Lawsuits Point To High Rate Of Click Fraud

by Mikhail Ledvich, May 19, 2006, 7:00 AM

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Another lawsuit against Google has just been filed. This one aims to stop the $90 million click fraud settlement from being approved by the courts, because the plaintiffs feel it shortchanges the advertisers. The plaintiffs are completely right, but their suit is just one of many more lawsuits to follow. Let me explain why.

These lawsuits are just a tip of the iceberg by people who are aware of the click fraud problem. As more and more advertisers realize that their money is being wasted, we may see many more of these. Google tried to package everyone up in a neat $90 million settlement, but from the advertisers' point of view, the settlement leave a lot to be desired. According to an analysis done by MarketingShift, "under the terms of the settlement... advertiser will only be able to recover 0.05% of the money which they lost. That means that if Google agrees that an advertiser has lost $10,000 to click fraud, that advertiser will only be entitled to receive 5 DOLLARS." The only winners here were the lawyers, who stake claim to $30 million of the settlement.

Advertisers are becoming frustrated by the major search engines' unwillingness to work with them when they find discrepancies and issues with the clicks they paid for. In March, Nicole Wong, associate general counsel for Google, addressed the issue of click fraud by saying "We have said for some time that we believe we manage the problem of invalid clicks very well... By far, most invalid clicks are caught by our automatic filters and discarded 'before' they reach an advertiser's bill. And for the clicks that are not caught in advance, advertisers can notify Google and ask for reimbursement." Yet, when the advertisers contact Google, they are blown off with standard form letters informing them about the superior, all-knowing Google system, without delving into the proof the advertisers attempt to provide.

The bottom line is this: the search engines can continue to deny and minimize the level of click fraud that exists as long as they want, but would people be filing lawsuits if they didn't believe the fraud was so substantial?

Affiliate click fraud is the most profitable for the scammers; they get paid for fraud, and until people complain, there is no incentive for engines to fix things because they get paid, too. Look no further than Google's own Blogger, one of the most prominent and spam-filled blog-hosting services. Google ignores spam blogs (blogs created without real content just to qualify for AdSense dollars).

If Google was serious about its problems, it could solve two issues at once. It would prevent spam blogs from joining the AdSense program, which would eliminate the financial incentive for the spam blogs to be created, eliminating potential click fraud launch pages and at the same time improving its search results quality, because people would no longer spam its search index with those useless spam blogs.

I cannot predict how many lawsuits it will take for search engines to admit they have a problem.

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