March 8, 2006 4:45 PM PST

Google says click fraud settlement near

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Under a proposed $90 million settlement of a class-action lawsuit over alleged click fraud, Google said Wednesday that it would offer advertising credits to marketers who claim they were charged for invalid clicks and not reimbursed.

The total amount of credits, including attorneys' fees, will max out at $90 million, Nicole Wong, associate general counsel at Google, wrote in a Google blog posting.

The lawsuit, filed in February 2005 in state court in Texarkana, Ark., accused the defendant search engines of charging advertisers for clicks on online advertisements that were fraudulent or done in bad faith and not with the intention of legitimate commerce. The lawsuit was filed by Lane's Gifts and Collectibles and Caulfield Investigations against Google, Yahoo, Time Warner and its America Online and Netscape subsidiaries, Lycos, FindWhat.com, now known as Miva Media, Buena Vista Internet Group doing business as Go.com, LookSmart and Ask Jeeves, now known as Ask.com.

"This agreement covers all advertisers who claim to have been charged but not reimbursed for invalid clicks dating from 2002 when we launched our 'cost per click' advertising program through the date the settlement is approved by the judge," Wong wrote.

Currently, advertisers have 60 days to seek a credit for clicks they believe are fraudulent.

"Under the agreement with the plaintiffs, we are going to open up that window for all advertisers, regardless of when the questionable clicks occurred," the posting said. "For all eligible invalid clicks, we will offer credits which can be used to purchase new advertising with Google."

The attorneys' fees, to be determined by the judge, will be charged as an expense, most likely in the first quarter, Wong wrote. The credits will be recorded as a reduction to revenue during the quarters in which they are redeemed, she said.

Though Google and the plaintiffs have come to an agreement, a judge must approve it for it to be final, she said. The details are confidential but will become public when it is formally filed to the court, she said.

"By far, most invalid clicks are caught by our automatic filters and discarded before they reach an advertiser's bill," Wong wrote. "And for the clicks that are not caught in advance, advertisers can notify Google and ask for reimbursement. We investigate those clicks, and if we determine they were invalid, we reimburse advertisers for them. We will continue to do that, and believe that this settlement is further proof of our willingness to work together with advertisers to reimburse invalid clicks."

George McWilliams, one of the lawyers for the plaintiffs, said he could not comment on the details.

"It is our understanding that Google has announced today that a $90 million settlement has been reached in connection with the click fraud litigation pending in Miller County, Arkansas, Circuit Court," McWilliams, of the firm of Patton Roberts McWilliams & Capshaw in Texarkana, Texas, said in a phone interview. "Because the settlement is not final and must be approved by Circuit Judge Joe Griffin, we are not able to comment about the details about it at this time."

A representative for Ask.com said the company was named as a defendant in the lawsuit "as a result of our syndication relationship with Google for their Google sponsored listings, not as a result of our Ask.com sponsored listings product. Google has been handling defense of the lawsuit, and we expect to be covered by the settlement as well."

An AOL representative said the company had no comment on the case. Representatives from Yahoo, Lycos, LookSmart, Go.com and Miva could not be reached for comment or did not immediately return calls seeking comment.

A legal expert who has been following the case said the settlement would be a good deal for Google.

"So with the settlement, Google effectively eliminates its entire legacy liability for click fraud for $90 (million), only a portion of which is out-of-pocket cash. Given that the click fraud has been estimated in the billions, a $90 (million) settlement sounds like an excellent deal," Eric Goldman, assistant professor of law at Marquette University Law School, wrote on his blog.

"Unfortunately, the settlement doesn't appear to resolve the basic question of what constitutes click fraud and when search engines are on the hook for it," he said. "On that front, Google still will have an advertiser relations issue that needs further attention."

Anywhere from 5 percent to 20 percent or more of clicks on Internet ads are fraudulent, according to estimates. Click fraud can be conducted by companies that want to rack up advertising costs for rivals or by Web site publishers who want to increase the amount of revenue they get from hosting ads on their site.

See more CNET content tagged:
settlement, advertiser, Go.com, LookSmart Ltd., Miva

5 comments

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It's settlements like these that make me dislaike Class Action suits
So - the settlement is for $90million cap vs. Billions, and only part of that is to cover all Lawyer expenses, the rest goes to fill unused Google ad inventory.

This is an example of class action suit where the only people to benefit from this are the lawyers, the "prize" for those really effected is marginal, and indeed, is STILL SUBJECT TO CLICK FRAUD. We'll give you credit in a system still susceptable to what you sued us for.
Posted by canadaboy (14 comments )
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You are right mainly
You are mainly right: that is too much of the settlement money in case of Class action suites goes to lawyers, as is the case here.
But Class action suites are absolutely needed, because how else can a company with few 100K in cash , set a side an individual with even less in cash, sue a behemoth like Google, etc. who have Billions in cash and are hence armed "literally" with an Army of lawyers. In fact Google is hiring lawyers at a faster rate than any other company in Silicon Valley history.

I guess they expect that their ClickFraud is going to sooner or later catch up h them and expose the fact that most of Google WebAds are nothing but click fraud driven, that is of course why they refuse to disclose the details of their WebAds click through and refuse audit by 3rd party companies to verify the authenticity of their WebAds click through.
Posted by Cyrus_K (60 comments )
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If anything, class action law suits give Justice the only way the little guy can get it, by banding together a lot of other little guys. Yeah, the payout sucks. But at least you get your voice heard.

http://www.californiabartutors.com
Posted by MendelPotok (54 comments )
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Posted by AdvolutionNow (1 comment )
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click fraud exponentiated
nice read... google's willing to pay advertisers back for fraudulent clicks BUT unwilling to prevent it even when they have been notified of vulnerabilities in their system that could be exploited.

I have been able to prove to google that I could generate fraudulent clicks that EXCEED 2000% CTR. I asked them to fix it. I gave them a demo... and in return all they did was ban me and not fix the issue...

I am contemplating releasing the exploit in the public domain to see how google would handle click fraud if exploited....

reference: <a class="jive-link-external" href="http://sla.ckers.org/forum/read.php?8,17826#msg-21951" target="_newWindow">http://sla.ckers.org/forum/read.php?8,17826#msg-21951</a>
Posted by rohanpinto (2 comments )
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