• by Wendy Davis  @wendyndavis, January 14, 2009

Yahoo's Right Media automated ad network allows "deceptive" banner ads to "run rampant through its system," according to a new report by Harvard Business School's Ben Edelman.

"Numerous banner advertisers are willing to resort to trickery to draw attention to their offerings. And plenty of Web site publishers stand ready to run deceptive ads," wrote Edelman, an attorney and assistant professor at Harvard. "But widespread distribution of deceptive ads also requires another crucial input: intermediary ad networks."

Edelman, who represents search marketers in an unrelated lawsuit against Yahoo, estimates that as many of 35% of the ads shown through Right Media are deceptive.

Right Media, which offers an automated auction platform for advertisers and publishers, said in a statement that it has "rigorous platform standards and guidelines" and does not allow its system to be used in a "misleading, deceptive or illegal manner."

"If we learn that an ad is in conflict with laws or regulations, our expectations or our guidelines, we take action to remove it ... as quickly as possible," the company stated.

For the report, Edelman examined online ads facilitated by the company at publishers like social networking site PerfSpot.com and video game "cheat" site CheatCode.com, and concluded that some of those ads were "deceptive."

For instance, PerfSpot.com displayed a Tattoo Media "crush" ad--similar to the ads that resulted in Tattoo Media agreeing to pay $20,000 and change some ad methods to settle a probe by Washington's attorney general.

The ad Edelman found said: "One of your buddies has a crush on you," but was actually for a $9.99 a month horoscope subscription service.

Right Media automatically vets ads to make sure they will not expose consumers to spyware or other malicious programs. The company's personnel also review ads manually before facilitating placement on sites that have requested prior review. For instance, some publishers routinely reject ads for specific types of services or merchandise, such as ads placed by their competitors. But if publishers don't request that additional layer of review, advertisers are allowed to bid for placement based solely on the information they have entered into Right Media's automated system.

Even if some of the ads placed through Right Media are deceptive, it's not clear that Right Media would face legal liability. Other courts have held that the federal Communications Decency Act immunizes ad companies from lawsuits based on material created by third parties. For instance, last month, a federal court in California threw out a lawsuit against Google alleging that the company displayed "fraudulent" ringtone ads. There, Federal District Court Judge Jeremy Fogel in San Jose held that the federal Communications Decency Act protected Google from liability for pay-per-click ads created through the AdWords platform.

Edelman said he intends to complain about Right Media's advertisers to the Better Business Bureau.

Edelman also represents search marketers in a pending lawsuit against Yahoo. In that case, marketers allege that Yahoo wrongly distributes pay-per-click ads at low-quality sites, such as "typosquatting" sites that consumers reach by mistake after misspelling the URL of the site they intended to visit.