Google To Issue Up To $90 Million In Credits For "Invalid Clicks"

[rustybrick]

Danny has the scoop at the SEW Blog Google Agrees To $90 Million Settlement In Class Action Lawsuit Over Click Fraud.

We are proposing a settlement with the plaintiffs in this case. The proposal would allow advertisers to apply for credits for clicks they believe were not valid. Specific details of the settlement will remain confidential until it is presented to the judge. We do not know how many advertisers will apply and receive credits, but the total amount, including the legal fees determined by the judge, will not exceed $90 million.

Advertisers need to act quick? Affect on advertiser confidence? Affect on Google's Stock? On future outlook of Search Advertising?

[Jeff Martin]

Steve Malouf contacted me and relayed to me that the $90 million will be consisting of advertising credits. I guess that will probably be made through a claims-made basis class action syle?

I guess I tied with Danny here and here

Advertisers need to act quick?
Im sure the court will allow adequate time to file for a credit. Ive seen class-action notices before where you have several months to file.

Affect on advertiser confidence?
As an advertiser I might be a little more confident in seeking my refunds for suspicious activity.

Affect on Google's Stock?
Emotion rules Wall St. I think we will see another chop towards the stock price. Isnt this the first lawsuit against Google they have settled?

On future outlook of Search Advertising?
If Google settles, how can they maintain the same model? Wouldn't this open the door to more lawsuits? To protect themselves (and those darn pesky shareholders) change is going to need to be made. Google needs to get rid of the conflict of interest and let a 3rd party make the decision of yea or nae on click fraud by analyzing both Google and advertiser data and making an independant unbiased judgement. This 3rd party must consist of click fraud subject matter experts - not just data analysis folks.

[dannysullivan]

I covered the last part in the postscripts to my story. Google says they are more proactive now. Steve says he hopes there will be more data provided and third parties have a roll. No one things click fraud is going away, but it does potentially give Google a fresh start to make sure it is keeping advertisers happy and credited quickly if they spot something, to the degree they don't feel they need to go to court. Plus, I think the case will scare some people off. Google's settling for only -- and I use that word on purpose -- $90 million for a four year period. That's not much across the billions spent. A class action for future cases could happen, but you have the burden of showing Google's gotten much worse at things to get a value higher than this one.

[Chris Boggs]

hee hee I feel funny that I called them today asking for $103.68 from an account that didn't get shut down as scheduled. They said "probably" and that it too would only be a credit.

Is 90 Million a "drop in the bucket" or will this really spur some get tough measures on fraud? Danny is another postcript coming re: what Google claims to be doing about increasing their own ability to stop this (I know they won't give specifics, but jeez some further assurance would be nice).

Also...anyone know if this fraud was mostly contextual or not really broken down between contextual and search?

[dannysullivan]

pretty much what i posted from them already says it. no one expect click fraud is going away. they just say they'll be more proactive in helping advertisers spot what might escape their own systems (which they say is small) and getting them credit, if so. if they're saying probably to you on this recent thing, that's an example of this, i'd say. in the past, you'd more likely have had to go through longer stalling. it will be cheaper for them to simply quickly issue credits with less hassle than risk another lawsuit. that's probably the big win in this, if it does go through -- that if they are smart, they really will be responsive and credit properly.

[Jeff Martin]

but it does potentially give Google a fresh start to make sure it is keeping advertisers happy

How does Google have a fresh start? Nothing has changed. The process is still the same and the conflict of interest is still the same. I have PPC advertisers over at VeriClix who are not too happy with Google and I meet more of them every week.

Google's settling for only -- and I use that word on purpose -- $90 million for a four year period. That's not much across the billions spent.

True, however we would be foolish to think that Google didnt settle this case becuase they thought they had to. The judged ruled against the SEs in each major decision, this case was going very well for Steve's team. Who is to say another talented law team couldn't/won't take this all the way?

A class action for future cases could happen, but you have the burden of showing Google's gotten much worse at things to get a value higher than this one.

I dont see why another team wouldnt just have to prove what Steve's team was trying to prove. Since nothing has changed all of the problems and issues are still there. The only difference now is that Google will be minus $90mm dollars and their stock will probably take another hit along with their capital.

I dont see how PPC advertisers have been helped. Sure a few of them will get some credits, however they are still going to lose more money to click fraud. We wouldnt let advertisers make the sole decision about refunds, why would we let the engines?

[dannysullivan]

How does Google have a fresh start? Nothing has changed.

