Net ad groups sue over 'click fraud'

GOOGLE, Yahoo and nine other search-engine companies are being sued in the US for so-called click fraud, a scam that involves increasing the claimed number of clicks on adverts to drive up the amount paid for them.

Billions of dollars are spent each year on search-generated advertising. Repeatedly clicking on adverts, or using software to automate the clicking, can escalate costs for rival businesses.

As many as 58% of advertisers are worried about click fraud, according to Kevin Lee, chairman of Sempo, an organisation working to increase awareness of search engine marketing.

The suit, filed in Arkansas, alleges that the search companies improperly charged the plaintiffs, a group of online retailers, for fraudulent clicks.

Google is well aware of the problem. 'I think something has to be done about this really, really quickly, because I think, potentially, it threatens our business model,' chief financial officer George Reyes told an investor conference sponsored by Credit Suisse First Boston.

The search companies claim they can detect fraud and constantly pay back overcharges, but have revealed few details.