This morning, many Yahoo advertisers received an email from Rust Consulting letting them know, they are included in a legal settlement over Yahoo search ads. The settlement web site, which is at inreyahoosettlement.com explains that the “lawsuit alleges that customers contracted for targeted ad placements through two products, “Sponsored Search” and “Content Match” (and predecessor products provided by Overture Services, Inc. and GoTo.com, Inc.) and that Yahoo! breached its contract with its customers by allowing Yahoo! ads to be displayed in spyware, domain name parking sites (bulk registration sites), pop-ups, pop-unders and typosquatting sites.”

Those eligible in the settlement get a refund of $20, whereas the lawyers get $4,170,000.00, plus reimbursement of expenses of approximately $100,000. You can see all the court documents over here and the email sent to eligible advertisers over here.

Finally, if you want to get your $20, you need to submit a claim online by March 22, 2010. If you are not happy with the $20, you can always sue Yahoo directly, but make sure to exclude yourself from this settlement by December 14, 2009.

Get ready marketers: a credible new report with sweeping implications from the University of Pennsylvania and UC Berkeley is likely to be the nail in the coffin of self regulation of online advertising. Specifically I’m talking about behavioral targeting, which largely concerns online display advertising but does marginally touch search at Yahoo and Google.

The NY Times discussed the report, released today:

The study’s authors hired a survey company to conduct interviews with 1,000 adult Internet users. The interview, which lasted about 20 minutes, included questions like “Please tell me whether or not you want the Web sites you visit to give you discounts that are tailored to your interests.” The results were later adjusted to reflect Census Bureau patterns in categories like sex, age, population density and telephone usage.

Tailored ads in general did not appeal to 66 percent of respondents. Then the respondents were told about different ways companies tailor ads: by following what someone does on the company’s site, on other sites and in offline places like stores.

The respondents’ aversion to tailored ads increased once they learned about targeting methods. In addition to the original 66 percent that said tailored ads were “not O.K.,” an additional 7 percent said such ads were not O.K. when they were tracked on the site. An additional 18 percent said it was not O.K. when they were tracked via other Web sites, and an additional 20 percent said it was not O.K. when they were tracked offline.

Lawmakers have been ready to regulate “behavioral advertising” for some time and the FTC has signaled that it did not believe marketers were doing a good enough job with self regulation. However, the new economic and political climate, more favorable toward regulation, combined with public frustration and anger generally have set the stage for regulation of some kind.

Search will largely be exempted because of the way it works — keyword matching rather than data mining —  although the search engines’ data retention policies are implicated by the report (which I quote a bit more fully on my blog). Yahoo is using search queries as part of its behavioral targeting and Google not long ago implemented “Interest Based Advertising,” a euphemism for behavioral targeting.

However, Google’s privacy and preferences management could become a kind of model in some new regulatory regime.

Very soon lawmakers will introduce legislation to more aggressively protect consumer privacy. One member of Congress, Rick Boucher of Virginia, recently wrote:

Because consumers need an assured level of control over the collection, use and sharing of information about them, a statute providing those assurances is now called for. That goal should be achieved by legislation, which reflects best industry practices and requires that they be followed by all websites that collect information from Internet users. Legislation assuring Internet users that their online experience is more secure will be a driver of greater levels of Internet uses such as e-commerce, not a hindrance to them.

In my view all this points to “when” rather than “if” and the question is: what disclosure and data management burdens will imposed on marketers and publishers? As I said, I think search will largely be unaffected but display could be profoundly affected.

If people are required to be given an “up front” opportunity to “opt-out” of targeting a majority likely will: “Tailored ads in general did not appeal to 66 percent of respondents.”

Bloomberg is reporting this morning that the US Department of Justice has decided to look more closely at the MicroHoo search deal. Microsoft and Yahoo are to provide more information on their “ad pricing and product plans, a person familiar with the matter said.” This is not a surprise.

The companies must convince regulators that the deal will not harm competition or adversely affect SEM pricing. They must also do a similar dance in Europe, where a parallel process will take place. In the end, however, it’s likely the deal will be approved given broad US and EU concerns about Google’s market position and this deal as a possible counterweight to that dominance.

