Unhappy Google Advertiser’s Lawsuit Completely Falls Apart–Dreamstime v. Google

This is one of several lawsuits by unhappy Google advertisers, each claiming that Google screwed them out of Google’s self-interest. (A reminder that advertisers always feel screwed because they believe they deserve more customers for less money). Anti-Google lawsuits tend to generate some buzz when filed because everyone loves to hate Google; and the cases garner extra attention if they survive a motion to dismiss, as this case did twice–first on general grounds, then on First Amendment grounds. Those early procedural wins usually don’t signal merit, however. They just delay the inevitable.

Dreamstime sells stock photos. It had favorable organic indexing that made it some money, and it bought Adwords advertising that made it more money. Dreamstime was a big enough player that it got personal support from Google, including actual responses to its email inquiries. But over time, its organic indexing declined and so did its conversion rate on advertising. Thus, Dreamstime sued Google on its unsubstantiated belief that Google was trying to screw it over.

This case started out as an antitrust case, but that argument fell apart. Dreamstime also claimed that Google intentionally downranked it, but it backed off that too (“both sides now agree that Google did not deliberately demote Dreamstime’s search ranking”). After successive rulings whittled the case down, all that was left was a breach of the implied covenant of good faith and fair dealing plus associated 17200 claims on the theory that “Google fraudulently concealed the reasons for Dreamstime’s search ranking drop in order to boost its advertising revenue.” Unsurprisingly, discovery did not produce anything damning.

The implied covenant claim failed because the Adwords contract doesn’t govern organic results. Judge Alsup says: “The implied covenant cannot write into the advertising agreement a duty or promise related to organic search.”

Regarding the 17200 claim, “Dreamstime’s fraud claims fail for one simple reason. Nobody at Google, either on the advertising or the organic side, ever believed that Dreamstime’s ranking dropped as a result of the update to Google’s salient terms algorithm.” Further, even if Google’s testing revealed that an algorithm update would hurt Dreamstime, Google didn’t have any obligation to disclose that kind of confidential information to its advertisers.

For both claims, Dreamstime tried to weaponize Google’s personal support to it, basically claiming that Google paying attention to Dreamstime caused Google to assume higher duties of care. Way to show some appreciation for the extra Google love that most Google advertisers desperately wish they could get. Stay classy.

In my first blog post on the case, I wrote:

Despite the favorable ruling on the Sherman Act claim, this is surely a frustrating ruling for Google. Dreamstime is almost certainly going to lose this case eventually. However, by greenlighting the case to the next stage and opening up discovery–including investigations for a dismissed claim–the judge ensured that the parties will spend a lot of time and money reaching the inevitable denouement. Even if the judge technically got the legal standard right for a motion to dismiss, this is one of those situations where Google surely wished the judge would demand more rigorous factual support in the complaint. I’m confident this judge will eviscerate Dreamstime’s case when it fails to deliver on its allegations with credible and admissible evidence, but it will take a lot of resources from both parties to prove that negative.

In my second blog post, I wrote:

this maneuvering puts Dreamstime into a likely impossible position. Google surely didn’t promise to index or prominently rank Dreamstime, so what promise can Dreamstime enforce that will give it any remedy over being downranked/deindexed? Judge Alsup lets Dreamstime indulge in discovery, but I think we’d all be shocked if Dreamstime found a dispositive smoking gun.

And here we are. 🎯 This case took 2.5 years, extensive discovery, and an ever-shifting plaintiff’s theory of the case before Judge Alsup finally shut it down. Judge Alsup may have skillfully filleted this nothingburger case, but his approach cost everyone extra time and money.

Case citation: Dreamstime.com, LLC v. Google LLC, 2020 WL 3630390 (N.D. Cal. July 3, 2020)