Google Agrees to Pay $90mln on Click Fraud Lawsuit

Hitokiri writes "Google has agreed to pay up to $90 million to settle a class action lawsuit 'Lane's Gifts v. Google'. The settlement stems from a lawsuit filed by Lane's Gifts earlier this year in an Arkansas state court and is designed to settle all outstanding claims against Google for fraud committed using its pay-per-click ad system back to 2002Google has made a statement on their blog."

Comments

Wired had a nice piece a few months ago on this

[Hulkster]

The January/2006 Wired had an article titled "How Click Fraud Could Swallow the Internet" that presented a case study of a charter-jet service victimized by this ... turns out it was their competition doing it to use up their on-line marketing budget. Google Girl basically stonewalled 'em.

Tip of the iceberg

[jimmyhat3939]

My guess is this is just the tip of the iceberg. It's a smart move for Google to try and resolve this stuff once and for all, but I doubt strongly this and related issues are likely to go away anytime soon.

Reasons why I'm concerned about Google's business:

• The fact that it's basically impossible to ascertain how prevalent click-fraud is.
• The fact that many many people accidentally click on ads. Don't believe me? Try clicking *anywhere* on the blue ad box that shows up over results. Notice that a click even way on the right of it counts.
• Many businesses are still in a 'honeymoon' with Google and aren't yet seriously computing the performance of their clicks (how many clicks turn into sales).
• Do you seriously believe Google can keep getting $0.11 of revenue per search done on the site? Don't believe the statistic? Read the SEC filings and compute it yourself.

Cue Google-fanatic flamewar.

Measuring Results

[Thunderstruck]

I wonder why internet advertising does not take a page from the radio advertising playbook. Daily, on the radio, I hear ads that say "Mention this ad and save an additional 12%!" This system allows the advertising folks to learn quickly whether their ad is reaching its audience. The customers come in and tell you so.

Is there any reason why internet ads do not do this?

Google Obviously Has The Leverage

[Doomedsnowball]

Basically it's an economics problem that the brilliant people at Google have realized. They could win the suit, but only after spending WAY too much on lawyer fees. Of course both sides would agree to a settlement by the defendant (more money, less work for the lawyers on both sides). This is also an opportunity that can't be passed by a defendant who realizes that their case might not have enough to overcome the amount of money Google can throw at a legal defense (which they could, but again, it's an issue of economics). This problem is clear in Google's blog on the subject:

For the finance folks out there wondering how we'll account for this, we can say that the attorneys' fees (which will be determined by the judge) will be charged as an expense, most likely in the first quarter, once the amount is determined. The credits will be recorded as a reduction to revenue in periods in which they are redeemed.

Anyone who is acting like Google isn't paying enough doesn't understand either economics or the american legal system (notice I didn't say justice system). They may understand the difference between right and wrong (and I don't think Google is right), but they fail to understand "the way things work in the real world."

Re:WTF is "click fraud"?

[Schraegstrichpunkt]

This is click fraud:

while true ; do wget -O/dev/null 'http://www.google.ca/url?sa=l&ai=BGJPNr64PRKWpIYv 0pAKh-Nj9DtLDihP2_NviAY6Z8ASAwLgCEAIYBCgIOABAzBBIi TlQ5o2j9f______AZgBnEqqATBvcmcubW96aWxsYTplbi1VUzp 1bm9mZmljaWFsK2ZpcmVmb3hfbm9ucmV2c2hhcmXIAQGVAhE3S Ao&num=4&q=http://www.internetcloning.com' ; done

Re:WTF is "click fraud"?

[MarkByers]

'But how is it fraud?'

The problem is that Google is charging advertisers for adverts which were not seen (by humans).

I can understand that the advertiser feels cheated if Google charges advertisers for 1 million clicks on their adverts, but 999,000 of them were faked by a script and only 1000 times a human end-user clicked the advert.

The problem gets worse when companies are deliberately faking clicks to create huge advertising bills for their competitors, even though their adverts are not being viewed. Similarly angry customers could do this to 'get their own back' on a company that they feel has cheated them.

Google has a problem here and they need to fix it or people won't want to risk using their service to place adverts.