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Yahoo settles pay-per-click fraud suit

As part of a class-action settlement, Yahoo plans to create a new ad distribution option that will give advertisers more control over where ads purchased through Yahoo appear.

Yahoo has settled a lawsuit over pay-per-click ads sold by Yahoo that wound up in some shady corners of the Internet.

Back in 2006 Yahoo was sued by a class of advertisers who alleged that Yahoo sold them ads that were supposed to appear on "highly targeted" sites and instead wound up on sites filled with spyware or run by typo squatters. Without admitting any wrongdoing, Yahoo has agreed to settle the lawsuit and change the way it sells certain ads across its sites, according to a settlement notice posted by Rust Consulting, the settlement administrator.

Yahoo will create an "Ad Placement Option" for advertisers to guarantee their ads will appear only on sites owned by Yahoo or sites designated as "premium" partners. That feature should appear early next year but Yahoo has a deadline of September 30, 2010, to provide advertisers with that option.

Advertisers will also get better tools for measuring traffic quality and potentially troubling sites bearing their ads. Yahoo said the deal will still be in place assuming it gets the regulatory approval to outsource its search business to Microsoft. Yahoo plans to retain the right to sell search ads on its sites once that deal is official.

If you went out of business as a Yahoo ads customer, you're eligible for $20, which should really make the pain of that failed business venture go away. As TechCrunch notes, the real winners here are the lawyers: of the $4.3 million settlement, $4.17 million is going to the lawyers.

More information on the settlement can be found here.