And in a CNBC interview Yahoo CEO Carol Bartz says she would have accepted the Microsoft takeover offer that then CEO Jerry Yang and the Yahoo board rejected. (That would have had a tougher time with regulators than the search-only deal now before them.) Bartz also asserted that Yahoo was still in the search business by controlling the search experience around Bing results.

Bartz also discussed many other aspects of Yahoo’s strategy and value to users. You can see the full interview below.

Eric Goldman updated us on a case where Yahoo was sued for showing spam and porn pages for a search on a person’s name. Beverly Stayart was upset that when you searched for her name on Yahoo, Yahoo returned some results that were not to her liking. So she sued Yahoo but the court wouldn’t have it.

Goldman explained that the court rejected her suit on three different levels. She sued Yahoo for Lanham Act false endorsement and it was denied by the court, as expected. The reason it was rejected? Goldman sums it up as follows:

The court denies Various’ 230 defense because its association with the banner ad was unclear. Having dismissed the federal Lanham Act claims completely, the court then declines supplemental jurisdiction over the state law claims. The court also rejects Stayart’s guffaw-inducing request for sanctions against the defendants for having the temerity of moving to dismiss her complaint.

Barron’s Online reports a former Yahoo engineer has been put in custody for allegedly being the “media chief” of the Indian Mujahideen, a terror group. Indian Mujahideen is charged with the September 2008 bombings in Delhi.

The ex-Yahoo’s name is Mohammed Peerbhoy and he was sending IM warning just before the bombings. It also says that he learned his hacking skills in a class Yahoo reportedly paid 70,000 Rupees for him to take.

This is not the typical search news you hear from us daily. Yahoo somehow allegedly involved in terrorism may one up Google’s Orkut being involved in pedophilia in Brazil.

Eric Goldman uncovered another interesting lawsuit involving Yahoo. This one involves the organic search results showing spam results for a person’s name, where this person is suing Yahoo and Overture for “Lanham Act false endorsement and false designation of origin and violation of Wisconsin’s publicity rights statute and common law privacy rights.”

Let me take you through why this person is suing Yahoo. It is pretty humorous to me, and maybe you will get a kick out of it as well.

1. Plaintiff searches for her name in Yahoo: Beverly Stayart
2. Plaintiff sees a spam page in the search results and clicks on it. Keep in mind, at this time, there are a total of seven results returned for her name at this time.
3. She is then redirected to a bad site named mysharedvideo.com. This site had her name centered in a darkened movie screen and ultimately played an adult video.
4. During this time, her anti-virus and malware tools detect malware and viruses.
5. She then continues to conduct searches at both Yahoo and Alta Vista for other flavors of search results, including “her name plus an erectile dysfunction drug’s brand name,” said Eric.
6. Time and time again, her Norton anti-virus tool warned her and she kept on going to these pages.

So she is upset that her name returned these spam pages and is suing Yahoo for it. Well, she got her wish, after all the coverage of this suit, I doubt these spam pages will be in the top ten anymore for her name.

Finally, let me share Eric Goldman’s professional legal opinion:

There are two obvious problems with the lawsuit against Yahoo and Overture. First, if there is or has been even one other Bev or Beverly Stayart in the world, the plaintiff has a real problem proving that the online references were to her and not the other person. And, with all due respect to Ms. Stayart’s lifetime of accomplishments, it would be ridiculous for her to argue that her name is so well-recognized that readers would assume that the references were to her instead of other folks with a common name.

Eric Goldman covers a recent lawsuit where Heartbrand Beef, Inc. sued several companies, including Yahoo, for selling the keyword “Akaushi” to Lobel’s of New York. Akaushi is a very expensive Japanese type of beef, known for being marbled with fat and coming out extremely tender.

Lobel’s does not sell Akaushi, but Heartbrand is the largest Akaushi cattle company outside of Japan and they felt that Lobel’s was being deceitful with their ads at Yahoo. Heartbrand also felt Yahoo allowing the ad “constituted Lanham Act false designation of origin and common law unfair competition,” said Goldman.

The court felt the suit did not make sense, they said, “Yahoo! obviously does not fit into these classic models [of false designation of origin] because Yahoo! is not in the business of selling beef.” And they reject the claim because “(1) Yahoo doesn’t make any “statement” (the advertiser does), and (2) even if Yahoo does make a statement, it’s not designating the origin of Yahoo’s offerings,” said Goldman.

