Google And Yahoo To Settle Click Fraud Cases

In an article appearing in USA Today on Monday July, 16th, 2006, speaks to the fact that click fraud has hit a peak where the advertisers of Google adwords and Yahoo sponsored listings are paying far more money for illegitimate clicks than ever before. Click fraud occurs in pay-per-click web marketing, when a user or computer programs click on a sponsored link on a search engine such as Google or Yahoo, where the competitor's true goal is trying to deplete adversary's marketing budgets, through fraudulent charge to the advertiser.

For costly search phrases, those over $2 per click that generally comprise the majority of an advertiser's total expenditure; click-fraud was 20.2 percent, according to a survey by Click Forensics.

"For the first time, we have industry data that clearly shows what many have expected — organizations purchasing higher-priced search terms are significantly more vulnerable to click fraud," said Tom Cuthbert, president and chief executive of Click Forensics, in a statement.

Both Google and Yahoo have been sued via class action lawsuits for this practice and both Google and Yahoo have decided to settle these class-action lawsuits to limit their prospective liability for previous click fraud. The article states, "If approved, the two settlements would address any click fraud that occurred amid more than $22 billion of ad spending... A two-day court hearing on Google's offer to pay up to $90 million in refunds and attorney fees is scheduled to begin July 24... Yahoo's proposed settlement, which doesn't limit how much the company might pay, will take place in a California Federal court."

Perhaps, the most appalling aspect to this whole case is a statement made by Google in March where a company agent stated that from an economic viewpoint it was logical to "let it happen".

Google may be getting out of this case easy, if in fact they are allowed to payout only $90 million dollars. Where Yahoo will not limit the amount of damages they may pay. It should be noted that in the latest ComScore report, Google accounted for almost 50% of the search engine market share, while Yahoo only accounted for 28%.

"The settlement is just a joke," said plaintiff Joseph Kinney, a security consultant who said he has lost about $1,500 to click fraud on ads related to his SafeSpaces.com Web site. "A jury needs to hear these issues and Google needs to be held accountable."

The latest lawsuit to deny the proposed settlement argues that the settlement should be rejected because it would not "adequately compensate advertisers who lost money from fraud".

"Under the settlement, Google can pay a half a percent of your losses, or $5 on every $1,000 of losses claimed", said an attorney for the plaintiff. For instance, a loss of $10,000 would garner a coupon worth $50 from Google that could used only to buy more advertising through Google.