May 15, 2006

There are now a total of at least three interrelated click fraud lawsuits that will impact Google in 2006.

First, there is the case that got filed in Arkansas, Lane’s Gifts late last year. The second lawsuit is AIT, a case that got filed in California. Third there is the most recent case, Kinney vs. Lane.

This 3rd case is quite a kicker: it’s a suit against the plaintiffs that filed the first lawsuit in Arkansas.

The suit claims that they aren’t fairly representing all the Google advertisers and that the settlement the plaintiffs agreed to is just simply a bad deal.

Let’s start with the first suit: Lane’s Gifts. When the case began, both Google and Yahoo argued that the case should be dismissed because it was in the wrong venue, which means the suit was brought in the wrong location.

If you look at your Google contract, it likely says that you have to sue them in California, and no other location. To quote the Terms and Conditions, it says the contract is “governed by California law . . . and adjudicated in Santa Clara County, California.” Bringing a case in the wrong venue when the contract specifies the venue usually means the case automatically gets dismissed.

But this first case in Arkansas went forward while a motion to dismiss the case, based on the venue provision, was getting scheduled. Someplace midstream, Google and the lawyers for Lane came to terms. There’s nothing a judge likes better then when the two parties come to terms; it’s off his docket. But these are the terms of the settlement:

1. Based on the amount of money that Google has made over the last 4 years with AdWords, the settlement comes down to less then ½ cent on the dollar. What this really means is that the small advertiser has almost no chance at some sort of reasonable recovery. It simply isn’t worth the effort.

2. If you decide to apply for a fraud refund guess, who gets to decides if the claim is legitimate? Google is the final judge and jury.

3. If Google decides that you merit a refund, it isn’t for cash. You get a credit against your future ad spend. That’s good; it will partially cover future click fraud which most experts put in the 14 to 30 percent range.

4. It brings us up the last point, which is that there is no guarantee that Google will help stop click fraud moving into the future. Welcome back to court because you’re not getting any relief.

So why did Google change its mind and decide to settle in Arkansas?

That is simple, the terms are totally one-sided in Google’s favor. Because Google was about to have the case against it dismissed based on the fact that it was in the wrong venue, it forced Lane’s Gifts’ lawyers into a bad deal.

Google’s lawyers figured they could give a small amount of cash to these lawyers and limited refunds to the advertisers.

If you’re saying to yourself that 30 million dollars is a lot of money, it is–for the lawyers.

But where does that leave the advertisers, who had billions of dollars in possible losses and will continue to have them moving into the future?

Source: Adotas