Click-fraud settlement approved

Lisa Napoli Jul 27, 2006

KAI RYSSDAL: About 5.5 million shares of Google traded hands today. Price was down half a percent or so. But there are still plenty of people willing to pay $383 for a piece of the company. All the more remarkable, really, when you consider that Google doesn’t sell much of anything. Except ads. Today, a judge in Arkansas approved a $90 million legal settlement against the company. Google’s trying to end a class action suit over some of those ads. Marketplace’s Lisa Napoli explains.

LISA NAPOLI: The casual Internet user may think Google’s all about search. Really it’s all about advertising. Advertising is the reason Google’s stock has soared to the stratosphere. And fraudulence related to advertising is the core of a class action suit against Google and other search companies.

People in the industry like Danny Sullivan of Search Engine Watch call it “click fraud.”

DANNY SULLIVAN: Click fraud is akin to a lot of people doing a lot of shoplifting.

Since advertisers pay search companies every time someone clicks on their ad, you can see why they wouldn’t want to pay for clicks that weren’t coming from authentic customers.

SULLIVAN: It could be a competitor that has clicked on an ad trying to drive up the cost for the people that they’re competing with, or it could be someone who is hosting these ads on their own website and is clicking in order to earn money off of those ads for themselves.

All this is why Google agreed to settle a class action suit filed against them by advertisers. Brian Bookholt works for a company that helps detect click fraud. He says the $90 million Google will pay is a pittance.

BRIAN BOOKHOLT: The amount of click fraud that is out there has been determined to be about 25 percent. The pay-per-click industry generated $4 billion worth of revenues a year ago. Twenty-five percent means $1 billion of click fraud.

Of course, who’s really getting rich in this lawsuit is the lawyers. They’ll get 30 million bucks — a third of the settlement — for their trouble.

In Los Angeles, I’m Lisa Napoli for Marketplace.

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