March 08, 2006
Lane's Gifts Click Fraud Lawsuit Near Settlement
By Eric Goldman
Google announced that it is near a settlement in the Lane's Gifts class action lawsuit over click fraud. The way I read the announcement, the parties have agreed to the terms, so the settlement just needs the judge's approval.
As for the substantive terms, Google will allow any advertiser to claim credit for click fraud, an expansion of its normal policy that such credit requests must be made in 60 days. Google then will give "makegoods" to advertisers who experienced click fraud. Google's total exposure (makegoods plus attorneys' fees) is $90M.
From my perspective, this sounds like an outstanding outcome for Google. Because this was a class action lawsuit, the settlement will bind all advertisers (except those advertisers who opt-out, which I doubt many will do). So with the settlement, Google effectively eliminates its entire legacy liability for click fraud for $90M, only a portion of which is out-of-pocket cash. Given that the click fraud has been estimated in the billions, a $90M settlement sounds like an excellent deal.
Unfortunately, the settlement doesn't appear to resolve the basic question of what constitutes click fraud and when search engines are on the hook for it. On that front, Google still will have an advertiser relations issue that needs further attention.
I've repeatedly blogged about click fraud issues.
UPDATE: Danny Sullivan has done some excellent investigative work, including interviews with both plaintiff's counsel and Google's in-house counsel.
UPDATE 2: John Battelle weighs in, saying that the "settlement is a major victory for Google....I think the folks at Google are pleased as punch with the deal."
UPDATE 3: Google has posted this FAQ on click fraud. It says, "Some invalid clicks do make it through our filters, but we believe the amount is very small." The post also deconstructs the report claiming that click fraud is 30% of clicks.
UPDATE 4: The AIT lawyers say they are going to continue pressing their litigation. We need to see the settlement terms before we can fully understand the interaction between the two suits. I know it's obvious, but I should also point out that the judge might not approve the settlement, so the case isn't done until it's done.
Posted by Eric at March 8, 2006 04:25 PM | Search Engines
Wish I'd read Eric's analysis of the Google settlement before offering my own -- that the litigious will smell blood -- on my Network World blog. His makes more sense, as I noted in a followup item.
Posted by: Paul McNamara at March 9, 2006 03:19 PM
Great post and points, Eric.
I am curious, though, if you saw the words "make goods" in a legal document relating to the settlement, or were you just "coining" a phrase?
I have an advertising background which convinces me that if "make goods" become a legal precedent for search engines, it will have two implications that I put in my my blog post of 3/10/05.
Posted by: Brokerblogger at March 10, 2006 12:45 PM
With a quick search, I didn't find any legal cases interpreting the term "makegood." But it has such a well-defined meaning in industry circles that I think most courts would ascribe that technical meaning to the term. Eric.
Posted by: Eric at March 10, 2006 12:57 PM
Thanks, Eric. I agree, but just for clarification purposes, the reason I asked the question is this:
I know it's just semantics, and it may differ from publisher to publisher, but the 100 year old publishing company that I was contracted to used the term "makegood" only in conjuction with "paper" credits for extra, free advertising. Otherwise, it was a "cash refund", which they wanted to avoid at all costs.
Posted by: Brokerblogger at March 10, 2006 06:14 PM
I have spent nearly 10k with google adwords. Once I stopped using Google Adwords, my traffic seemed to be more authentic. I can see more click throughs to other links on my site. Whereas when I was purchasing clicks from Google the traffic seemed to only go to my homepage. How do I get in on this class action suit?
Posted by: michael shanley at July 7, 2006 07:29 AM
You're already in, unless you opted out! Eric.
Posted by: Eric Goldman at July 31, 2006 09:23 PM