March 8, 2006

Google Agrees To Pay $90 Million in Click Fraud Lawsuit

SAN DIEGO -- Web search leader Google Inc. said on Wednesday it had agreed to pay up to $90 million to settle a class action lawsuit over advertising fraud by outside parties on its site, in a bid to put the controversy behind it.

The settlement stems from a lawsuit filed by Lane's Gifts earlier this year in an Arkansas state court and is designed to settle all outstanding claims against Google for fraud committed using its pay-per-click ad system back to 2002, it said.

The $90 million would involve legal fees and credits -- rather than any cash payments -- to all advertisers who apply to be part of the class settlement, once the judge certifies the agreement, Google spokesman Steve Langdon said.

The case covers all advertisers using Google's pay-per-click advertising system back to February 2002 through the date when the judge certifies the case. The final settlement hearing is expected to take place in coming weeks.

The vast majority of Google's revenues, or around 97 percent, are the result of pay-per-click ads, which critics say can be vulnerable to fraud.

Bearish analysts have harped on the threat of click fraud as the single greatest risk to Google's advertising-dependent business model, although the company has downplayed the risk, saying only a small percentage of search ads are fraudulent.


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