It's a fresh start to remove four years of liability for $90 million. If the settlement goes through, all those potential claims go away. Anyone who feels they have a case has to start counting from say April 2006 forward. And they'll have to prove Google wasn't being responsive, wasn't issuing credits and so on. Maybe that will happen because Google will be that way. But they'd be pretty stupid, if so.

Who is to say another talented law team couldn't/won't take this all the way?

They might have, but it's a moot point. This settlement will settle it for all parties to the class, ie, all Google advertisers in the US.

I dont see why another team wouldnt just have to prove what Steve's team was trying to prove. Since nothing has changed all of the problems and issues are still there. The only difference now is that Google will be minus $90mm dollars and their stock will probably take another hit along with their capital.

So again, this case will settle all previous problems, unless an advertiser specifically opts-out. Eric Goldman explains more about that here. Perhaps some will do so and decide its worth doing their own case and potentially arguing they are entitled to a bigger settlement. Not saying that can't happen, only that now you've got an amount agreed for every advertiser in the US before one US district court, so seems like you're going to have a harder time convincing that you should get a bigger payout. Again, I can't rule that out -- I'm not a legal expert, but neither do you need to be a legal expert to see some of this.

I dont see how PPC advertisers have been helped. Sure a few of them will get some credits, however they are still going to lose more money to click fraud. We wouldnt let advertisers make the sole decision about refunds, why would we let the engines?

I don't know that they are necessarily helped. They are only helped if the search engines really do police click fraud and issue prompt refunds to prevent future cases from being filed. Part of that is likely going to involve making use of third parties, though the settlement doesn't seem to require this.

In short, no one loses their right to go to court in a case for things after the settlement date. But you don't go to court unless you have to. Jeff, if your spotting fraud at VeriClix and Google's agreeing with you and issuing refunds in the majority of your cases, maybe the vast majority, why would you go to court? You're only going to do that if they aren't acting upon valid complaints you feel you have in many cases.

And keep this in mind -- it's very much to their advantage to even drag some things out now until the settlement happens. That's because once it goes through, they don't have to pay up except through the settlement itself.

Post settlement attitude is what's goig to be crucial. If they aren't responsive after that, no doubt new cases will emerge.

[Mikkel deMib Svendsen]

If the settlement goes through, all those potential claims go away.

Danny, maybe you can explain this because I don't understand the above statement in context of what you wrote in your blog: "Issues With Non-US Advertisers Not Resolved: ..." How can all potential claims go away just because of a US case that, as far as I see, have NO legal impact outside the US? did you mean "all those potential claims go away ... IN THE US"?

[dannysullivan]

Ah, Mikkel, are you suggesting I wasn't writing clearly!

It was pretty late

My understanding is that this case will only resolve claims in the US. So somemone could still file a suit against Google over click fraud during this period outside the US.

What's less clear is who gets paid outside the US in this claim. If you are an advertiser who is based in the US, you are covered. If you're an advertiser outside the US, you might not be. But what if you are an advertiser outside the US who was placing ads to be viewed in Google's US market?

The main point is that the exact answer to the international element isn't known yet. We're going to have to see how the settlement plays out.

[Jeff Martin]

It's a fresh start to remove four years of liability for $90 million. If the settlement goes through, all those potential claims go away. Anyone who feels they have a case has to start counting from say April 2006 forward. And they'll have to prove Google wasn't being responsive, wasn't issuing credits and so on. Maybe that will happen because Google will be that way. But they'd be pretty stupid, if so.

I should have phrased my question - How does Google have a fresh start in the eyes of PPC advertisers?

The advertisers I have spoken to in the short term don't see how they have been helped and their view on Google and click fraud hasn't changed much.

Not saying that can't happen, only that now you've got an amount agreed for every advertiser in the US before one US district court, so seems like you're going to have a harder time convincing that you should get a bigger payout.

I look forward to seeing the details as to how compensation is going to be figured out. You can’t just apply a blanket number to all advertisers. You really cant even just base it on spend. To get the best understanding you would need to look at the spend, the buying cycle of a particular vertical and then gauge the prevalence of click fraud based on specific vertical numbers.

I don't know that [advertisers] are necessarily helped.

Again - that makes two of us.

They are only helped if the search engines really do police click fraud and issue prompt refunds to prevent future cases from being filed.

They haven’t done much to date in communication with their advertisers or done much to meet advertisers expectations for dealing with click fraud. Now they have gotten off by paying a tiny amount of money (for them) to wipe out potentially hundreds of millions of dollars of click fraud money that they shouldn't keep. From that perspective, it would make more financial sense to just pay up $90mm so I could sweep the issue under the rug every four years and keep the rest.

