The Beginning of the End-Google Adwords Sued for Fraud

[LeeRyder]

Advertiser Sues Google Over Click Fraud

Suit alleges the search engine doesn't properly protect its advertisers.

Juan Carlos Perez, IDG News Service
Friday, July 01, 2005
Google knows that click fraud is rampant in its pay-per-click advertising program and hasn't seriously attempted to prevent this practice of individuals clicking on ads with malicious intent, an advertiser has charged in a lawsuit filed against Google.


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Click Defense claims it was the victim of click fraud when it advertised on Google's AdWords program earlier this year, and has filed a lawsuit alleging breach of contract, negligence, unjust enrichment, and unfair business practices.

Google believes the lawsuit is without merit, said Mike Mayzel, a Google spokesperson. "We will defend ourselves vigorously," Mayzel said. He declined to comment any further on the specific allegations being leveled against the Mountain View, California, company.

Click Defense, an application service provider based in Fort Collins, Colorado, should know a thing or two about click fraud, since its specialty is helping customers enhance their online advertising campaigns and monitoring for such fraud.


Lawsuit Details
In its lawsuit, filed last week in the U.S. District Court for the Northern District of California, San Jose Division, Click Defense alleges that Google is aware that due to click fraud, the ads it sells are worth "significantly less" than what advertisers pay Google for them. Click Defense also accuses Google of not "adequately" warning customers about the existence of click fraud and of not "adequately" alerting them and refunding them when they become victims of this practice.

"Google has an inherent conflict of interest in preventing click fraud since it derives the same amount of income from each fraudulent click as it does from each legitimate click," Click Defense claims in the lawsuit.

Click Defense is asking the court to allow the lawsuit to proceed as a class action, to award it and the class damages of at least $10 million, and to require Google to refund it and the class the money derived from invalid clicks that they have paid to Google.


Google Refunds
The problem of click fraud has become a hot topic recently. A common type of click-fraud perpetrator is a company official who clicks on competitors' ads, knowing that every time he or she does that, it costs competitors money. Publishers of some Web sites that run pay-per-click ads may also be involved in click fraud, because the more that the ads on such sites are clicked on, the more commission money those publishers receive.

In its lawsuit, Click Defense says some industry analysts put the incidence of click fraud at up to 20 percent of all clicks, and points out that in December 2004, Google Chief Financial Officer George Reyes described click fraud as "the biggest threat to the Internet economy."

In its 2005 annual report, Google addressed click fraud, saying it has "regularly" refunded advertisers due to this practice, and that those refunds may increase if Google is unable to curb this activity. Moreover, Google acknowledged that if new evidence of past fraudulent clicks emerges, it may have to issue retroactive refunds which would negatively affect its bottom line and could hurt its brand.

"If fraudulent clicks are not detected, the affected advertisers may experience a reduced return on their investment in our advertising programs because the fraudulent clicks will not lead to potential revenue for the advertisers. This could lead the advertisers to become dissatisfied with our advertising programs, which could lead to loss of advertisers and revenue," the annual report reads.

Google, which has systems and staffers in place to monitor and detect click fraud, doesn't disclose its click-fraud percentage, Mayzel said.

http://www.pcworld.com/news/article/0,aid,121687,00.asp

 

[vimkar]

thakns for sharing .... :loveyou:

 

[Mark]

I think google is probably doing more to prevent and compensate for click fraud than any of the others - IMO .... I'm not saying it doesn't happen a lot - But I feel safer paying for PPC Ad Campaigns there than any others I've tried.

There is another related thread on this here as well :

http://www.namepros.com/showthread.php?t=103142

 

[OvenMitt]

Merits of the lawsuit aside, you do see that this is a publicity stunt for "Click Defense", right?
Click-fraud is huge (As any number of 14 year olds on this board can attest to), but the lawsuit smacks of devious purposes itself.

 

[Jonathan]

That's exactly what I thought, OvenMitt.

I mean, it's not Bed & Breakfast Inc. that is suing them for bad clicks, it's something called Click Defense.

 

[equity78]

Right on OVEN Mitt

 

[thetzfreak]

Wow, OvenMitt, I never actually thought if it that way... I can easily see how I could get a lot of business from something like this... but if something goes wrong for click defense, wouldn't that be BAD for them (although they already made a big commotion)?

 

[Genialnames]

I think it is difficult for Click defense to demonstrate click fraud vulnerability, also if he do it has to prove it and by proving it it could incour in Google TOS infringment.... one should not attempt to try to fraud.
Even if they are able to demonstrate it and win , well I think google is too strong legally speaking, at the best they will pay a sanction and then they have a good pubblicity for free claiming that they are using this case to improve the click fraud prevention system and.....they could even lower the revenues for that reason, or just cut off some site.
I don't think they are going to loose anything, to the contrary, I think they are even go make more profit form that.
It would be different if google would be sued by many many advertisers at once. IMHO

 

[theparrot]

How can the claim google charges more then the ads are worth, when the price is set by bidding? Then they want to make it class action. For sure it is a stunt, and/or money grab. I hope they get slapped down hard somehow for misuse of the courts.

 

[armstrong]

It would be different if google would be sued by many many advertisers at once. IMHO

That's what a class action lawsuit is - many aggrieved parties suing the same company over the same issue.

Google can do more in terms of transparency. They should disclose statistics about their adwords program (including fraud rates and refunds), and provide free tools for advertisers to monitor their adwords stats, like IP address patterns, time on site, and time-of-day patterns, etc.

 

[Veolus]

Merits of the lawsuit aside, you do see that this is a publicity stunt for "Click Defense", right?
Click-fraud is huge (As any number of 14 year olds on this board can attest to), but the lawsuit smacks of devious purposes itself.

