Files Internet Advertising Legal Suit Against AOL

Whether America Online maliciously mishandled a keyword advertising deal is at issue in a new lawsuit filed Tuesday against the online giant by, an online mortgage search site.

In the suit, which also names AOL’s ad agency at the time, Chancellor Media Corporation’s Katz Media unit, LoanPage contends that AOL failed to uphold its portion of an October 1997 advertising contract.

Representatives from AOL and Katz did not return repeated phone calls. said that it signed several ad contracts with Katz Media in October 1997, which awarded all of the possible keyword advertising impressions for the keyword “Mortgage” on the AOL NetFind search engine, for a one-year time span beginning May 1, 1998.

Terms of that deal were not disclosed, but the purchase meant that would be able to place a banner at the top of any search result on the AOL NetFind search engine whenever the word “mortgage” was a search term.

LoanPage maintains that soon after the contract was finalized AOL began a direct sales effort and then later breached and “resold” the keyword. LoanPage said the breach of contract resulted in damages of more than a million dollars in lost sales.

But as LoanPage tells it, this isn’t a case of simple mismanagement.

“We believe they intentionally violated the contract, not just to resell the advertising at an inflated price because of the growth of the Internet but also to avoid paying agency and commission fees to Katz Media,” said president Michael Barber.

Barber also maintains that AOL wasn’t performing at the level it had agreed, and speculates that it could have been looking for a new contract to hide its mistake.

“ saw a more than 450 percent increase in 45-day advertising sale returns from just a short, two-week run of advertising on AOL NetFind, and this was at a level far below what the … contracts were anticipated to deliver”, Barber said.

Trial date is set for August 10, 2001 at the Alameda, Calif. County Superior Court.

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