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4/28/2006
02:54 PM
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Google Condemned For Click-Fraud Settlement

The settlement won't adequately compensate harmed advertisers or penalize Google, says an attorney who has a related case pending against the company.

An attorney representing plaintiffs in a federal click-fraud class action suit pending against Google in California claims the $90 million settlement Google reached last month in a related case filed in Arkansas fails to penalize Google or fairly compensate advertisers victimized by click fraud.

The most that aggrieved advertisers can expect from settling with Google is about a half a cent for every dollar lost to click fraud, according to Brian S. Kabateck, a partner in Los Angeles law firm Kabateck Brown Kellner LLP.

Kabateck is representing disaffected Google Adwords customers in the California click-fraud case, Advanced Internet Technologies (AIT) v. Google.

In March, Google said that it had reached a settlement in Lane's Gifts and Collectibles LLC v. Yahoo! Inc., which was filed in Arkansas in February 2005. The plaintiffs, small companies that paid for search engine ads, accused a number of search engines including Google of breach of contract, unjust enrichment, and civil conspiracy arising from click fraud. The case is still pending against the other defendants including Yahoo.

"We stand firmly by our proprietary click protection systems and look forward to vigorously defending our position on this matter," Yahoo said in a statement.

A hearing to determine whether Kabateck's California case would have qualified for nationwide class action had been scheduled for May in the U.S. District Court for the Northern District of California, but in early April Google won a stay in the AIT lawsuit. The stay delays Kabateck’s case until the Arkansas case is resolved and possibly renders it moot.

"Google apparently doesn't see cheating its customers out of billions of dollars as doing evil," Kabateck said in a statement issued Wednesday. Google's detractors frequently accuse the company of being evil to highlight alleged failures to live up to its informal corporate motto, "Don't be evil."

Google did not respond to a request for comment. Google has until May 20th to notify advertisers in the Arkansas case of the settlement. Once notified, advertisers have 30 days to opt-out. The settlement is slated for final judicial approval in July.

At the time the settlement was announced, John Battelle, author of The Search and noted Google observer, said in his blog, "This settlement is a major victory for Google. Was it good for advertisers? Not sure. But I think the folks at Google are pleased as punch with the deal."

At a panel discussion on click fraud at the Ad:Tech Conference in San Francisco on Thursday, Jessie Stricchiola, president of search engine marketing firm Alchemist Media, declined to comment on the fairness of the settlement Google reached in the Arkansas litigation, citing her involvement in the case.

But she did have a lot to say about click fraud in general.

Stricchiola began the discussion by pointing out the mixed signals the industry has been sending about click fraud. She cited conflicting statements by Google executives to prove her point. Google CFO George Reyes has called click fraud "the biggest threat" to the Internet economy. Google CEO Eric Schmidt has called click fraud "immaterial." The truth, she and others on the panel suggested, lies somewhere in between.

Click fraud occurs when someone, directly or using click-automation software, clicks on an online ad for a purpose other than receiving information about advertised product or service. That's an inherently difficult thing to define given that human intentions are not machine readable.

Google refers to click fraud using the decidedly less pejorative term "invalid clicks." "Invalid clicks are clicks generated by prohibited methods," the company explains on its Web site. "Examples of invalid clicks may include repeated manual clicking or the use of robots, automated clicking tools, or other deceptive software. Invalid clicks are sometimes intended to artificially and/or maliciously drive up an advertiser's clicks and or a publisher's earnings."

In March, Nicole Wong, associate general counsel for Google, addressed the issue of click fraud when disclosing the proposed settlement in the Google blog. "We have said for some time that we believe we manage the problem of invalid clicks very well," she wrote. "We have a large team of expert engineers and analysts devoted to it. By far, most invalid clicks are caught by our automatic filters and discarded *before* they reach an advertiser’s bill. And for the clicks that are not caught in advance, advertisers can notify Google and ask for reimbursement."

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