Google, Yahoo lose bid to dismiss gambling ad suit

Joel Rosenblatt

Tuesday, June 7, 2005 | 9:39 a.m.

Yahoo! Inc., Google Inc., and other Internet search engines lost a bid to dismiss a lawsuit filed by two gamblers over advertisements promoting online casinos.

California state Judge Richard Kramer in San Francisco ruled that the suit, filed against Google, Yahoo, Ask Jeeves Inc. and 10 other search engines and Web sites, can proceed with the evidence gathering process in the case.

The suits target ads that appear alongside Internet search results, an industry that is expected to grow by 34 percent to $5.16 billion in the United States this year, according to Goldman Sachs Group Inc. The suit highlights the regulatory issues search engine companies face when displaying certain types of advertising, such as online casinos or company trademarks.

"The court gave us a green light to move forward," said Ira Rothken, a lawyer for two online gamblers who brought the case on behalf of the California public. "Unless the case is settled it's extremely likely we'll go to trial."

The two gamblers, Mario Cisneros and Michael Voight, used sponsored links at search engines or Web sites to find online casinos where they lost money, Rothken said. Under California law, any money recovered must go to charities, he said.

Yahoo made as much as $12.97 for each person who clicked on ads directing them to illegal Internet gambling Web sites, said Rothken. Most of the companies have stopped the placement of the advertisements since the lawsuit was filed, he said.

Steve Langdon, a spokesman for Mountain View, Calif.-based Google, said the company doesn't permit advertising for online casinos, citing company guidelines in place before the lawsuit was filed that prohibit ads "with the primary purpose of driving traffic to online gambling sites." He said the case is "without merit."

Ask Jeeves spokeswoman Colby Zintl said the Oakland, Calif.-based company doesn't comment on pending litigation. Yahoo spokeswoman Joanna Stevens didn't immediately return calls seeking comment.

Google shares Monday climbed $10.68, or 3.8 percent, to a record $290.94 in Nasdaq Stock Market composite trading.

Yahoo shares rose 60 cents to $38.52. Ask Jeeves shares rose 23 cents to $31.33.