Uber Technologies Inc. (NYSE:UBER) won a multimillion-dollar lawsuit over mobile ad fraud, and in the process uncovered significant evidence.
Uber wins ad fraud case against Phunware
In 2017, mobile advertising firm Phunware Inc. had sued the ride-sharing company for $3 million unpaid invoices. However, Uber counterclaimed against the company accusing the company’s co-founder and CEO Alan Knitowski and other staff of racketeering, wire fraud, and fraudulent transportation of obtained funds across state lines. Uber sought $17 million in compensation plus punitive damages.
Interestingly, as the legal battle ensued, more proof emerged of continued and widespread fraud. Uber became suspicious of the ad activity from the company in 2016 when an employee raised concerns regarding Phunware’s ad campaign activities. The ride-hailing company had indirectly hired Phunware to help increase app installation among consumers. Unfortunately, most of the installations that Phunware delivered were fraudulently generated through “click flooding” which means reporting more clicks than occurring. Notably, most of the traffic Phunware brought was via auto-redirects where visitors ended in an app store even when they had not clicked the ad.
Phunware placed Uber ads on porn sites
Most importantly, two ex-Phunware employees had conducted a probe and discovered that the firm had billed Uber falsely for clicks it didn’t deliver. Nevertheless, Phunware continued with the fraudulent practices with the culture continuing for several months. Equally, the company placed Uber ads on pornographic sites, which is a violation of its advertising standards. To make matters worse, Phunware tried to cover it up by falsifying reports to make it look like the ads were on legitimate sites.
The win by the Reed Smith team against Phunware is a massive step towards ending ad fraud. The grant of the Reed Smith motion came after Phunware spoiled uncovered evidence including employer whistleblower files. Also, the company destroyed logs that showed where Phunware placed Uber ads. The court dismissed Phunware’s claims against Uber, and also issued a default judgment against the ad firm opening the way for settlement.