Part of that is likely going to involve making use of third parties, though the settlement doesn't seem to require this.

From what I have heard the settlement makes no attempt at trying to change this flawed system.

Jeff, if your spotting fraud at VeriClix and Google's agreeing with you and issuing refunds in the majority of your cases, maybe the vast majority, why would you go to court?

Because this just isn’t so Danny. Since Google shares no data and only provides a filtered view of what's happening in Adwords reporting they can say either "It doesn’t look like click fraud to us" or "You were never charged for those clicks".

Again - Use of a third party to mediate claims of click fraud by advertisers could do Google a world of good by taking the wait off their sholders and a good deal of the responsbility.

[zetetic]

I agree with the sentiment that this settlement, as currently reported, would be great deal (some might even say "information highway robbery") for Google and its shareholders. However, the devil for advertisers--both past and present--lies in the details of the settlement which, as of yet, are not public.

What I'd like to see is whether this settlement includes any permanent requirement that Google modify its policies and procedures as they relate to questionable clicks. Is the requirement that advertisers file their reimbursement requests within 60 days gone for good or only as it relates to this settlement? Will Google be providing advertiser with more granular data about the source of each click? Will Google be working with third-party analytics solutions (like Yahoo has announced it is doing with WebTrends and others) to provide advertisers with a better 360 degree view of click validity?

While the settlement, once public, may answer some of these questions, my instinct is that, for at least the short-term, it's going to raise more questions than it answers.

[Mikkel deMib Svendsen]

The main point is that the exact answer to the international element isn't known yet.

I think from a legal point of view it will have absolutely no impact. How would a US case like this have ANY impact on the legal system of, lets say, Denmark? I can't see how. If I bring up the case in a Danish court the judge is not going to say: We can't take this cae, under Danish law, because some judge in the US rule on it in the US. That would make no sense at all.

So, the question remaining is really only, as you also point out Danny, who will actually be paid back from the click fraud under this settlement: US adevertisers, or advertisers advertising in the US.

[Jeff Martin]

Well only the attorneys are being "paid" I believe. Advertisers get some form of credit to keep using the same defunct system. I think this ruling would apply to US based companies advertising in Adwords.

[Mikkel deMib Svendsen]

WOW, I did not get that part, Jeff. Is that really true? I mean, Google accept that their system let them charge for invalid clicks and then refund them into the same system - with more fraudelent clicks to come out of it. Is this a mad house or what? That truely sounds totally crazy. That solution would be completely un-usable for most of the campaigns I run in AdWords - many of them are time limited and after that time the client may not do any AdWords for a while - or ever. So where would I put those creadits? And how would that influence my legal liability with clients?

Puhh, I am happy that this stupid settlement will have no legal impact on what we can do here, what cases we can bring up and what settlements we may come to here - this one, I would not recomend ANYONE to sign. It's a piece of legal BS in my mind.

[andrewgoodman]

Originally Posted by Jeff Martin

Well only the attorneys are being "paid" I believe. Advertisers get some form of credit to keep using the same defunct system. I think this ruling would apply to US based companies advertising in Adwords.

The system is "defunct"? This is news to me. Compared to...?

[dannysullivan]

Ah, Mikkel, that's how it seems to go often in class actions suits. You don't get money. You get product. Specifically to search engines, remember the LookSmart case was largely settled in people getting credit. And I agree -- I think you should get your choice, credit or cash. Imagine if you are no longer a Google advertiser? I can see it now, people selling and trading their ad credits on eBay or Google Base.

How does Google have a fresh start in the eyes of PPC advertisers?

I agree, I don't know that they do. Well, realistically, assuming this settlement is reached, they either have to change their ways and make you feel as an advertiser that they really are being responsive to you or they'll risk another suit.

The advertisers I have spoken to in the short term don't see how they have been helped and their view on Google and click fraud hasn't changed much.

It may be a bit too early to judge. The settlement was just reached, and despite it being a sweetheart deal for Google, it's also an admission they have had problems. Heck, I've got a quote where they flat out say they need to be better. If you don't see fast, good responsiveness improve very shortly after the settlement, then the cloud hanging over them will return.

From that perspective, it would make more financial sense to just pay up $90mm so I could sweep the issue under the rug every four years and keep the rest

That's assuming the price would stay the same. Say they change nothing. Say allegations of click fraud continue. Another suit could result, and that suit might go after a much larger settlement.

