fraud lawsuits filed against it.

While an arcane subject to most people, the topic is a hot issue among online advertising customers who believe click fraud may be unfairly inflating the prices they pay for ads. Both Google and Yahoo have settled class-action suits accusing them of failing to protect customers against click fraud.

Click fraud can occur when Web site publishers attempt to trick Google’s ad system into counting ads never seen by real users, or when competitors use automated programs to create fake clicks, driving up per-click charges and site ad rates.

Previously, Google and Yahoo were tight-lipped on the extent of fraud in their systems, arguing that disclosing too many details makes it easier for bad actors to game their systems.

Davis is responsible for providing advertisers with greater transparency on how Yahoo’s display and search ad systems work, seeking to put to rest uncertainty the extent to which its automated ad systems act as magnets for computer fraud.

He is charged with hiring a staff that will work with both advertisers and Web site publishers to respond to issues across Yahoo businesses related to click fraud, traffic quality, network placement and other marketplace quality issues.

Besides quality control, Davis has begun working with Yahoo product management team on enhancements to give search ad customers greater visibility into how well their ads perform.

Later this year, Yahoo aims to introduce quality-based pricing; domain-level blocking that allows advertisers to exclude traffic from suspicious Web sites, and more automated advertiser feedback and control over ads they are billed for.

“We want to take the heat out of this issue around click fraud,” Davis said. “Everything on top of that will be used to define the competition. We really want to focus the issue on who is doing a better job around quality,” he said.

Tom Cuthbert, a vocal critic of the industry’s handling of the click fraud issue, said he was pleased by Yahoo’s moves.

“I think Yahoo is taking a more honest approach than others,” Cuthbert said. Specifically, he criticized market leader Google for denying click fraud is a material issue.

Cuthbert is the president of Click Forensics, a San Antonio, Texas-based company who has been battling with the major search advertising players to allow his company to work an independent auditor on behalf of their ad customers.

“None of this eliminates the need for a third party to verify click quality,” Cuthbert said. “Only with this greater transparency will it create a trust among (advertising) customers that doesn’t really exist right now.”