Google AdWords Settlement for Click Fraud – What to Do
By Peter Boyd on May 21, 2006 in Internet Marketing
Google Click Fraud Overview
It looks like the Google Class Action lawsuit may finally be settled for the click fraud. All Google advertisers are receiving a PDF document outlining the settlement via email. Legal Notice (PDF)
What You Can Do
In basic terms, you can either do nothing, be part of the class, and file for a claim of the settlement. You can exclude yourself and then file your own lawsuit later on. Finally, you can object to court and counsel that the settlement is unfair.
The Settlement
Right now the settlement is for $60 million of “Google Credits”. It is actually for $90 million, but the lawyers are taking $30 million of our advertising dollars. What I mean by “Google Credits”, is that it is funny money. You will not be receiving a check or actual cash for any click fraud. Rather, you get advertising credits. A similar analogy would be airline miles or airline credits.
Under the settlement, the $60 million of Google Credits will be divided up on a pro rata share between all class members who file claims. If you are a big advertising spender then you can expect to receive more than PaperStreet.
Our 10 Questions
At first glance, there are a lot of questions about the settlement:
1. What is the annual revenue of Google’s Adwords program since January 1, 2002?
2. What is the amount of estimated click fraud that has happened since January 1, 2002?
3. What is the total estimated amount of claims that will be filed by the settlement class?
4. What is the estimated amount that Google will allow to be claimed?
5. How will claims be handled (i.e. will they allow everyone to claim 30% of their clicks as fraud)?
6. Who determines what is fraud?
7. Why can you only apply 50% of your credit towards future ad expenses?
8. What is Google doing to prevent future click fraud?
9. Will being part of the class prevent future law suits from this time forward for future click fraud?
10. Finally, and most importantly, why won’t Google report and give advertisers a list of IP addresses of every single click?
Thoughts & Reactions – Money (Questions 1 – 7)
Before we decide to recommend to be a part of the class or not, I would like the above questions answered by Google or the class counsel. The settlement is for a $90 million. Theoritically that should represent the amount of click fraud that has happened since January 2002. Google’s revenue is now over a billion dollars per year and the Adwords revenue accounts for most of that revenue.
With estimates that click fraud ranges from 15% to as much as much as 30% (see CNET, Authenticlick, ClickFraudReport) then its doubtful that $90 million is an accurate representation of the amount of click fraud for even the year 2005 (let alone other years).
Of course, this is a settlement, so negotiation is involved, but $90 million seems small, very small. For instance, if Google is generating a billion dollars a year in revenue from AdWords, then theoritically the click fraud is anywhere from 150 million to 300 million…per year. Since this settlement covers all fraud for the last four years, then that the fraud could be estimated from 600 million to 1.2 billion. Obviously, the Google settlement amount is paltry in comparison.
Right now, there are estimates that advertisers will only be receiving $4.50 per $1000 spent (see ClickFraud). Based on the above numbers alone, I think it would be wise for all class members to question the lead counsel on the settlement. Get more answers and negotiate for higher credits. More importantly, as advertisers, we should know how is the Adwords system going to be improved to prevent click fraud.
Thoughts & Reactions – Moving Forward (Questions 8 – 10)
With any automated system that involves money, there is bound to be fraud. However, Google should notify everyone as to what they are doing to prevent the fraud. More importantly, if in the future we find that fraud is continuing to grow (as it might), then what legal ramifications do we have against The Google.
In our dealings with Google in attempting to get refunds, they were not vary forthcoming with information. Last year after installing AdWatcher, we wanted to know the IP addresses of all clicks that were coming into our site from Google that we were being charged for. However, after several automated emails and a few canned email responses, we were never given them and gave up. With the IP addresses, we would have been able to match them up with our own server logs to get a better understanding of who was visiting our site, which clicks were fraud, and which clicks we wer being charged for. Basically, Google witheld the proof that we needed to say what was and what was not click fraud.
Irregardless of the settlement, unles Google makes the program transparent and does everything in their power to combat fraud, then ultimately the faith in the advertisers will not be restored. The settlement should include specifics of what will be done in the future to prevent click fraud.
UPDATE:
If you want to opt out of the class, you can go to this site to join a lawsuit that is trying to stop the settlement – http://www.clickfraud-legal-center.com/. You will probably still need to opt-out of the suit in writing, but counsel at this site can help if they take you on as a client.
Side Note:
Finally, on a side note the web site http://www.buydomains.com/ is crashed and unavailable as of 2pm Sunday, May 21. Good start to this settlement process.
