E-Commerce Law

Surprise! Google Says Click Fraud Problem is Exaggerated

On the heels of reports that Google is joining Yahoo and MSN to address the click fraud problem, Google has released a report criticizing earlier attempts to quantify the problem as exaggerations.

According to this article in the Washington Post:

"Google said reports about click fraud have exaggerated the problem and could scare away advertisers. In its report yesterday, the company attacked the methodology used and conclusions drawn by click-fraud consultants, arguing they either lacked the technology to differentiate between a fraudulent click and a Web page reloading or that their technology improperly counted a single click as multiple clicks. Google cited specific examples of such methodological problems.

The reports ‘have led to vastly inflated estimates’ of the problem, said Shuman Ghosemajumder, Google's product manager of trust and safety. ‘We saw media reports and data from consultants submitted by advertisers and it didn't make any sense. This report details the flaws and explains the discrepancy. We want to help consulting firms.’"

As we’ve previously posted, declining advertiser confidence has forced the largest pay-per-click advertising companies (Google, Yahoo, and MSN) to finally address the click fraud problem. Google’s latest report is an attempt at damage control. Hopefully, it will lead to an honest appraisal of the problem and the granting of additional assurances to participating advertisers.

For more information, see Google Says About Click Fraud Are Overblown in the Washington Post and Google calls click fraud estimates overblown on CNET News.

Technorati Tags:  google, click fraud

Search Giants Join Forces to Fight Click Fraud

Earlier this week, E-Commerce Law informed readers of Google’s decision to disclose the number of clicks on each customer’s bill which are deemed to be invalid. At the end of that short post, we predicted that "[t]o remain competitive, Yahoo and MSN will have to follow suit."

Now, from an AP story on the website of WTOP News:

"The Internet's leading search engines [Google, Yahoo, and MSN] are teaming up with an advertising trade group to find a better way to identify and measure ‘click fraud,’ a scam that has raised doubts about the Web's trustworthiness as a marketing vehicle.

. . .

It may take more than a year before the guidelines are finalized, said Greg Stuart, chief executive of the Interactive Advertising Bureau.

The decision to develop the guidelines reflects the Internet industry's ‘commitment to being the most accountable advertising medium and providing marketers with the highest level of transparency,’ Stuart said."

Search giants Google, Yahoo, and MSN really had no choice but to join forces to address the issue of click fraud, as consumer confidence in the accuracy of Internet advertising charges plummets as a result of publicized court cases and industry reports quantifying the problem. Though the teaming of these search engines to address the click fraud problem may result in systematic improvements, it’s impossible to eliminate the problem altogether.

For more information, see Web Search Engines to Fight Click Fraud on wtopnews.com.

Update (8/2/2006):  Here's the washngtonpost.com version of the article:  Web Search Engines to Fight Click Fraud.

Technorati Tags:  google, click fraud

Google to Disclose Number of Fraudulent Clicks

In April, E-Commerce Law argued that to maintain the confidence of advertisers the search engine giants would have to assist in quantifying and reducing the click fraud problem. Now, Google has taken a first step in this process by agreeing to disclose the number of clicks on each customer’s bill which are deemed to be invalid.

To remain competitive, Yahoo and MSN will have to follow suit.

For more information, see Google to Disclose Dishonest Ad Clicks on nytimes.com.

Technorati Tags:  google, click fraud

Google Click Fraud Settlement Approved

Despite attempts by a former advertiser to block it and amid criticism of its terms, the $90 million class action settlement of click fraud claims against Google has been approved.

According to an article on washingtonpost.com:

"Miller County Circuit Judge Joe Griffin called the settlement "fair, reasonable and adequate" and downplayed claims it hurt small advertisers. More than 70 objections were filed, with smaller companies saying they didn't have the resources to prove "click fraud" losses.

By settling claims made in the plaintiffs' class-action lawsuit, Google will give advertising credits that are the equivalent of a $3.80 refund on every $1,000 spent in its advertising network during the past 4 1/2 years.

No one will receive cash except the lawyers, who will split $30 million."

The fact that the advertisers, who are presumably the injured parties in this action, will receive only a small advertising credit while the attorneys representing the class will split an eight-figure legal fee has been one of the many criticisms leveled at the settlement. Critics also argue that the settlement fails to adequately compensate class members or deter similar conduct by Google and others and that it does not adequately compensate smaller advertisers who do not have the resources to prove click fraud losses.

For E-Commerce Law’s earlier posts on this topic, see Former Advertiser Attempts to Block Google Click Fraud Settlement, Google Click Fraud Settlement Granted Preliminary Approval, AIT's Click Fraud Lawsuit Against Google Stayed, and "Ninety Million Dollars is Chump Change."

For more information on this story, see Judge OKs $90M 'Click Fraud' Settlement on washingtonpost.com, Judge Approves Google's $90M Click Fraud Settlement on E-Commerce Times, and Google Click Fraud Settlement Approved on Eric Goldman’s Technology & Marketing Law Blog.

