Google’s $90 Million Click Fraud Settlement
Google has apparently agreed to pay the equivialent of $90 million (Yikes!) to settle a click fraud class action. Here’s the AP Story. According to third party data compiled by eMarketer, SEMPO found that “the percentage of advertisers who say that click fraud, the artificial inflation of click through numbers, is a growing problem tripled in 2005, to 16%. Elsewhere, a survey by IntelliSurvey Inc. and Radar Research reports that, among respondents surveyed, 46% of all advertisers with 500 or more employees have been a victim of click fraud.”
According to the AP story:
The proposed settlement…would apply to all advertisers in Google’s network during the past four years. Any Web site showing improper charges dating back to 2002 will be eligible for an account credit that could be used toward future ads distributed by Google.
This settlement must indicate that the case had some teeth because Google clearly has the resources to fight the case to the end. (Yahoo! was also a defendant and said it will fight.) This is also not a nuisance settlement at this dollar level.
One question is whether this settlement will bar future suits. There are a host of complex rules surrounding class action litigation and who can be bound by settlements. It may be that this settlement was justified from Google’s point of view because it will largely prevent — certainly at a class action level — this sort of litigation in the future. (That’s not entirely clear right now to me.)
The terms of the settlement appear to require actual proof of click fraud to get the credit and seem to extend to any Google advertiser over the past four years. So as a practical matter Google may wind up “paying” less than the stated potential value of the settlement.
And while this settlement may bar future legal action it won’t necessarily address advertiser concerns and complaints today, only an effective transparent policy on click fraud will do that. But Google knows that.
Google’s statement on the Click Fraud case from Nicole Wong, Associate General Counsel at Google on the Google Blog:
You may remember that last February, Google was sued in Arkansas over what is commonly called click fraud. We’re very near a resolution in that case, so we thought we’d offer an update.
We’ve been discussing the case with the plaintiffs for some time and have recently come to an agreement with them which we believe is a good outcome for everyone involved. As a result, Google and the plaintiffs are going to ask the judge to approve the settlement, which would resolve the case.
Until the settlement is approved by the judge, it is not final. And the details are confidential, but will become public when it is formally filed for the judge’s consideration. However, we can share the major pieces of our proposed agreement.
Google currently allows advertisers to apply for reimbursement for clicks they believe are invalid. They can do this for clicks that happen during the 60 days prior to notifying Google. Under the agreement with the plaintiffs, we are going to open up that window for all advertisers, regardless of when the questionable clicks occurred. For all eligible invalid clicks, we will offer credits which can be used to purchase new advertising with Google. We do not know how many will apply and receive credits, but under the agreement, the total amount of credits, plus attorneys fees, will not exceed $90 million.
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.