RootZoo, Inc. v. Facebook, Inc.: Class Action Complaint Alleges Facebook Click Fraud

RootZoo, Inc. v. Facebook, Inc., 5:09-cv-03043-HRL (N.D Cal. July 7, 2009)

In a federal court complaint filed in the Northern District of California on July 7th, sports discussion board and social networking site RootZoo alleged that Facebook charged them for advertising referrals that never occurred and that Facebook failed to “properly guard” against click fraud, the practice of third-party individuals or computer programs repeatedly clicking on the advertisement to inflate the number of referrals.

RootZoo’s complaint accuses Facebook of both breach of the “implied covenant of good faith and fair dealing” in their advertising contract and unfair business practices. RootZoo was one of many advertisers who paid Facebook for each click referring a Facebook user to their site. RootZoo claims that Facebook consistently charged them for more outgoing referrals than the RootZoo servers logged as incoming during the period they advertised on Facebook. According to the complaint, when RootZoo submitted server log documentation to Facebook and asked to be refunded for the discrepancy, Facebook refused to provide any refund and would not release any documentation to back up their refusal. The complaint contrasted Facebook’s unwillingness to release data with the more transparent practices of Yahoo! and Google. RootZoo’s filing came only weeks after TechCrunch wrote a series of well-publicized articles on Facebook click fraud prompted by outraged advertiser posts on the marketing discussion board WickedFire. Following the TechCrunch articles, Facebook representatives claimed to have “developed a series of sophisticated systems” to detect click fraud and to have refunded any advertisers that were affected. However, RootZoo is seeking class action status and an unspecified amount of damages..

MediaPost and The Register offer overviews of the filing and a response from Facebook, while TechCrunch summarizes some of the preceding controversy and WickedFire discussion board postings.

RootZoo’s complaint offers June 2, 2008 as an example of the overcharging and third-party click fraud. On June 2nd, Facebook charged RootZoo for 804 clicks, but RootZoo’s server logs showed only 300 incoming visitors transferred from the Facebook site. In addition to this overcharging, RootZoo claims that all of the documented visitors came from small towns at a rate that "would be almost statistically impossible” given the site’s past visitor history. This statistical impossibility is offered as evidence that most of the referrals actually received were not potential customers, but individuals or programs repeatedly clicking on the RootZoo advertisements to artificially increase the number of Facebook referrals.

The suit is the first that Facebook has faced in the click fraud forum because, as eConsultancy explains, Facebook’s advertising does not allow third parties to profit directly from click fraud. Unlike Yahoo! or Google’s advertising services, where bot-driven click fraud from anywhere on the internet profits the fraudster directly, Facebook does not pay ad revenue to third parties who generate clicks. Furthermore, Facebook’s advertisements are both extremely targeted and require a logged in user. As a result, Facebook click fraud requires the creation of thousands of “dummy” accounts to click on ads, which produce revenue for Facebook, but not for the fraudster. Unlike “conventional” click fraud, RootZoo’s complaint suggests that Facebook click fraud instead results from competing advertisers who hope to increase RootZoo’s advertising costs--an indirect type of click fraud. This “non-conventional” click fraud only incidentally profits Facebook, but even incidental profits may keep the Facebook team from thoroughly investigating or preventing such profitable, third-party behavior.

The future success of this lawsuit remains unclear. RootZoo has the benefit of representation from the experienced firm of Kabatek Brown Kellner, which recently handled click fraud lawsuits against Google and IAC. However, Eric Goldman suggests that RootZoo’s lawsuit also faces many difficulties—from establishing class action status to overcoming the system issues inherent in tracking site visits. Furthermore, Goldman suggests that the terms of the advertising contract with Facebook may protect Facebook from liability for third-party click fraud. However, eConsultancy points out that even if RootZoo faces great challenges collecting from Facebook, the lawsuit may represent larger problems for Facebook if they lose future advertisers who are concerned about click fraud.