• by Wendy Davis , September 7, 2011

Facebook does not follow industry standards aimed at ensuring that advertisers are billed only for "legitimate" clicks, a group of marketers suing the social networking service for click fraud allege in new court papers obtained by Online Media Daily.

The papers, filed as part of a motion to certify the lawsuit as a class-action, assert that Facebook violates industry guidelines -- including the Interactive Advertising Bureau's 2009 recommendations -- in several key ways. Among others, the service allegedly does not permit independent audits or publish a description of its methodology for counting clicks.

Also, when the lawsuit was filed in 2009, Facebook allegedly did not use industry lists of bots and spiders to filter out questionable clicks. (The version of the court papers obtained by OMD had large swaths of text covered with black bars, but the motion can be viewed in its entirety by cutting and pasting it into another file.)

Marketers that buy ads on a pay-per-click basis often say they expect to pay only for "legitimate" clicks, which they define as clicks by users who are interested in visiting the marketers' sites. Marketers say they don't expect to pay for clicks generated by bots and other suspect sources, or for more than one click by the same user in a short time period.

Determining which clicks are legitimate often involves judgment calls. The marketers that brought suit say that Facebook sometimes goes against industry practices to err on the side of charging advertisers.

For instance, the marketers allege that Facebook initially excluded clicks by the same user within two seconds of each other, but subsequently decided to lengthen that time.

"Facebook's engineers concluded internally in late 2009 that it was a 'no brainer' that the filter should be changed to at least a 20 -- or even a 30-minute interval -- to conform with industry practice and ensure click legitimacy," the marketers allege. "Ultimately, Facebook's revenue objectives prevailed over any concern for click legitimacy, resulting in the decision to make the interval only 30 seconds between clicks."

The plaintiffs also allege that Facebook "refuses to be audited under IAB criteria," and "has flat out refused to allow any third party to test its wholly internal process for determining the legitimacy of the hundreds of millions of clicks it charges advertisers for each month."

The marketers add that Facebook "knows it would fail" an audit. "Facebook's own engineers have admitted internally that its click system is not IAB-compliant," the plaintiffs say in court papers, referencing testimony about an engineer's remarks to a colleague.

"In fact, when a junior member of the Facebook ad team sent an email to E&Y [Ernst & Young] suggesting that Facebook was interested in having E&Y do an IAB audit, that initiative was quickly quashed by a senior member of the Facebook finance team."

The litigation dates to 2009, when Facebook was sued in federal district court in San Jose, Calif. for click fraud by several search marketers, including Steven Price, who operated the car site drivedownprices.com.

Price alleged that Facebook billed him $500 for ads that appeared May 26 and June 21, 2009, but that analytics programs from Google and Statcounter.com show that around two-thirds of the clicks he was charged for did not take place. He said that Facebook acknowledged it had charged him for invalid clicks and gave him $105.01 in credits that could be used to purchase other ads, but argued in his initial court papers that he was entitled to a refund.

In April, U.S. District Court Magistrate Judge Howard Lloyd in San Jose, ordered Facebook to disclose the source code its systems use to identify and filter out invalid clicks. At the time, Lloyd also ordered the parties to keep the information confidential.

Earlier, Facebook unsuccessfully asked for the litigation to be dismissed on the grounds that all cost-per-click advertisers were required to agree to the company's terms and conditions, which the company says included the following language: "I understand that third parties may generate impressions, clicks, or other actions affecting the cost of the advertising for fraudulent or improper purposes, and I accept the risk of any such impressions, clicks, or other actions."

U.S. District Court Judge Jeremy Fogel in San Jose, Calif., instead ruled that the marketers can sue Facebook for allegedly charging them for "invalid" clicks, but not for "fraudulent" ones.