Net News

Google Sued Over 'Click Fraud' in Web Ads

A seller of online marketing tools recently sued Google Inc., charging that the Web search behemoth failed to protect users of its advertising program from “click fraud,” costing them at least $5 million.

Click Defense Inc. filed its lawsuit, which also seeks class action status, on June 24 in U.S. District Court in San Jose, CA.

Click fraud is not “fraud” as defined under the law. Rather, it is an industry term used to describe the deliberate clicking on Web search ads by users with no plans to do business with the advertiser. Rival companies might employ people or machines to do this because the advertiser has to pay the Web search provider for each click.

Users of Google's popular Web search advertising program pay a set amount for each click ' varying from pennies to well over $1, though in rare instances, the payment is as much as $95.

Click fraud can run up thousands of dollars in advertiser costs or benefit a Web site operator that gets a cut of advertising revenue from Internet search providers.

“We believe the suit is without merit and we will defend ourselves against it vigorously,” a Google spokesman says.

Google, which had first-quarter net revenue of $1.3 billion, makes virtually all of its money from search ads.

The company, whose stock has topped $300 after debuting at $85 last August, has previously said that click fraud is not material to its results and that it has technology and teams working to prevent it.

Google and its top rival, Yahoo Inc., have declined to say what percentage of clicks would fall under click fraud. The figure most cited by independent firms that track the practice is around 20%.

Google and Yahoo, which is not named in the lawsuit, let advertisers set per-click pricing by allowing them to bid on key words that launch ads when Web users enter matching search queries.

For example, when Web users type “laptop computer” into Google.com, they will see search results as well as a section of ads from laptop makers or sellers.

Google has said it credits advertisers who have fallen prey to click fraud, but Click Defense charges that the company has not done enough to warn advertisers about the risks it presents or to protect them against it.

Computer security and software companies are urging the U.S. Senate to approve the world's first treaty targeting cybercrime.

A letter from the groups, including the Business Software Alliance, VeriSign, InfraGard and the Cyber Security Industry Alliance, called on senators to ratify the controversial document, which was the subject of a brief flurry of attention last year before it expired without a floor vote.

“The cybercrime convention will serve as an important tool in the global fight against those who seek to disrupt computer networks, misuse private or sensitive information, or commit traditional crimes utilizing Internet-enabled technologies,” said the letter. “It requires countries to adopt similar criminal laws against hacking, infringements of copyrights, computer-facilitated fraud, child pornography and other illicit cyberactivities.”

Because U.S. law already includes much of what the convention requires, the Senate's vote would largely be symbolic. The treaty requires nations to adopt laws governing search and seizure of stored data, surreptitious Internet wiretapping, cross-border assistance, and retention of Internet provider records upon police demand.

The treaty also includes stiff copyright-related penalties. It says participating nations must enact criminal laws targeting Internet piracy and circumvention devices ' a measure akin to the Digital Millennium Copyright Act ' when acts “are committed willfully, on a commercial scale and by means of a computer system.”

Another section requires participating nations to outlaw the act of “making available” on the Internet any type of hardware or software that is designed for the purposes of committing a long list of computer crimes including “illegal interception” or “data interference.” In some cases, even the mere possession of such hardware or software must be criminalized.

Those far-reaching prohibitions have caused alarm among civil liberties groups.

The Electronic Privacy Information Center sent a letter to the Senate Foreign Relations Committee last year saying the treaty should not be ratified because it “would create invasive investigative techniques while failing to provide meaningful privacy and civil liberties safeguards.”

The Canadian government has already suggested that the cybercrime treaty, drafted by the Council of Europe, require Internet providers to rewire their networks for easy surveillance by police and spy agencies.

So far, the treaty has been ratified by 11 nations, including Denmark, Hungary, Romania and Bulgaria. President Bush has called on the Senate to follow suit.

An addition to the treaty would require nations to imprison anyone guilty of “insulting publicly, through a computer system” certain groups of people based on characteristics such as race or ethnic origin, a requirement that could make it a crime to e-mail ethnic jokes.

The U.S. Department of Justice has said that it would be unconstitutional for the United States to sign that addition because of the First Amendment's guarantee of freedom of expression. Because of that objection, the Senate is not considering the addition, but other nations ratifying the treaty are expected to adopt both documents.

The European Commission proposed a single Europe-wide copyright and licensing system for online music last month, aimed at boosting the European Union's music business.

EU Internal Market Commissioner Charlie McCreevy says European online services have to be improved to make copyrights cheaper for artists to obtain.

“We have to improve the licensing of music copyright on the Internet,” McCreevy says, adding that such a system would ensure “Europe's creative community will get the lion's share in revenues achieved online.”

Currently, artists have to secure copyrights in each of the EU's 25 member nations, with each country requiring separate copyrights for the right to transmit songs over the Internet ' a complex and expensive process, the EU head office says.

As a result of these costs, online music sales in Europe have lagged behind those in the United States. Last year, the U.S. had an estimated $248 million in online music sales compared with Europe's 27.2 million euros ($32.5 million).

Musicians make money from their music after they register copyrights with collective rights managers. Those managers then license songs to online services, radio stations, dance clubs and other outlets. All these registrations are complex and costly for artists.

The EU head office says a single system governing music rights would save money.

“The most effective model for achieving this is to enable right-holders to authorize a collecting society of their choice to manage their works across the entire EU,” the commission says, adding that such a system would “considerably enhance” earnings for artists.

