Doing Business With A Controversial Partner

Yahoo turns ads over to a company associated with suspicious clicks, inflated bills, and rogue software

The relationship between Yahoo! (YHOO ) and an obscure Web site called illustrates why a growing number of companies are worried about where their online ads are turning up and who's actually clicking on them.

Yahoo recycles ads to Oemji even though several leading Internet security firms claim the site's owner also distributes software that can deceive and annoy computer users. Yahoo's own correspondence with Oemji's parent, Oemtec Ltd., confirms that the online giant knows about the controversy. Yet Yahoo continues to send ads to Oemji that advertisers and online experts allege result in dubious clicks and inflated bills.

Yahoo formalized its link to Oemtec in an Apr. 14, 2004, contract providing that Oemtec, which is registered in Barbados, would become one of the thousands of site owners that receive Yahoo ads. The contract, reviewed by BusinessWeek, states that Oemtec would receive 55% of the revenue from clicks on ads that Yahoo distributes to Oemji. Since advertisers pay Yahoo from a few cents to more than $20 a click, Oemtec's share of revenue from Yahoo ads could total many thousands of dollars a year.

Oemji isn't a "parked" site offering only lists of ads. It features its own search engine, news and weather reports, and a program called Oemji Bar, which can be downloaded as a PC's search engine. Still, advertisers are questioning the quality of clicks from ads on Oemji, says Click Forensics Inc., an online auditing firm in San Antonio. Last month, Click Forensics found that nine of its advertiser customers received suspicious clicks via Oemji that originated in Asia, Africa, and other distant regions. "You don't see that kind of traffic unless there is something sneaky going on," says Tom Charvet, vice-president of technology at Click Forensics.

One frustrated advertiser is Chief Executive Martin Fleischmann says that, in the past year, Yahoo charged the online financial-information provider an estimated $10,300 for 2,690 clicks from visitors to Oemji. Ninety percent of the clicks came from such places as Mongolia, Vietnam, and Honduras, where MostChoice does no business. Only eight clicks, less than 0.3%, turned into sales, compared with 30% or more from clicks on ads on Yahoo's own Web site.

Questions about Oemji have arisen elsewhere. Computer security firms Sunbelt Software Inc. and Aladdin Knowledge Systems Inc. have posted consumer warnings, calling Oemji Bar a "browser hijacker," meaning software that can replace unwary PC users' search engines without permission, sometimes as they download other software from Oemtec.

Four other security firms, including giant Symantec Corp. (SYMC ), have issued alerts about a different Oemtec product called SpySpotter. Available until last month at, this program is supposed to clean computers of spyware -- programs that can track users' Web surfing and send them pop-up ads. But Symantec and the others say SpySpotter is actually a "security risk" or "rogue" product, because it can install itself without permission and send exaggerated spyware warnings to entice PC users to sign up for a $29.95 annual subscription. "SpySpotter for a very long time has had a bad history of being force-installed or stealth-installed on people's PCs," says Eric L. Howes, who heads research on pernicious programs at Clear-water (Fla.)-based Sunbelt Software.

Some security companies, such as PC Tools and CA Inc. (CA ), have removed "browser hijacker" ratings of Oemji Bar as new versions have been released. But "older versions still in distribution are browser hijackers," says Sam Curry, vice-president of security management at CA.

Yahoo knows about Oemtec's reputation. In a Feb. 28, 2005, e-mail reviewed by BusinessWeek, Dan Frazier, a Yahoo sales representative, torpedoed Oemtec's plan to advertise SpySpotter on Yahoo's Web site. "Unfortunately, it looks like we won't be able to run your ads on Yahoo!" he wrote. Attached to the e-mail was a link to a review by watchdog group, which calls SpySpotter "rogue/suspect anti-spyware."

Yahoo says that when it began its relationship with Oemtec in 2004, the smaller company complied with Yahoo partnership requirements. But now Yahoo is reviewing its tie to Oemtec, says Joshua Meyers, a senior director of the search engine's publisher network group. Meyers declined to comment on why ads on Oemji for U.S.-only companies generate clicks from Mongolia or Vietnam. He says Yahoo polices its partners and that a substantial number of suspect clicks are not billed to advertisers.

Oemtec calls the negative ratings of its products "patently and demonstrably false." Oemji Bar is similar to toolbars distributed by major online companies, and SpySpotter "is a legitimate and effective anti-spyware application," Craig Marcus, an attorney for the company, said in a Sept. 8 letter to BusinessWeek. Denying any involvement in click fraud, Marcus wrote: "Every single Oemji-generated click to, and every other Web site, was and remains legitimate and genuine." But he acknowledged that Oemtec "was alerted by advertisers in the past few months that certain foreign clicks were ineffective and undesirable." That prompted the company to stop displaying ads to users in Mongolia, Syria, and other countries, he said. Yahoo continued in September to supply Oemji with ads.

Sunbelt Software's Howes says the big search engine should rethink how it recycles advertising: "We just see [Yahoo] ads in too many places where they shouldn't be."

By Brian Grow

Before it's here, it's on the Bloomberg Terminal.