Google Proposes $90M Settlement

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John Thys still hasn't figured out how much his company has paid Google Inc. for bogus sales referrals caused by "click fraud" - a sham aimed at a perceived weakness in the Internet search leader's lucrative advertising network.

Click fraud takes different forms, but the end result is usually the same: Merchants are billed for fruitless traffic generated by scam artists and mischief makers who repeatedly click on an advertiser's Web link with no intention of buying anything.

Based on a monthlong analysis of the traffic that Google ads referred to Radiators.com, Thys suspects click fraud may have accounted for 35 percent of the Web site's $20,000 ad bill.

Thys says he has uncovered enough of it to conclude that Google is trying to shortchange his company and thousands of other advertisers by offering refunds totaling $60 million to settle a lawsuit.

"It's almost like an insult that they expect us to take this token money," said Thys, director of Internet marketing for Radiators.com.

Google also expects to pay $30 million to the lawyers who settled the case on behalf of advertisers, raising the settlement's total value to as high as $90 million. Still, that's a fraction of the more than $10 billion in cash held by the Mountain View, Calif.-based search company.

An Arkansas judge is expected to consider the proposed class-action settlement in late July.

The refunds, which will be provided in the form of advertising credits, are meant to compensate Google's customers for undetected click fraud, which contributed to the $13.3 billion in ad revenue that has poured into the company since 2001.

Google's offer works out to a $4.50 refund on every $1,000 spent in its vast advertising network over the past 4¼ years.

Meanwhile, independent studies assert that anywhere from $100 to $400 of every $1,000 stems from click fraud. If those estimates prove correct, Google might be on the hook for $1 billion to $5 billion in advertising refunds.

After reviewing Thys' evidence, Google said its internal safeguards had spotted the suspicious activity as it occurred and never billed Radiators.com for fraudulent clicks. But Thys said the search engine didn't provide him with any data to back up its findings in an e-mail signed simply by "Ray" from Google's click quality team.

Google maintains its class action settlement represents a fair offer that underscores how well it has shielded advertisers from the costs of click fraud.

The class-action settlement of the Arkansas lawsuit will likely test advertisers' faith in Google. The company is supposed to send out notices of the settlement later this month, giving advertisers until late June to reject or protest the refund offer. Radiators.com already has decided to reject the offer.

If the entire deal is rejected, lawyers then go back to the negotiating table; individual advertisers can also declare they won't participate, freeing them to file their own lawsuits seeking better deals or join a separate one pending in California.

Miller County Circuit Court Judge Joe Griffin is scheduled to decide whether to approve the settlement in a two-day hearing beginning July 24.

Yahoo Inc. - owner of the Internet's second-largest advertising network - continues to fight similar click fraud allegations in the same Arkansas court as well as a federal court in California. A click-fraud lawsuit filed against Google in that same federal court has been suspended while its Arkansas settlement is reviewed.

  • Lloyd Vries

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