Google Sued Over 'Click Fraud' in Web Ads

A seller of online marketing tools recently sued Google Inc., charging that the Web search behemoth failed to protect users of its advertising program from “click fraud,” costing them at least $5 million.

Click Defense Inc. filed its lawsuit, which also seeks class action status, on June 24 in U.S. District Court in San Jose, CA.

Click fraud is not “fraud” as defined under the law. Rather, it is an industry term used to describe the deliberate clicking on Web search ads by users with no plans to do business with the advertiser. Rival companies might employ people or machines to do this because the advertiser has to pay the Web search provider for each click.

Users of Google's popular Web search advertising program pay a set amount for each click ' varying from pennies to well over $1, though in rare instances, the payment is as much as $95.

Click fraud can run up thousands of dollars in advertiser costs or benefit a Web site operator that gets a cut of advertising revenue from Internet search providers.

“We believe the suit is without merit and we will defend ourselves against it vigorously,” a Google spokesman says.

Google, which had first-quarter net revenue of $1.3 billion, makes virtually all of its money from search ads.

The company, whose stock has topped $300 after debuting at $85 last August, has previously said that click fraud is not material to its results and that it has technology and teams working to prevent it.

Google and its top rival, Yahoo Inc., have declined to say what percentage of clicks would fall under click fraud. The figure most cited by independent firms that track the practice is around 20%.

Google and Yahoo, which is not named in the lawsuit, let advertisers set per-click pricing by allowing them to bid on key words that launch ads when Web users enter matching search queries.

For example, when Web users type “laptop computer” into Google.com, they will see search results as well as a section of ads from laptop makers or sellers.

Google has said it credits advertisers who have fallen prey to click fraud, but Click Defense charges that the company has not done enough to warn advertisers about the risks it presents or to protect them against it.

Computer security and software companies are urging the U.S. Senate to approve the world's first treaty targeting cybercrime.

A letter from the groups, including the Business Software Alliance, VeriSign, InfraGard and the Cyber Security Industry Alliance, called on senators to ratify the controversial document, which was the subject of a brief flurry of attention last year before it expired without a floor vote.

“The cybercrime convention will serve as an important tool in the global fight against those who seek to disrupt computer networks, misuse private or sensitive information, or commit traditional crimes utilizing Internet-enabled technologies,” said the letter. “It requires countries to adopt similar criminal laws against hacking, infringements of copyrights, computer-facilitated fraud, child pornography and other illicit cyberactivities.”

Because U.S. law already includes much of what the convention requires, the Senate's vote would largely be symbolic. The treaty requires nations to adopt laws governing search and seizure of stored data, surreptitious Internet wiretapping, cross-border assistance, and retention of Internet provider records upon police demand.

The treaty also includes stiff copyright-related penalties. It says participating nations must enact criminal laws targeting Internet piracy and circumvention devices ' a measure akin to the Digital Millennium Copyright Act ' when acts “are committed willfully, on a commercial scale and by means of a computer system.”

Another section requires participating nations to outlaw the act of “making available” on the Internet any type of hardware or software that is designed for the purposes of committing a long list of computer crimes including “illegal interception” or “data interference.” In some cases, even the mere possession of such hardware or software must be criminalized.

Those far-reaching prohibitions have caused alarm among civil liberties groups.

The Electronic Privacy Information Center sent a letter to the Senate Foreign Relations Committee last year saying the treaty should not be ratified because it “would create invasive investigative techniques while failing to provide meaningful privacy and civil liberties safeguards.”

The Canadian government has already suggested that the cybercrime treaty, drafted by the Council of Europe, require Internet providers to rewire their networks for easy surveillance by police and spy agencies.

So far, the treaty has been ratified by 11 nations, including Denmark, Hungary, Romania and Bulgaria. President Bush has called on the Senate to follow suit.

An addition to the treaty would require nations to imprison anyone guilty of “insulting publicly, through a computer system” certain groups of people based on characteristics such as race or ethnic origin, a requirement that could make it a crime to e-mail ethnic jokes.

The U.S. Department of Justice has said that it would be unconstitutional for the United States to sign that addition because of the First Amendment's guarantee of freedom of expression. Because of that objection, the Senate is not considering the addition, but other nations ratifying the treaty are expected to adopt both documents.

The European Commission proposed a single Europe-wide copyright and licensing system for online music last month, aimed at boosting the European Union's music business.

EU Internal Market Commissioner Charlie McCreevy says European online services have to be improved to make copyrights cheaper for artists to obtain.

“We have to improve the licensing of music copyright on the Internet,” McCreevy says, adding that such a system would ensure “Europe's creative community will get the lion's share in revenues achieved online.”

Currently, artists have to secure copyrights in each of the EU's 25 member nations, with each country requiring separate copyrights for the right to transmit songs over the Internet ' a complex and expensive process, the EU head office says.

As a result of these costs, online music sales in Europe have lagged behind those in the United States. Last year, the U.S. had an estimated $248 million in online music sales compared with Europe's 27.2 million euros ($32.5 million).

Musicians make money from their music after they register copyrights with collective rights managers. Those managers then license songs to online services, radio stations, dance clubs and other outlets. All these registrations are complex and costly for artists.

The EU head office says a single system governing music rights would save money.

“The most effective model for achieving this is to enable right-holders to authorize a collecting society of their choice to manage their works across the entire EU,” the commission says, adding that such a system would “considerably enhance” earnings for artists.