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Google Agrees To $90 Million Settlement In Class Action Lawsuit Over Click Fraud

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Search Engine Watch has learned that Google has agreed to a $90 million settlement fund in the class action lawsuit filed by Lane's Gifts & Collectibles that came to light last April (see also this for background). We're working on getting details about who will be considered eligible for payment as part of the class, exact details and other information, so expect more to come and be postscripted here.

Postscript 1: Google sent this statement:

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.

Google's also posted a much longer statement on its blog here. It covers that the judge still needs to approve the settlement, which would allow any Google advertiser to apply for credit involving questionable clicks from 2002 through the official settlement date. Specifically, it would be credit to buy new advertising given, not a refund.

Postscript 2: I've now talked with Steve Malouf, one of the lead attorneys on the case against the search engines. Here's a rundown on main points from him:

Why Settle? Given Google's overall revenue, along with some high estimates of click fraud, why not fight for more? "Within the context of the risk that each party faces of losing, it was a reasonable settlement,? Malouf said.

Protection From Click Fraud Going Forward: What's going to prevent future cases like this? Malouf said it was a combination of giving more data to advertisers along with more third-party assistance.

"They could all do a better job in terms of transparency and providing a more robust data set to perform analytics," Malouf said. "The solution going forward is going to be an industry solution, with transparency in the form of a third party or several third parties to help advertisers with auditing."

Postscript 3: I've now spoken with Nicole Wong, associate general counsel at Google with some follow-up questions. Here's a rundown on main points:

Other Engines Involved: Some of the other search engines named in the suit were involved because they carried Google's ads. Are they excused from it as part of the settlement? Wong said Google couldn't comment on this yet. I suspect this will likely be the case. Services named in the suit that are or were part of Google's network include AOL (and Netscape), Ask, Lycos and possibly LookSmart. Yahoo and Miva (formerly FindWhat) have never carried Google's ads, so they seem unlikely to be excused.

Protection From Other Suits: It's possible if not likely to my understanding that if this settlement is approved, it will resolve all click-fraud related claims now or being considered during the period from when Google began offering pay-per-click ads in February 2002 through when the settlement is approved (that will probably happen in the coming weeks). That would include another suit already underway in California. Google said it couldn't comment to confirm this however. I expect we'll see some more articles that will explore this aspect to appear in the next day or so.

Protection Going Forward: What prevents more claims happening going forward? Wong said Google believes the 60 day window it allows for claims to be reviewed, along with more proactive and responsive help for advertisers, will be a good preventative.

"What we will do going forward is to continue to fight click fraud or invalid clicks to ensure our advertisers are happy," Wong explained. "We're getting better at it and we are more proactive than we were when we launched the program. We take that responsibility seriously."

Issues With Non-US Advertisers Not Resolved: To date, Google's had no lawsuits over click fraud filed outside the US. However, it has a number of non-US advertisers. Will this cover those? Google said they couldn't comment on this, at the moment.

Why Settle? Google's explained what's involved with the settlement, but why do it at all? Afraid they might lose and face a bigger payout? Decide it was easier to pay and get the issue resolved?

"We believe the problem is small and well managed, and we think that the settlement is a very good and fair outcome for everyone," Wong said:

The why answer seems a no brainer for me. A $90 million settlement, compared to Google's revenues, is cheap to get this particular issue resolved. It seems likely to buy an out from all potential cases going back for years. Compared to the estimated $260 to $290 million Google spent to resolve a patent lawsuit with Yahoo, this deal seems an especially cheap, smart one to take.

Postscript 4: I asked Yahoo if it was seeking a similar settlement. It responded with this statement:

We cannot comment on Google?s reported settlement. That said, we stand firmly by our proprietary click protection system, and look forward to vigorously defending our position in this matter

Postscript 5: To my knowledge, the only other settled class action lawsuit we've had involving a search engine to date was that against LookSmart. As with Google, advertisers were given credits and a few a cash payment of up to $50.

Postscript 6: Legal expert Eric Goldman confirms what I understood to be likely and mentioned above, that this class action if settled will settle all potential actions by advertisers (in the US) unless they specfically opt-out. Meanwhile, News.com does the rounds to some Google partners and finds Ask expecting they'll be covered by the settlement, as I suggested would be the case above. Other search engines didn't comment.

Want to comment or discuss? Visit the Google To Issue Up To $90 Million In Credits For "Invalid Clicks" thread at our Search Engine Watch Forums.

Postscript 7: Google explains invalid clicks in their Google Blog and Inside AdWords blog.


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