Three Web sites that joined Interactive Imaginations' Commonwealth Network filed a class action suit against the company, alleging breach of contract and fraudulent practices.
Interactive, which publishes game site Riddler, launched Commonwealth a year ago to help Web sites gain ad revenue while retaining their homegrown look and feel. It is one of the first so-called ad networks on the Net.
2/24/97: Riddler shifts to results-based rates
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The lawsuit, filed in Superior Court of the State of California in Los Angeles for plaintiffs Brian Shuster of Lake Tahoe, Calif., Michelle Wallace of Los Angeles and Scott Raymond of New York, who all run small Web sites, claims Commonwealth engaged in unfair business practices.
"By guaranteeing cash payments, Commonwealth Network was thus able to drive its competitors out of business and obtain a monopoly on the Web page advertising brokering business," the complaint reads. "After establishing a monopoly on the market, Commonwealth Network unilaterally changed the methods for calculating the amounts it owed its affiliates."
The Commonwealth ad model requires only that affiliates agree to let the network handle all ad sales. Sites put no money down to participate and do not sign contracts, but are subject to the payment conditions constructed by the network.
In the past, sites were paid based on impressions generated; as of last week, Commonwealth began implementing a new click-through model.
Representatives from the law firm did not return phone calls at press time.
Interactive disputes the claims.
"The key is that affiliates can come and go as they please--they can leave if they want. There's no monopoly," said Michael Paolucci, president and co-founder, who said the network has paid out more than $500,000 last year to its affiliates.
In fact, plaintiff Mr. Shuster was recently paid $1,000 for sales on his site, Mr. Paolucci said.
Other affiliates say the suit is unnecessary. Tom Culligan, who works at Portland, Ore.-based Total Network Interface and uses Commonwealth for his political site, said, "Did I make as much money as I'd like to make? No, but who does?"
Copyright April 1997, Crain Communications Inc.