Yahoo! Sued For "Operationally Defective" Search Technology

May 15, 2007 | 1,594 views | by Navneet Kaushal
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Lerach Coughlin Stoia Geller Rudman & Robbins LLP aka Lerach Coughlin, a law firm with headquarters in San Diego filed a a class action lawsuit on behalf of purchasers against Yahoo! citing "Yahoo and certain of its officers and directors with violations of the Securities Exchange Act of 1934."

Search Engine Land cites the key points listed below as reasons for the action include:

Yahoo! generated fraudulent revenue by deliberately misleading Internet advertising business customers to induce these customers to buy Yahoo! advertising products through deceptive means.

Yahoo! made false, misleading, and deceptive representations regarding its advertising technology and products to investors and potential investors, industry analysts, and customers to increase sales and stock prices

Yahoo!’s false, deceptive, and misleading representations were material in that they had a natural tendency to influence, or were capable of influencing, purchasing decisions, and they related to the essential characteristics, quality, and/or nature of competing products and commercial activities, including relevance, potential click-throughs and quality.

Yahoo!’s advertising technology was operationally defective, causing its own advertising offerings to substantially under-perform those of its rivals.

Whereas Yahoo!’s rivals were paying high-traffic vendors to route traffic through their Web sites, Yahoo! was charging large vendors for access and was dependent on that revenue to make its revenue targets, making Yahoo!’s Web site a less desirable location for vendors to drive traffic to.

The complaint alleges that Yahoo!’s stock rose precipitously on defendants’ positive statements concerning Yahoo!’s sales growth, record reported revenues and earnings and strong business fundamentals, which defendants stated would provide further stability and growth, reaching a Class Period high of over $43 per share on January 6, 2006. However, concealed from investors was the fact that due to operational deficiencies in its ad technology, Yahoo! was rapidly losing market share to Google and other search engines and Web destinations that would significantly undermine its revenues, earnings and value."

Yahoo! suffered a decline as visible on their first quarter earnings. Profits dropped by 11%.

4.thumbnail Yahoo! Sued For Operationally Defective Search Technology

Navneet Kaushal

Navneet Kaushal is the founder and CEO of PageTraffic, an SEO Agency in India with offices in Chicago, Mumbai and London. A leading search strategist, Navneet helps clients maintain an edge in search engines and the online media. Navneet's expertise has established PageTraffic as one of the most awarded and successful search marketing agencies.
4.thumbnail Yahoo! Sued For Operationally Defective Search Technology
4.thumbnail Yahoo! Sued For Operationally Defective Search Technology