Three Lawsuits Against Facebook For Fraud Raise Concerns For Advertisers

If your business is advertising on Facebook, or considering it, you should do some research on the newest allegations of advertising fraud against the online giant.  Facebook reportedly has over 250 million users so it is understandable that a business would want access to Facebook’s users.  Facebook offers businesses advertising space online that is targeted to specific demographics of its users.  Facebook charges for the advertising based on the number of views or clicks that the ad receives from users.

As reported by TechCrunch’s Michael Arrington, massive complaints started surfacing recently against Facebook for "click fraud."  Basically, advertisers were clicking on competitor’s ads, or paying others to do it, to artificially drive the price up.  Advertisers were also reporting that Facebook was charging for more clicks than the ad was actually receiving. There are now three lawsuits filed against Facebook for advertising click fraud.

 The most recent lawsuit was filed on July 31st by an individual advertiser seeking class action status.   The second lawsuit was filed by Unified ECM, a software company, seeking class action status for massive click fraud by Facebook.  The first click fraud lawsuit was filed by sports company RootZoo and it also seeks class action status. 

BNET Media’s Catharine Taylor posted a good report on the details of the first two lawsuits including email comments from Facebook.  In the email, Facebook maintained that the Unified lawsuit is "unnecessary and baseless."  Wendy Davis of Online Media Daly posted a good report on the fist lawsuit by RootZoo. All three suits alleged discrepancies between the charges by Facebook and the actual number of clicks recorded by the advertisers.

Although Facebook has denied all the fraud allegations, TechCrunch takes the position that the click fraud problem is real and confirmed by Facebook. The Lost Press Marketing Blog presents a different view accusing Unified ECM of a "marketing stunt" to get exposure through press coverage of its lawsuit. 

Any business considering advertising with a pay per click campaign, should take caution whether on Facebook, another website, or a search engine.  If you want to measure your return on investment, you should consider monitoring any pay per click campaign internally.   If you are considering Facebook, you should wait to see what Facebook does to reassure its advertisers that fraud will be monitored effectively.  For now, the problem does not appear to be going away.