Google click fraud settlement given go-ahead

Arkansas judge rejects a challenge claiming that a $90 million settlement with affected advertisers is inadequate.

An Arkansas judge has given final approval to a $90 million settlement Google reached to settle a click fraud lawsuit, rejecting arguments by opposing attorneys that the amount was not adequate compensation for advertisers that had been charged for fraudulent clicks on online ads.

In an order signed Wednesday but released on Thursday, Miller County Circuit Court Judge Joe Griffin said he found that the settlement was "fair, reasonable and adequate," and overruled the objections.

"The court finds that approval of the stipulation and the proposed settlement embodied therein will result in substantial savings in time and resources to the court and the litigants, and will further the interests of justice," he wrote.

The ruling comes after an submitted an independent report concluding that Google's efforts against click fraud on its pay-per-click ad system were "reasonable." Alexander Tuzhilin, a professor of information systems at New York University, filed his report in a court in Arkansas last Friday. A hearing on the case was held on Monday.

"We're pleased Judge Griffin has affirmed the settlement as appropriate and fair to advertisers," said Nicole Wong, associate general counsel at Google. "We look forward to continuing to manage invalid clicks effectively and provide our advertisers with an outstanding return on their investment."

Attorneys for the original plaintiffs did not return calls seeking comment. An attorney who was challenging the settlement, who is involved in other click fraud litigation against Google, said he was disappointed with the ruling, but not surprised.

"We plan to file an appeal and continue to object to this settlement," said Brian Kabateck. As of July 19, about 7,000 claims had been filed for a total of $250,000 to be paid to claimants, he said.

Click fraud typically occurs when Web site publishers click on ads on their site to boost their own revenue or when companies click on rivals' ads in an effort to deplete their advertising budgets and acquire the keywords themselves.

The Arkansas litigation started when Lane's Gifts & Collectibles and Caulfield Investigations sued Google and other search engines in February 2005, for clicks on online advertisements that were fraudulent or done in bad faith.

Under in May, saying affected advertisers deserved more than a half of a percent on their losses and should be paid in cash, not credit.

The settlement doesn't mean that the problem of click fraud will go away, some experts have said , and there have been calls for an independent auditor to monitor click fraud at all the major search engines. The Search Engine Marketing Professional Organization has teamed up with Fair Isaac, an independent company that tracks credit card fraud, and its effects on the search engine advertising industry.

Industry estimates of the click fraud rate range from about 14 percent to as high as 30 percent, but true figures have been difficult to reach because Google and other search engines have refused to provide click fraud data, citing competitive reasons. Search engines, meanwhile, have complained that third-party providers of anti-click fraud services and software inflate the rates to drum up business.

On Tuesday, Google announced enhancements to its AdWords system that will enable advertisers to see the number of invalid clicks on their purchased keywords and the percentage of the total those represent.

Meanwhile, a hearing in federal court in San Jose, Calif., was scheduled for Thursday morning on a proposed settlement in a separate click fraud lawsuit involving Yahoo.

The settlement between Yahoo and Checkmate Strategic Group, given preliminary court approval last month, provides for nearly $5 million in attorneys fees to be paid by Yahoo, one-sixth the amount Google has agreed to pay attorneys in the Arkansas settlement.

A group of plaintiff lawyers from the Arkansas lawsuit are contesting the Yahoo settlement, arguing that Yahoo was not mediating in the Arkansas lawsuit in good faith when it was settling the case in California. The Yahoo settlement would release the company from all similar click fraud claims against it in other actions, including the Arkansas litigation, according to paperwork Yahoo filed with the court.

Yahoo's settlement is better for affected advertisers because it would give full credits to them from 2004 to the present, company lawyers wrote in a motion to ask the California court to prevent the Arkansas court from interfering with the settlement.

 

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