When the ad-supported ad-buyer goes bust, a whole new set of headaches arise
NEW YORK — When your ad-funded ads are losing money, the ads you use to help sell them could be the difference between keeping your business afloat and leaving your customers feeling like you’re not in control.
That’s the predicament facing the ad industry in the wake of a $6 billion lawsuit filed Monday against Adblock Plus, a San Francisco-based online ad blocking company, alleging that the company and its advertising partners breached contract and violated consumers’ rights by charging them for ads that they could not afford.
Adblock Plus is a pioneer in ad blocking technology, a market that is poised to reach $1 trillion this year.
The company has been the subject of multiple lawsuits in recent years alleging its technology infringes on the privacy of online users and is the target of the FBI’s cybercrime investigation.
The suit alleges that AdblockPlus violated its agreements with the networks that provide its service by charging advertisers money to use the service to promote their ads without their consent.
It also contends that AdBlockPlus breached contract with users by charging fees for ad space that were “substantially” less than the amount of money that it would receive for the same space, and that AdBlocks were not entitled to recover the fees.
The lawsuit is one of the largest antitrust class actions in history and the biggest antitrust class action ever brought by the Justice Department.
The complaint alleges that while AdBlock’s ad-blocking technology is widely used in the advertising industry, users have no way of knowing that they are being charged a premium for ads they don’t want to buy, and for the ads they do want to purchase, AdBlock doesn’t provide a way to opt out of its ad-blocker features.
The case stems from a lawsuit filed in 2015 by the New York Attorney General’s office, alleging AdBlock had “fraudulently” marketed AdBlock Plus as “a ‘pay-per-click’ program that allowed users to receive advertising for free on sites that they chose to visit.”
The lawsuit was filed on behalf of the New Yorkers in a case brought by New York City Mayor Bill de Blasio and former Attorney General Eric Schneiderman, the first of two similar suits filed against AdBlock.
The New York lawsuit alleges that between May 2017 and July 2018, Adblock and its affiliates “provided advertisers with a pay-per.com platform where they could promote their advertisers’ ads, without their permission, and without any opt-out mechanisms, including opting out of AdBlock software.”
The New York complaint also alleges that advertisers could not opt out “as a matter of policy,” meaning they could never opt out.
According to the complaint, the New Yorker lawsuit claims that advertisers paid $9.4 million in the first six months of the lawsuit, $2.7 million in August and $2 million in September.
This figure does not include payments made to AdBlock after the case was filed.
The plaintiffs’ lawyers say the amount that Ad Block paid to advertisers in the third quarter of 2017 is more than the $4.6 million that they have already collected from advertisers.
“We believe that the complaint is baseless and without merit, and we intend to vigorously defend this matter,” AdBlock said in a statement.
The complaint also states that Adblocks’ practices violate the Digital Advertising Alliance’s Terms of Service, which states that “advertising services, including any platform operated by an advertiser or its partners, may not use any user-generated content without the express permission of the advertiser and may not charge users fees for their use of the services.”
Adblock added that the case is about a “misleading representation of Adblock’s advertising products and services, which it alleges misrepresented Adblocks services and services provided to advertisers.”
AdBlock Plus said in the statement that it had “no knowledge of” the New Jersey Attorney General suing it, and declined to comment further.
In addition to New York, the plaintiffs are also suing the company’s parent company, Ad Block Plus, and a subsidiary of its parent, AdWords.
AdBlock is based in Palo Alto, California, and has been operating since 2015.
AdBlock is owned by Facebook, which has a 25% stake in the company.