Microsoft says RedOrbit site used its software to defraud advertisers

Microsoft sued a science news website this week, saying it drove its readers to click on advertisements that put money into the site's pockets while taking it away from the people who paid for the ads.

The lawsuits say RedOrbit, a seven-year-old site based in Dallas, and separately, a group of 20 anonymous defendants, engaged in a practice called "click-laundering" using proprietary software Microsoft created.

A Microsoft spokeswoman said that in both the RedOrbit and the "John Doe" case, the company was seeking an injunction preventing the defendants from conducting further click laundering and as-yet unspecified damages.

Here's how it works: When a reader clicks on a website ad, normally the reader is taken to the advertiser's web site. The advertiser pays the website "per click" based on the number of people who come to the advertiser's site.

The system can, of course, be gamed by creating automated software that runs up the number of clicks, a practice called "click fraud." At its worst, using counterfeit brands or misleading tactics, click fraud can send people to places on the Internet they shouldn't go, where malware or other fraudsters work. Meanwhile, the user is unwittingly participating in a crime.

These types of bogus clicks can be detected, however, and disregarded. However, "click laundering," a term Microsoft coined, uses a technically complex process to convert low-quality ad clicks into high-quality ones appearing to be the work of humans instead of machines.

"Like money laundering, the fraudulent traffic is made to look like legitimate traffic, with the result that online advertisers, who buy advertising using a pay-per-click model, are paying for fraudulent ad clicks," said Richard Boscovic, a senior attorney in Microsoft's Digital Crimes Unit. "Click laundering allows the perpetrator to profit directly, and substantially, from the illegitimate ad revenue generated by the clicks."

RedOrbit was a former partner of adCenter, the proprietary Microsoft software and service. It was chosen along with other web hosts to test adCenter during its development. But the company says it did not try to defraud Microsoft. "We do not, nor have we ever, engaged, assisted in, or condoned click fraud. We are disappointed that Microsoft has made these baseless allegations, and intend to defend against them vigorously," said Eric Ralls, RedOrbit's president and founder.

Microsoft investigators say RedOrbit raised suspicions after they detected an alarming surge in dubious ad clicks on the site between January and February 2009, from an average of 75 per day to more than 10,000. Ralls said Red Orbit was not paid "one dime" for these clicks.

In the other lawsuit, a number of unnamed suspected scammers apparently connected to HelloMetro, a network of local city guides that aggressively courts advertisers. HelloMetro is not named as a defendant in the complaint, which accuses anonymous fraudsters of combining several methods to inflate the number of times ads were clicked on, then "laundering" the clicks by hiding their origin.

Microsoft has gone after perpetrators of click fraud and "malvertising" -- online advertising that delivers malware - in the past in an effort to deter unscrupulous web publishers from its networks.
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