Google to settle click fraud suit with $90m?

Under a proposed $90m settlement of a class-action lawsuit over alleged click fraud, Google said on 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 $90m, Nicole Wong, associate general counsel at Google, wrote in a Google blog posting.

The lawsuit, filed in February 2005 in state court in Texarkana, Arkansas, 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 Caulfield Investigations and Lane's Gifts and Collectibles against Ask Jeeves, now known as Ask.com; Buena Vista Internet Group, doing business as Go.com; FindWhat.com, now known as Miva Media; Google; LookSmart; Lycos; Time Warner, and its AOL and Netscape subsidiaries; and Yahoo!.

Wong wrote: "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 programme through the date the settlement is approved by the judge."

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

The posting said: "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."

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 added.

Wong wrote: "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. 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.

McWilliams, of the firm of Patton Roberts McWilliams & Capshaw, said in a phone interview: "It is our understanding that Google has announced today that a $90m settlement has been reached in connection with the click fraud litigation pending in Miller County, Arkansas, Circuit Court. Because the settlement is not final and must be approved by Circuit Judge Joe Griffin, we are not able to comment about the details… 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 defence 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 Go.com and Miva, LookSmart, Lycos and Yahoo! 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.

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

"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. On that front, Google still will have an advertiser relations issue that needs further attention."

Anything from five per cent to 20 per cent 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 website publishers who want to increase the amount of revenue they get from hosting ads on their site.

Elinor Mills writes for CNET News.com