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May 15, 2006

UPDATE: Google Click Fraud Settlement

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Ever since Google settled its highly-publicized click fraud settlement for a mere $90 million, talk has been circulating that AdWords customers were getting a raw deal. But if the deal was so bad, why did they agree to it in the first place? Blogger Jordan Glogau of Adotas has a new theory that alleges that the advertisers’ lawyers were given a sour-sounding ultimatum – settle or watch the case get dismissed.

As Glogau accurately notes in his post, Google is currently the King of Click Fraud lawsuits, with three suits pending. Currently on the books for Google: the Lane’s Gift case that was filed in Arkansas, the now-paused Click Defense/AIT case and the recently filed Kinney vs. Lane case.

Let’s rewind. For those just joining us, a class-action lawsuit was brought against Google in February of 2005 that alleged Google had charged advertisers billions of dollars in fraudulent clicks. However, regardless of how much evidence advertisers may or may not have had to prove the fraudulent clicks, it may not have mattered. Google’s Terms and Condition states that in order for a suit to be valid, it must be filed in California. Section 17 of Google’s Terms and Conditions clearly states;

“This Agreement shall be governed by the laws of California , except for its conflicts of laws principles. Any dispute or claim arising out of or in connection with this Agreement shall be adjudicated in Santa Clara County, California.”

This case was filed in Arkansas. Bringing a case in the wrong state, regardless of the evidence, usually means the case will be automatically dismissed.

So when the case went forward in Arkansas, it did so under the very likely possibility that it would be dismissed due to wrong venue grounds. Google knew this. And allegedly, Google made sure the plaintiffs’ lawyers knew this as well. According to Glogau, Google used this knowledge to strong arm Lane and his lawyers into accepting a $90 million settlement that was, at best, insulting to advertisers.

Jump ahead to May 2006, when Kinney and his lawyers filed to have the proposed $90 million settlement overturned. Kinney argues that Lane agreed to a bad settlement and that his acceptance does not represent the wishes of the rest of Google’s advertisers. Kinney is asking the courts to void the settlement.
If the court does agree to block the proposed settlement, the case would be free to either go to trial or reopen settlement negotiations. The controversy has caused the pending AIT lawsuit, properly filed in San Jose last year, to be put on hold awaiting the outcome of the Arkansas case.

Of course, this is all speculation. We don’t know enough to say what is true and what isn’t. Google, of course, denies the claim and says Kinney’s lawyers are trying to ‘circumvent the normal class action process’. We reiterate — this is all speculation — but it makes you wonder.

Why would Lane and his lawyers agree to a settlement that gives advertisers less than $.50 for every dollar lost, allows Google to be the judge and jury when deciding if a claim is legitimate, gives AdWords ‘credit’ instead of cash as a refund and includes no guarantee that Google will improve their ability to fight click fraud in the future? Why would someone agree to that so freely if they didn’t fear the case was on the verge of dismissal? The only group who benefited from this deal was Google, and perhaps the lawyers who got to split $30 million among themselves. The conspiracy theory makes sense. And that makes it dangerous.

If true, the big losers in this case are the advertisers, and in a much grander scale than previously thought. The futures of their businesses were jeopardized when Google found a convenient loophole around a bigger problem. If Glogau’s claims are right, this has the power to be huge blow to Google’s AdWords, and an even bigger blow to Google’s Do No Evil mantra.

Also, if true, congratulations to Lane and his posse for effectively selling out the entire Internet marketing community. We hope you use your $50 in Google AdWords credits wisely. Assuming they judge you are worthy of receiving them in the first place.

What goes better with Mondays than a little conspiracy theory?

(via Andy Beal)

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