Google Slapped with Click Fraud Lawsuit
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The recently-announced lawsuit against Google by Click Defense threatens not just the search engine giant, but the entire revenue making model for most search engines. Is click fraud as pervasive as Click Defense claims? Or is there more to this story than meets the eye?
The nightmare has been brewing for at least a year, when you may have heard the first estimates of click fraud representing as much as 20 percent of the fees in some advertising categories. Click fraud, a fairly new term then, occurs when Web search pay-per-click ads are deliberately clicked by users who do not plan to do business with the company represented by the ad. Sometimes performed by software, sometimes by humans (some people are even paid by companies to perform the task), click fraud could cost a company many thousands of dollars before it realized what was happening. Yet click fraud is an industry term, not a legal term; it is not legally defined as “fraud.” But the lawsuit recently filed by Click Defense just might change that.
On June 24 in a U.S. District Court in San Jose, California, Click Defense filed a lawsuit against search engine giant Google. The company is seeking class action status for its suit. The filing, which runs to 18 pages, accuses Google of breach of contract, negligence, unjust enrichment, and unfair business practices. Click Defense believes that Google has not done enough to protect its advertisers from click fraud, or reimburse those who have suffered damages from it. Click Defense is seeking $5 million in damages.
If successful, this lawsuit stands to do far more damage to Google and other search engines than the loss of money. Given that Google’s net revenue for the first quarter was $1.3 billion, a mere $5 million, though noticeable, would register more as the cost of doing business. The problem is that the lawsuit attacks Google right in its main revenue stream – advertising. And if Google is vulnerable, why not all of the other search engines that make a significant amount of money from pay-per-click ads? That is a good question – but there may be more to this lawsuit than first meets the eye.
Next: A Closer Look >>
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