Say what you will about the quality of made-for-advertising (or is it “made-for-arbitrage”?) inventory: At least there are real people behind those ad impressions.
Well, maybe not.
Digital media company Nubai Ventures filed a lawsuit with the New York State Supreme Court on March 11 against native ad platform Outbrain. The suit claims traffic Nubai paid to acquire from Outbrain last year contained a high percentage of bots masquerading as humans.
Jamarlin Martin, Nubai’s founder and CEO, also accuses Outbrain of guaranteeing human traffic only for buyers that spend extra to have their content promoted on premium sites in Outbrain’s publisher network.
In the suit, Nubai claims that if buyers don’t shell out for premium placements like on CNN and Fox News, Outbrain instead places their links on less-reputable sites that have been found to attract a high degree of sophisticated invalid traffic (SIVT) – aka bots.
Nubai’s filing describes this model as Outbrain treating certain buyers as “second class,” and the company hopes to challenge this alleged two-tiered system in court.
The lawsuit is a re-filing of a federal case Nubai filed in October with the Southern District of New York that its counsel later requested be voluntarily dismissed without prejudice.
Outbrain declined to discuss active litigation. But it pointed to its TAG Brand Safety Certification, its internal anti-fraud and security efforts, its work with TAG-certified third parties and its use of the MRC’s invalid traffic detection standards as proof of its commitment to avoiding bot traffic.
Human traffic costs extra
Martin described himself to AdExchanger as “a pioneer in arbitrage.” But he claims this is the first time he’s seen so many bots from a paid traffic source.
In 2012, he founded Moguldom Media Group, a media organization focused on politics, technology, financial and lifestyle content for Black audiences. Moguldom was the launchpad for Bossip, HipHopWired and MadameNoir. Martin later sold this portfolio of publications to iONE Digital in 2017.
Between 2012 and 2017, Martin said he spent about $14 million acquiring traffic from Outbrain and never noticed any issues with bots. Under his leadership, Moguldom eventually attracted 20 million monthly users at its peak, partly as a result of buying traffic.
So, in 2017, when Martin launched his new publishing startup, Nubai Ventures, he attempted to apply the same traffic acquisition playbook, beginning a contract with Outbrain the following year.
Under this contract, Nubai agreed to pay between 3 cents and 8 cents per click on a sponsored link in Outbrain’s native ad network. As a result of this deal, Nubai paid Outbrain more than $1 million between 2018 and 2023, according to the filing.
But in January 2023, a “strategic advertising partner” informed Nubai that its fraud security software had flagged its site for having a high degree of SIVT. (Although the lawsuit does not name this partner, Martin confirmed to AdExchanger it was digital ad agency IO Digital.)
Nubai then hired security firm Escalated.io to run its own audit of its traffic and found that Outbrain had “distributed over 92,000 fraudulent bots to Nubai’s site over a 45-day period,” according to the filing.
As a result of its traffic being overrun with bots, Nubai claims to have lost business from its advertising partners last year, causing its ad revenue to drop by 80%.
When Martin contacted Outbrain about the issue, he claims a representative told him that if he wanted to avoid bots he should have been paying extra to target the company’s publisher whitelist. Martin also claims that, despite partnering with Outbrain for more than a decade, this was the first time he had ever heard of Outbrain offering such a whitelist or the need to pay a premium to access it.
In February 2023, Martin received an email from an Outbrain representative noting that, because Nubai set a strict bid cap of 3 cents per click for paid mobile traffic, “this limits your campaigns from scaling and buying the top-performing section/widgets and forces you to buy traffic from underperforming sections.”
In an earlier email in January, an Outbrain rep told Martin that such “underperforming sources” were “causing your high SIVT rate.”
Instead of Outbrain working with Martin to fix this issue, he said the company effectively told him, “You got 92,000 bots because you were too stupid to use our system correctly.”
Outbrain disputes that version of events; a company spokesperson said Outbrain attempted to work with Martin to corroborate his complaint, but he broke off contact instead of engaging.
Nubai ended its relationship with Outbrain in April 2023.
Punitive damages
Nubai is suing Outbrain, in part, for breach of contract. Nubai alleges it paid Outbrain $1 million under false pretenses since Outbrain misrepresented the quality of its paid traffic and the due diligence it undertakes to ensure its traffic remains bot free.
In addition, Nubai also claims its publishing business suffered reputational harm as a result of being flagged by advertisers for having a high degree of bot traffic. It hopes to have the court assign a dollar amount to the scope of these reputational harms to its business.
But Nubai is also seeking punitive damages from Outbrain, which Nubai alleges is “a major, knowing contributor to the $120 billion in waste that occurs each year as a result of bot fraud.”
Martin believes companies like Outbrain look the other way when it comes to bot traffic because there’s so much money to be made from selling fraudulent clicks. In working with ad fraud security vendors to get his head around Nubai’s SIVT problem, he felt like he was uncovering an “ad fraud bot complex” that operates in the shadows of the ad industry.
Or, put in legalese as per the filing: “The Court should enter punitive damages in an amount that will cause Outbrain to appreciate the devastating consequences that its wrongful conduct has on small businesses (and others) and will help pave the way for industry-wide transparency and accountability.”
Martin initially filed the suit with New York’s Southern District federal court, with the intention of representing Nubai himself. The court ruled that Martin must secure an attorney or prove that Nubai is a sole proprietorship.
Nubai then hired law firm Parker Pohl as representation. Martin said counsel advised him to refile the case with the New York State Supreme Court because the federal case could have been challenged on jurisdictional grounds due to lack of diversity, since both Nubai and Outbrain are incorporated in the same state, Delaware. Parker Pohl filed a petition to voluntarily dismiss the federal case, then filed the state case.
When asked for comment, an Outbrain spokesperson said “being a trusted partner is a key priority for Outbrain. As such, we are extremely committed to combating fraud as demonstrated by the network-wide practices we employ to minimize non-human traffic to the greatest extent possible.”
Outbrain added, “The plaintiff filed a similar claim in federal court which was dismissed. We believe this lawsuit is without merit, the claims are unfounded and we plan to vigorously defend against it.”
Update 3/27/24: After publication of this story, Outbrain reached out to AdExchanger to express its view that it attempted to work with Martin to corroborate his complaint, but that Martin broke off contact instead of engaging. Outbrain declined to discuss any further details of the case with AdExchanger.
