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Uber Sues Mobile Agency in U.S Alleges Mobile Ad Fraud

Uber Technologies Inc. has filed a lawsuit against Fetch Media Ltd., a mobile ad agency owned by ad giant Dentsu Inc., 4324 2.23% alleging the agency misrepresented the effectiveness of its mobile ads, failed to prevent ad fraud and didn’t return rebates owed to Uber.

The ride-hailing company is suing Fetch for breach of contract, fraud, and negligence, among other allegations.

In the complaint, Uber said it hired Fetch to purchase and place mobile ads that direct potential new riders and drivers to download the Uber app. Uber said it only pays for ads that lead to app installations, new sign-ups or first trips. Fetch coordinated multiple ad networks to purchase ad inventory from a variety of publishers on behalf of Uber, according to the suit.

The complaint, filed Monday in the U.S. District Court for the Northern District of California, claims that Fetch misrepresented the effectiveness of its mobile media strategy by failing to “prevent and remediate fraud among the networks and publishers.”

The suit alleges that Fetch caused monetary damage to Uber of at least $50 million. While the complaint doesn’t specify how much Uber is seeking in damages, Uber said separately it will be seeking at least $40 million in this lawsuit.

In the suit, Uber alleges that Fetch “squandered tens of millions of dollars” purchasing nonexistent, nonviewable or fraudulent ads and that it “concealed those facts from Uber.”

“With Fetch, we learned the age-old lesson ‘buyer beware’ the hard way,” Uber said in a statement. “Fetch was running a wild west of online advertising fraud, allowing Uber ads on websites we wanted nothing to do with, and fraudulently claiming credit for app downloads that happened without a customer ever clicking on an ad.”

In a statement, Fetch Chief Executive James Connelly denied the allegations. ”We are shocked by Uber’s allegations which are unsubstantiated, completely without merit, and purposefully inflammatory so as to draw attention away from Uber’s unprofessional behavior and failure to pay suppliers. Fetch terminated its agreement with Uber months ago after Uber stopped paying invoices for services provided by over fifty small business suppliers,” he said. He added that Fetch delivered on Uber’s strategic goals, as promised.

”Fetch takes ad fraud extremely seriously and has been working with clients and suppliers to minimise its impact within ad networks,” Mr. Connelly said. The suit is a sign of the growing frustration that marketers have with the problems of fraud that exist in the online advertising business.

Last year, a marketing industry trade group estimated that marketers would waste at least $7 billion on online ads that people don’t see because of fake web traffic generated by so-called “bots,” computer programs that mimic human behavior to trick advertisers into thinking they are a person.

In addition to fraud, the suit says Fetch failed to “pass back to Uber volume rebates, commissions, or discounts received from networks and publishers, causing Uber to overpay for mobile inventory and Fetch’s commission.” Advertisers have been concerned about rebates for several years.

Last year, a probe commissioned by the Association of National Advertisers found agencies were shortchanging clients. One nontransparent practice disclosed in the report involved agencies getting rewarded with rebates from media companies for reaching spending thresholds on behalf of their clients, without clients’ knowledge.

Big ad companies have denied wrongdoing, though the report didn’t name specific agencies. Uber’s suit also alleges that the fraud issues stem in part from Fetch failing to disclose material conflicts of interest.

Uber became aware of alleged fraud with its ads in early 2017, according to court documents, when consumers began complaining that Uber ads were appearing on sites that the company had previously requested Fetch ads not be placed on. While clicks on Uber ads were reported as coming from placements such as “Magic_Puzzles and Snooker_Champion,” the clicks actually came from conservative news site, the complaint said. Uber had instructed that no ads be placed on that site.

Before Uber suspended its ad effort with Fetch in March, Uber was spending millions of dollars a week on mobile ad inventory that was “purportedly attributable to hundreds of thousands (even millions) of Uber App installs per week,” according to the complaint. However, when the mobile ad effort was suspended, Uber said it saw “no material drop in total installations.”

“Fetch received substantial, unearned compensation from Uber and allowed networks and publishers to take credit for Uber App installs that would have happened regardless of advertising,” Uber alleges in the suit.

As digital advertising has evolved, it has become increasingly complicated to prove the effectiveness of such ads, raising questions in the industry such as: What is the real return on digital ad spending? Are ads reaching the right target audiences on reputable sites? How do you prove an ad led a consumer to take an action?

One transparency issue Uber alleges to have found included seeing a Fetch transparency report that showed the number of weekly reported clicks on Uber ads on one website was nearly equal to the site’s monthly active users, according to the complaint.

Between 2015 and the first quarter of 2017, Uber paid more than $82.5 million for the ad effort coordinated by Fetch, court documents show. Uber has withheld about $7 million in payments to Fetch “since learning of the extent of the fraud,” the complaint said.

Earlier this year, Uber also refused to pay a number of its digital media and mobile ad vendors as it investigated suspected fraudulent ad activity, according to people close to the firms. The company gave its vendors a chance to prove that their work was valid, but in some cases continued to freeze payments, the people said.

At least a handful of vendors still claim that Uber owes them money, ranging from thousands to millions of dollars. In response to those claims, Uber said it suspended the Fetch campaign in March 2017 and began withholding payments to Fetch at that time. Uber declined to elaborate. Typically, marketers pay the agency and the agency then pays the media vendors.

In August, a Fetch executive told The Wall Street Journal that the agency was “helping to resolve the dispute” between Uber and its mobile ad vendors.

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