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Click fraud report sides with Google
Clicking against the pricks...

By Reuters

Published: Monday 24 July 2006

An independent report filed on Friday in an Arkansas court sided with Google over disgruntled advertisers who had sued the search-engine giant, accusing it of trying to drive up fees through so-called click fraud.

The two sides agreed to commission the report as part of a settlement deal for the lawsuit, filed by advertising customer Lane's Gifts.

Pay-per-click advertising, where advertisers only pay when people click on ads, is seen by critics as the Achilles' heel of web search-leader Google, which last quarter saw revenues grow 77 per cent to $2.46bn, virtually all from such ads.

The suit alleged web advertisers allowed their pay-per-click ad systems to be abused in order to drive up fees paid by customers. It argued that companies such as Google have not taken reasonable steps to regulate the practice.

Alexander Tuzhilin, a professor of information systems at New York University, said in the report: "Based on my evaluation, I conclude that Google's efforts to combat click fraud are reasonable." Lane's Gifts commissioned Tuzhilin's report.

Google, in a statement on its website, said in response: "The bottom-line conclusion of the report is that Google's efforts against click fraud are in fact reasonable." It added: "It is an independent report, so not surprisingly there are other aspects of it with which we don't fully agree."

In a separate court filing, Google urged the Arkansas judge, Joe Griffin, to give final approval for the settlement, which was unveiled in March and got preliminary approval in April.

A hearing is scheduled for today to hear objections raised to the proposed agreement, in which Google has agreed to pay up to $90m to settle charges of over-billing customers.

Tuzhilin, a web marketing expert, said after talking to Google's fraud prevention team, he could say "with a moderate degree of certainty" that click fraud is "under control".

Critics argue that up to 30 per cent of pay-per-click advertising actions may be fraudulent, a figure Google and rival Yahoo! both describe as wildly exaggerated.

Google says it uses a variety of automated filters to protect advertising customers from "invalid clicks".

Tuzhilin identified a previously undisclosed policy change in March 2005 where Google quit double-billing advertisers when customers, perhaps inadvertently, clicked twice on the same ad. The report criticises Google for taking two years to halt the double-click billing practice.

The report stated: "Despite its noticeable negative effects on its financial performance, Google decided to abandon the old double-click policy and not to charge advertisers for the second click, which was an appropriate action to take."

Tuzhilin does not identify the source of his information, and he was not immediately available to comment.

Barry Schwartz, an analyst with Search Engine Watch, said the report sheds light on a business shrouded in secrecy, which Google has argued is vital to protect it from unethical users who seek to use Google's system to commit massive fraud.

He said: "It is going to be good for advertisers to know more about how their clicks are getting charged."

Financial research company Outsell has estimated click fraud to be a $1.3bn problem. The Click Fraud Network, which detects such fraud for advertisers, estimates it affects 14 per cent of pay-per-click ads, though a bit less for Google and Yahoo!.