Lane’s Gifts Click Fraud Lawsuit Near Settlement

March 8, 2006 · by · in Search Engines

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.