Technorati Tags:  google, click fraud

Click Fraud Rates Rising

E-Commerce Law’s advice last month about managing the risk of click fraud may be becoming even more important.

According to figures released by the Click Fraud Index, the overall rate of click fraud is rising (from 13.7% for the first quarter of 2006 to 14.1% for the second quarter). Click fraud cost Internet advertisers over $800 million dollars last year.

For more information about the rise in click fraud rates, see Report Says Click Fraud Rates on the Rise in E-Commerce Times and Bogus clicks on Web ads continue to rise on usatoday.com.

Technorati Tags:  click fraud

Common Issues Facing E-Commerce Businesses

Issue # 7: Pay Per Click Advertising and Click Fraud

The amount of money spent on Internet advertising has grown steadily since 2002. As companies devote more and more of their advertising budgets to this emerging medium, they are confronted with the reality that not every "click" for which they are paying is the result of an action by an interested, potential customer.

Click fraud is a growing concern among Internet advertisers involved in the various pay per click (PPC) advertising programs sponsored by popular search engines. Recent cases filed against Google and Yahoo have heightened awareness of the problem as third-party vendors rush to monetize a solution. In the end, click fraud, which results in 14 to 30 percent of all clicks of PPC advertisements, is a problem inherent to the advertising model.

The sponsors of PPC advertising programs actually profit from click fraud; unless the click on an advertisement is obviously fraudulent (as defined in the terms and conditions applicable to the specific PPC advertising program), the PPC program sponsor gets paid for the click, whether it resulted from the actions of an interested consumer or not. As long as the problem does not cause the PPC advertising sponsors to lose revenue, they have very little motivation to address the concerns of advertisers.

Though an Internet advertiser may not be able to eliminate the effect of click fraud in PPC advertising, a company can reduce or manage its risk by:

• Understanding the Effect of Click Fraud on the Company’s Specific Advertising Plan. Some commentators have argued that click fraud is far less of a problem than generally believed and that it is unfair to expect Internet advertising to guarantee a certain Return on Investment (ROI). They point out, quite correctly, that no other form of advertisement guarantees that it will be viewed by an interested potential customer. However, many businesses and individuals expect their dealings on the Internet to differ significantly from their experience in other mediums of communication. In any event, a business embarking on a PPC advertising campaign must ensure that it can absorb the cost associated with wasted or fraudulent clicks.

• Carefully Reviewing the Terms and Conditions Applicable to the PPC Advertising Program. Most PPC advertising programs have terms and conditions that expressly address the issue of click fraud, detailing how the program sponsor identifies fraudulent clicks and outlining the specific procedure and deadlines which must be met by an advertiser who wishes to challenge the charges associated with certain clicks. An Internet advertiser must carefully review those terms and conditions and compare them to competing programs to fully appreciate the risk associated with a particular PPC advertising program.  This also ensures compliance with dispute resolution procedures that could save the company thousands of dollars of advertising expenses.

• Considering the Use of Third-Party Programs to Quantify and Resolve the Problem. Some third-party vendors advertise software designed to identify fraudulent clicks. The use of that type of software may give the Internet advertiser the information it needs to address the loss associated with click fraud through the PPC advertising program’s dispute resolution procedures or legal action.

Previous Posts in this Series

Issue # 1:  Protection of Domain Names

Issue # 2:  Protection of Original Website Content

Issue # 3:  Website Terms of Use

Issue #4:  The Potential for Universal Jurisdiction

Issue # 5:  E-Mail Marketing and Managing Risk Under the CAN-SPAM Act of 2003

Issue #6:  Keyword Advertising and the Effect of Trademark Law

"Common Issues Faced by E-Commerce Businesses" is a seven-part series appearing each Tuesday afternoon on E-Commerce Law. Readers are reminded that all of the information on this site is provided for informational purposes only and is not intended to be a substitute for legal counsel. No one should act or refrain from acting on the basis of any content included on this site but should instead seek the appropriate legal advice on the particular facts and circumstances at issue from a properly licensed attorney.

Technorati Tags:  ppc, keyword advertising

Former Advertiser Attempts to Block Google Click Fraud Settlement

Update to Google Click Fraud Settlement Granted Preliminary Approval

A former Google advertiser has filed suit in an attempt to block the $90 million class action settlement of click fraud claims against Google. The advertiser alleges that, after attorneys for the class are paid their proposed fee, class members would be left with a settlement pool that represents less than half of one percent of the $13.3 billion in ad revenue that Google has collected during the past four and a half years.

This should come as no surprise.  The announcement of the proposed settlement resulted in immediate criticism from those who believe that the settlement fails to adequately compensate class members or deter similar conduct by Google and others. (See "Ninety-Million Dollars is Chump Change")

For more information, see Lawsuit seeks to block Google settlement on CNET News and Ex-Google Advertiser Sues Over Settlement on WTOP Newsradio.

Technorati Tags:  google, click fraud