I’m uniquely qualified to comment on today’s announcement that Google will pay up to $90 million to settle a class action lawsuit against click fraud. After all, I am a search engine marketer who has repeatedly submitted click fraud claims, I have a JD, and I worked for a class action law firm.

And based on these experiences, I can tell you that this so-called settlement is nothing but bad news for you and me. Here’s why.

1. Google Isn’t Obligated to Pay Anyone, Anything
Read the announcement carefully and you’ll note that Google has agreed to pay “up to and no more than” $90 million to settle click fraud claims from 2002 to present. As noted on Google’s blog: “For all eligible invalid clicks, we will offer credits which can be used to purchase new advertising with Google.” So, this isn’t a cash payment, it’s limited to $90 million, and it only applies to “eligible invalid clicks.” What does “eligible” mean? Read on.

2. The Definition of “Click Fraud” Remains a Black Box Defined by Google
As has always been the case – and as will continue after this settlement – the definition of click fraud remains a closely-guarded secret inside Google. Google – and only Google – determines whether your clicks were fraudulent. They are not obligated to provide an explanation of their reasoning (and generally do not) and their decision is final. This settlement doesn’t change that. So anyone who previously submitted a click fraud claim and was rejected will likely get rejected again, meaning that virtually no one will actually receive a credit from this lawsuit.

3. Advertisers Basically Have No Choice But to Accept the Settlement
One of the downsides of class actions for consumers is that it enables companies to “freeze” future claims. In other words, if the judge approves the settlement, you have two choices: accept the terms of the settlement, or “opt out” of the agreement and pursue action against the defendant independently. Since the average consumer (or small business) can’t afford to pursue action independently, you essentially have no choice but to accept the settlement. So few companies will actually get any money by opting-in to the settlement and even fewer will have the legal resources to opt-out. A win-win . . . for Google.

4. Class Action Suits Mostly Benefit Lawyers
So why would the plaintiff make such a bad settlement? Again, read the fine print: “We do not know how many will apply and receive credits, but under the agreement, the total amount of credits, plus attorneys fees, will not exceed $90 million.” Ah, attorneys fees. Lawyers who file successful class action lawsuits usually get a huge payment as part of the negotiation. The payment includes the cost of their attorneys’ time, as well as a lump sum of pure profit. My guess is that a $90 million lawsuit will probably return at least $1-2 million to the law firm that filed the suit.

So let’s review: this suit doesn’t obligate Google to do anything, leaves the determination of click fraud up to Google, is unlikely to result in any new settlements, puts the onus on the marketer to recover any money, precludes further lawsuits, and only financially benefits the lawyers filing the suit.

Click fraud? Try lawsuit fraud!

Tags: click fraud, adwords, google, SEM


  1. Anonymous March 8th, 2006

    My general feeling is that CPC is a poor business model. It surprises me that as smart as the Google engineers are, they did not realize the potential for click fraud early out and take steps to at least limit advertisers’ exposure to it before rolling out their CPC services. Anyway, I agree with you that this lawsuit benefits Google (and the lawyers) more than the plaintiffs, and leaves many questions about click fraud unanswered.

  2. Advolution March 9th, 2006

    Time for an Advolution?

    Advertisers may wish to consider moving some of their ad budget to Advolution (“the benefits of pay-per-click, but without the actual pay-per-click” – and thus no click fraud) http://www.advolution.com

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David Rodnitzky
David Rodnitzky is founder and CEO of 3Q Digital (formerly PPC Associates), a position he has held since the Company's inception in 2008. Prior to 3Q Digital, he held senior marketing roles at several Internet companies, including Rentals.com (2000-2001), FindLaw (2001-2004), Adteractive (2004-2006), and Mercantila (2007-2008). David currently serves on advisory boards for several companies, including Marin Software, MediaBoost, Mediacause, and a stealth travel start-up. David is a regular speaker at major digital marketing conferences and has contributed to numerous influential publications, including Venture Capital Journal, CNN Radio, Newsweek, Advertising Age, and NPR's Marketplace. David has a B.A. with honors from the University of Chicago and a J.D. with honors from the University of Iowa. In his spare time, David enjoys salmon fishing, hiking, spending time with his family, and watching the Iowa Hawkeyes, not necessarily in that order.