I think the existing settlement does give you some burden of showing things are much, much worse than what we guess at here (AP reports the settlement is less than 1 percent of Google's revenue over the period, so you can imagine them arguing that undetected clickfraud might have been in that range). But heck, in legal cases, anything can go. You could get a future case waged successfully for much more. Hence a desire for them to keep their nose clean.

From what I have heard the settlement makes no attempt at trying to change this flawed system.

I agree, the settlement doesn't seem to force them to do anything. But they have to do something, or else they'll be right back in the same mess. Color me slightly optimistic that we will see some more responsiveness. It has to happen quickly post-settlement, and it has to convince the likes of you, Jeff, and others who especially track this. If they are, we'll know, because we won't hear the complaints. If they are not responsible, the truth will tell.

How would a US case like this have ANY impact on the legal system of, lets say, Denmark? I can't see how.

I can't either and to be clear, that's the point I was making. I see nothing preventing advertisers in countries outside the US for taking action against Google for alleged clickfraud where Google has a business presence.

Who will actually be paid back from the click fraud under this settlement: US adevertisers, or advertisers advertising in the US.

Wish I knew. I see that as a key sticking point. There are going to be plenty of advertisers who can fairly claim that while based outside the US, they incurred clickfraud on ads Google served in the US and to a US audience. I think the settlement is going to need to address them. But since the details are still being worked out an approved, it's just we'll see mode for now.

[Jeff Martin]

The system is "defunct"? This is news to me. Compared to...?

Compared to? Well you can look at Mikkel's last comment and probably figure it out. In addition, I would say compared to a system that doesn’t have an inherit conflict of interest.

[jpchrysler]

The funny thing is that in the long-term, the elimination of click fraud doesn't represent a conflict of interest for a company like Google, but in the short term, an apparent conflict of interest does exist.

We've built our network from the ground up eliminating click fraud in the click stream, so we never see the revenue from potentially fraudulent clicks. As a result, we've been able to grow and provide the cleanest traffic anywhere.

This of course, keeps advertisers happy and conversions high.

In the short term, however, it's always difficult to provide refunds and actively police your network, particularly if the advertisers aren't clever enough to do it themselves.

I think it's very hard for companies to make the connection between the short term loss of revenue and the long term sustinence of revenue. One need only look at the barren wasteland of conversion present in the Tier II/III/IV PPC engines to see that it's human nature not to do so.

Hopefully the negative attention will be enough to force Google's hand, but like many here, I don't expect any dramatic change.

[andrewgoodman]

Originally Posted by Jeff Martin

Compared to? Well you can look at Mikkel's last comment and probably figure it out. In addition, I would say compared to a system that doesn’t have an inherit conflict of interest.

Mikkel's comments don't explain anything to me, and neither do yours. They do not seem to faze the many conscientious, careful, and profitable advertisers I see when I look inside our MCC at daily optimized spends across a range of industries.

Click fraud a problem? No one would deny it.

AdWords "defunct"? Far from it. The platform continues to be highly functional. The tone of these debates does a disservice to intelligent advertisers who know the difference between profit and loss, and who know how to measure. Google's $5+ billion in revenue isn't all gossamer.

Yeah, some of it is, admittedly:

Gossamer
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[BKCB]

For many years, in the advertising industry, there have been traditional ways of dealing with "problem advertising" that is deemed the publisher's responsibility. These so called "Make Goods" are a perfect solution for the publisher, because they actually provide an opportunity to have the advertiser get more proof of the kind of ROI the publisher provides, thus "selling" the advertiser further on THEIR service. The hope is that the advertiser will get some great new accounts or sales that will make them even more dependent upon that publisher.

Even though the exact terms of the proposed settlement have not been disclosed yet, it is probable that Google will only be responsible for specific, agreed upon, click fraud click dollars and no more. Even though Google may be generous in allowing "debatable clicks" to be compensated, they probably will not do what is traditional for many publishers. That is, they give a credit of up to THREE TIMES the cost of the ad in EXTRA FREE ADVERTISING to be used any way the advertiser wants. This is done because of what I said previously, and because it avoided any CASH CREDITS on the part of the publisher. It also avoided any "contraes" (commission give-backs) to sales people who sold the advertising.

I wasn't aware, Danny, of that LookSmart "mostly credit" settlement. I agree with you that the judge should give the plaintiffs a choice of cash or credit. Or, Google should have to pay at least twice the amount of the click fraud dollars in extra free PPC advertising. However, would a cash settlement in any way tend to affect any commissions paid to anybody on the sale of PPC?