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On March 08, 2006, a post on Google Inc.’s official blog[1] by
Nicole Wong, Associate General Counsel at Google Inc. (Google), said that the
company was close to an out-of-court settlement of a class action lawsuit led by
Lane’s Gifts & Collectibles (plaintiff), an online retail store. This lawsuit
was filed in February 2005 in an Arkansas state court against Google, Yahoo!,
Time Warner and its America Online and Netscape subsidiaries, Lycos, Ask Jeeves
Inc., FindWhat.com Inc., Buena Vista Internet Group, and LookSmart Ltd.
The plaintiff had accused the web search companies of overcharging, by charging
them for invalid clicks on the plaintiff’s online advertisements. Google’s
blogpost further mentioned that the settlement agreement would cover all
advertisers who were charged and not reimbursed for invalid clicks from 2002
onwards, as this was when Google had launched its “cost per click” advertising
program.
Google would offer credits, for all eligible invalid clicks, which could be used
to purchase new advertisements with Google. The total value of this settlement,
including legal fees, was expected not to exceed US$ 90 million. The settlement
had yet to get the approval of the court, after which it would become final.
Most of the other popular search engines named in the lawsuit were non-committal
on Google’s decision.
However, it was reported that Yahoo! would continue to its legal battle on this
issue. A Yahoo! spokesperson said, “We stand firmly by our proprietary click
protection system, and look forward to vigorously defending our position in this
matter.”[2] The reactions of investors, analysts, and advertisers to Google’s
decision were mixed. Some analysts felt that this settlement would not really
affect the Internet search giant’s business.
Jim Friedland, an analyst at SG Cowen[3] said, “There are a number of issues that
could hurt Google, but we believe click fraud is not one of them. We continue to
expect near-term sentiment to be negative and the stock is likely to go down on
this news item. Nevertheless, the fundamentals remain unchanged.”[4] Other analysts
felt that the US$ 90 million settlement amount was very small when compared to
Google’s revenues of US$ 6.1 billion and net income of around US$ 1.5 billion in
2005.
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To download this micro case study (No. MCMK0002 ) click on the
button below, and select the case from the list of
available micro cases:
[1] http://googleblog.blogspot.com/2006/03/update-lanes-gifts-v-google.html, March 08, 2006.
[2]
Juan Carlos Perez, “Google to settle click-fraud lawsuit for $90 million,” http://www.networkworld.com/news/2006/030906-google-click-fraud-lawsuit.html, March 09, 2006.
[3]
SG Cowen is a US Investment bank specializing in technology and healthcare.
(Source: http://en.wikipedia.org/wiki/SG_Cowen)
[4]
Kate DuBose Tomassi, “Google’s Click Fraud Settlement Seen As Non-Event,” http://www.forbes.com/markets/economy/2006/03/09/google-click-fraud-0309markets06.html, March 09, 2006. |
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