The Google and the 'Click Fraud' Menace

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Case Details:

Case Code : MKTG120
Case Length : 9 Pages
Period : 1998 - 2006
Pub Date : 2006
Teaching Note : Not Available
Organization : Google Inc.
Industry : Online Advertising
Countries : USA

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"Click fraud is a fin sticking out of the water: You're not sure if it's a great white shark or a dolphin."¹

- John Squire, Vice President (business development), Coremetrics,² in July 2004.

"Search engine traffic is among the most valuable traffic to a web marketer. Click fraud, charging marketers for poor quality non-converting clicks, could poison the well."³

- Kevin Lee, Board Member, SEMPO.org,⁴ in February 2005.

Introduction

On March 08, 2006, a post by Nicole Wong, Associate General Counsel at Google Inc. (Google), on the company's official blog,⁵ said that the company was close to an out-of-court settlement in a class action lawsuit filed by Lane's Gifts & Collectibles (plaintiff), an online retail store.

The lawsuit was filed in February 2005 in an Arkansas state court against Google, Yahoo! Inc. (Yahoo!), Time Warner and its America Online and Netscape subsidiaries, Lycos, Ask Jeeves Inc., FindWhat.com Inc., Buena Vista Internet Group, and Look Smart Ltd. In the lawsuit, 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 said the settlement agreement would cover all advertisers who had been charged and not reimbursed for invalid clicks from 2002 onward, as this was when Google had launched its "cost per click" advertising program. Google said it would offer credits for all eligible invalid clicks. These credits could be used to purchase new advertisements with Google.

The total value of this settlement, including legal fees, was expected to not exceed US$ 90 million. As of April 2006, 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 with 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."⁶ Google's decision received mixed reactions from investors, analysts, and advertisers. Some analysts felt that the settlement would not really affect the Internet search giant's business.

The Google and the 'Click Fraud' Menace - Next Page>>

1] Stefanie Olsen, "Exposing Click Fraud," http://news.com.com, July 19, 2004.

2] Coremetrics is a web analytics firm.

3] "Click Fraud, an Industry Crisis, or Blip on the Search Engine Marketing," www.clickfraudreport.com, February 23, 2005.

4] The Search Engine Marketing Professionals Organization (SEMPO) is a non-profit professional association which focuses on increasing awareness and promoting search engine marketing across the world.

5] http://googleblog.blogspot.com/2006/03/update-lanes-gifts-v-google.html, March 08, 2006.

6] Juan Carlos Perez, "Google to settle click-fraud lawsuit for $90 million," www.networkworld.com, March 09, 2006.