Not everyone agrees with Goldman on Yahoo’s victory, for other commentary see Rebecca Tushnet and Ryan Gile.

Responding to European demands that the major search engines cut the length of time they store records of web searches, Microsoft said on Monday it would only store that data for six months as long as Google and Yahoo follow suit.

The New York Times reports, however, that neither Google nor Yahoo are ready to go along with the request. Microsoft attorney John Vassallo says the company won’t change its policy alone. “We support the commissioners’ recommendations but are asking them to ensure these are uniformly observed,” Vassallo tells the Times. “Otherwise, to do so unilaterally would put us at a disadvantage.”

The debate goes back almost two years, if not longer. In March 2007, Google said it would anonymize search records after 24 months to protect privacy, then followed that up a couple months later by agreeing to anonymize the date after 18 months. Just three months ago, with both the US and EU breathing down Google’s neck, the company said it would cut its data retention time down to nine months. Be sure to see Anonymizing Google’s Server Log Data — How’s It Going? for a recent update on how the process works.

But in April of this year, a European Commission advisory panel recommended that the major search engines delete search data after six months. Microsoft’s Live Search currently stores that data for 18 months, while Google and Yahoo store web search records for nine and 13 months, respectively.

According to the Times report, all three companies will make presentations to the advisory panel in February.

In response to court orders, Yahoo and Google are censoring search results in Argentina about a variety of celebrities, including public officials, models, actors, and sports stars. According to an in depth article on OpenNet Initiative, this has been going on since 2006 and more than 100 people have succeeded in getting Google and Yahoo to filter search results in Argentina.

Astonishingly, a search on Yahoo Argentina for [Diego Maradona] — one of the world’s most well known soccer stars and the current national team head coach — produces zero results, along with a message from Yahoo that’s roughly translated as follows:

“On the occasion of a court order sought by private parties, we have been forced to temporarily remove some or all of the search results relating to it.”

According to OpenNet, both Google and Yahoo are following court orders to filter their search results, but only Yahoo is completely scrubbing search results (as seen above). The article says both search engines have appealed the court orders that force them to block search results and have been fined on occasion for not following court orders closely enough.

The article goes on to explain that all of the individuals who are seeking to have web pages removed from search results are represented by one lawyer, Martin Leguizamon Peña, who claims to have an 80% success rate in getting the court to force Google and Yahoo into blocking search results for his clients:

“Peña is reportedly obtaining new restraining orders for the same clients, week after week, with revised lists of websites, articles, blogs, and keywords that must be blocked. Many of the orders contain specific web pages to be blocked, however, some also ambiguously order the search engines to block all sites containing defamatory or scandalous portrayals of Peña’s clients. It is then presumably up to Yahoo! and Google to determine which content is defamatory — a task that neither company wishes to or is qualified to perform.”

The OpenNet article takes Yahoo to task for waiting until this week to add the explanation of why search results are blocked. It also points out that Argentinian searchers can use other Spanish-language search engines, such as Yahoo Mexico or Yahoo Spain, or Google’s country-specific search engines in Mexico and Spain, to find information about the individuals who’ve successfully fought to have Google and Yahoo censor results for their names.

India’s National Newspaper reports that India’s Supreme Court is suing Google, Yahoo and Microsoft for allowing “sex selection” ads. India has a law that does not allow the sale or advertisement of services that allow people to pick the sex of their unborn child. India has virtually stopped all advertisements on TV, newsprint and radio, and are now trying to ban the ads online.

India’s “The Preconception and Prenatal Diagnostic Techniques (Prohibition of Sex Selection) Act” disallows ads for services or products that aid in the selection of an unborn child’s sex. Chief Justice K.G. Balakrishnan and Justices P. Sathasivam and J.M. Panchal filed a notice on a “writ petition filed by Dr. Sabu Mathew George,” said the Hindu paper. The Doctor wants to sue the three companies for punitive and deterrent action.

Dr. George told IDG News:

These companies are making money by breaking Indian laws.

In other legal news, Google ‘Ransoming’ Customers Searching For Trademarked Brands, Lawsuit Claims from InformationWeek reports on the third Google lawsuit for fraud and unfair business practices for selling ads on low-quality Web pages. I am honestly tired of covering these stories, so feel free to read it at InformationWeek. Also, Gary Price emailed me a link to the PDF of the filinghere.