Click fraud hounds Google

Topeka Capital-Journal, The, May 8, 2006 by Michael Liedtke

By Michael Liedtke

THE ASSOCIATED PRESS

SAN FRANCISCO - 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 advertising network.

But 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 Radiator.com.

Google also expects to pay $30 million to the attorneys who settled the case on behalf of advertisers, raising the settlement's total value to as high as $90 million. Still, that is 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 in 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 41/4 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.

Click fraud takes different shapes, but the end result is 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 site's $20,000 ad bill.

After reviewing Thys' evidence, Google said its internal safeguards had spotted the suspicious activity as it occurred and never billed Radiator.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 likely will 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. Radiator.com already has decided to reject the offer.