Yes, it could definitely be a publicity stunt but i believe Click Defense has the right to file a lawsuit against Google. Noone likes receiving fraud clicks, the only people that benefit from them are the publishers. I also agree with Apollo here, they should provide free tools for advertisers to monitor adword stats, etc. to let them know about whos clicking and when.

 

[jberryhill]

There is no doubt that Click Defense signed on to the program for the purpose of bringing this suit an obtaining publicity. That does not mean the claim is without merit. However, Google does take steps to deal with click fraud. Are those steps 100% effective? No, but if one can estimate that X% of clicks are 'trash', then one can take that into account in what one bids for clicks.

What makes this sort of claim possible is the precision with which internet advertising can be measured. Compare that to other forms of advertising. All advertising is sold on the basis of some sort of traffic measurement. My question is whether audience measurements for television or radio any more or less accurate than the click fraud rate in internet advertising?

Or consider circulation-boosting methods used by print advertisers. For example, USA Today has got to be the worst newspaper in the US. I can't imagine anyone who would actually buy it or subscribe to it, as it has to be the most news-free newspaper I have ever seen. Nevertheless, it seems that whenever I stay at a hotel, a complimentary copy arrives at my door. Giving it away to hotel guests would seem to be an appreciable chunk of their circulation. How many of those hotel guests, no doubt included in USA Today's circulation figures upon which advertising rates are based, do what I do and drop the paper into the nearest recycling receptacle?

How many people get up during a popular television show and get a beer during the commercials? How many "viewers" are recording on TiVo or VCR's and fast-forward through the commercials? Those people are included among the "viewers" for the purpose of determining advertising rates.

 

[Venolus]

OMG, the world has become more worse than the day i was born
I suppose i got to know it last monday
Google, i never thought they'd fall into the blacklist at all

 

[primacomputer]

What makes this sort of claim possible is the precision with which internet advertising can be measured. Compare that to other forms of advertising. All advertising is sold on the basis of some sort of traffic measurement. My question is whether audience measurements for television or radio any more or less accurate than the click fraud rate in internet advertising?

Without having the accurate numbers to compare them to it's impossible to say The idea that 5,000 boxes can give you an accurate idea of that 100,000 households are watching requires a huge leap of faith.
But TV statistics should be less vulnerable to distortion. If you know that there are 100k people in a city and the local station claims 250k viewers then it's easy to see they are lying. However when Google comes and says 250k people clicked on your ad you don't have anything to gauge it against, especially since no one is allowed to talk about their stats.

Or consider circulation-boosting methods used by print advertisers. For example, USA Today has got to be the worst newspaper in the US. I can't imagine anyone who would actually buy it or subscribe to it, as it has to be the most news-free newspaper I have ever seen. Nevertheless, it seems that whenever I stay at a hotel, a complimentary copy arrives at my door. Giving it away to hotel guests would seem to be an appreciable chunk of their circulation. How many of those hotel guests, no doubt included in USA Today's circulation figures upon which advertising rates are based, do what I do and drop the paper into the nearest recycling receptacle?

Circulation figures used to be a complete joke but have gotten much more reliable in recent years. A lot of stuff is audited now. Also, you pay a different advertising rate depending on whether subscriptions are paid or free, and if it's a free subscription whether it was requested or not. Some of the publications I've worked on had circulation audited accurately to a fraction of a percent. That's why an ad in USA Today costs about the same as the WSJ enough though they have a “circulation” of twice that of the WSJ.

How many people get up during a popular television show and get a beer during the commercials? How many "viewers" are recording on TiVo or VCR's and fast-forward through the commercials? Those people are included among the "viewers" for the purpose of determining advertising rates.

Perhaps. Personally I'm convinced they just make up the numbers.

 

[jberryhill]

you pay a different advertising rate depending on whether subscriptions are paid or free

Okay, when I stayed at a Hilton recently, they had a box on the check-in form that you could mark if you did NOT want to get USA Today, and you would get a $.50 reduction in your room rate. You had to go out of your way to save fifty cents on a two hundred dollar hotel room. Was that a paid subscription or not?

 

[Lyn]

White Knight

Click defense might be trying to be a white knight by taking on a biggy called Google or they might have sinister motives like public exposure.

Either way, none will come cheap. These types of court actions are very expensive and is one that Google can afford to run, but can't afford to loose, now that they are a public company.

I am being sued in Oz over a stupid issue called greed. Either way, once the amount goes over $50,000, and in this case it does, the matter has to be heard in the higher courts. Just to defend this matter is costing approx. $50,000 in legal bills and that is without winning. To lose will cost my legal bill of $50,000, their legal bill of $50,000+ and the $88,000 I'm being sued for.

So, either way, Click Defense is up for a lot of money win or lose.

Lyn

P.S. If I am buying something off you, don't get nervous, I don't intend to lose the court case and have counter sued for $150,000.

 

[dsforsaken]

they dont do much againmst click-fraud and what they do do is usually inaccurate, such as when they banned my account 5 mins afte ri registered for click fraud and i didnt even post a link anywhere to my ads...

 

[primacomputer]

Okay, when I stayed at a Hilton recently, they had a box on the check-in form that you could mark if you did NOT want to get USA Today, and you would get a $.50 reduction in your room rate. You had to go out of your way to save fifty cents on a two hundred dollar hotel room. Was that a paid subscription or not?

I would gladly pay and extra $0.50 to not receive USA Today
There may or may not have actually been something paid for the paper but for the purpose of calculating the value of ad space this would not be counted as a normal paid subscription. Basically anything sold below a certain percentage of the cover price doesn't count as paid.

But this still counts as part of the total aggregate “circulation”. I'm sure if you look into the breakdown, the actual paid circulation of USA Today is more than a million less than the total. Hence the ad rates comparable with papers who don't give their publications away and have a million less circulation.