A class action lawsuit was filed in US District Court against Google alleging breach of contract, negligence, unjust enrichment, and unfair business practices-all involving charges of click fraud. Click Defense Inc, a click fraud protection firm, filed the suit in California in the name of an unknown number of plaintiffs for an amount not less than $5 million.

Did Google Turn A Blind Eye To Click Fraud?

Of course, one should always consider the plaintiff in any suit presented. The publicity gained through this type of action is worth its weight in gold–especially to a click fraud business whose bread and butter is identifying click fraud and getting money back for its clients.

Click fraud is the term used in the Internet search industry to describe the practice of clicking on search advertisements to run up the costs on advertisers.

Companies buy an advertisement through Google’s AdWords program, whereby certain keywords are purchased in order to appear in the sponsored links section of the search engine’s results page.

Advertisers bid upon the search terms with the top spot going to the top bidder. Once the advertisement is in place, advertisers pay a fee to the search engine each time the ad is clicked by a searcher.

Click fraud, estimated by some to be as high as 20% of all clicks, is caused by those with a vested interest using software that clicks on the ad hundreds or thousands of times to either drain the advertising budget of a rival company, or create revenue for the seller of the ad space.

Colorado-based Click Defense, a company that specializing in procuring rebates for advertisers, says the average cost per click is 50 cents, but prime search engine real estate can go for as much as $100. Disputing the 20% estimations, Click Defense alleges that click fraud on Google is as high as 38%.

The lawsuit claims that since 99% of Google’s revenue comes from advertising, Google has a huge financial interest in doing little about the instance of fraudulent clicks and criticizes the search giant for failure to disclose its own estimate of the number of fraudulent clicks.

The suit fall just short of accusing Google of physically performing the click fraud itself. The most visible allegation is the charge of negligence on the part of Google, claiming that Google isn’t doing enough to prevent the problem.

Click Defense argues that the same software Google uses to track the number of clicks on an advertisement and then bill advertisers could be used to investigate and identify instances of click fraud.

Google’s terms of use with AdWords promises a refund in any event of identifiable click fraud. According to Google’s 2005 Annual Report, click fraud is a major concern of the search engine.

“If we fail to detect click-through fraud, we could lose the confidence of our advertisers, thereby causing our business to suffer,” as stated in the report.

Google, who reported a first quarter net profit of $1.3 billion, is dismissing the claims of Click Defense.

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

It is important to note that Click Defense Inc. makes money by promising protection against click fraud and procuring refunds for client advertisers. The plaintiff in this lawsuit seems especially suspect considering the nature of the business it is in.

That Click Defense is accusing Google of having a financial interest in not detecting click fraud is a little bit funny as Click Defense has a definite financial interest in nailing Google for it.

A jury has been demanded to investigate the claims and they will ultimately decide, if the case goes to trial, whether there is sufficient evidence of the charges brought against Google.