Google to Refund Advertisers After Suit Over Fraud Scheme

Date : 05/17/2019 @ 6:42PM
Source : Dow Jones News
Stock : Alphabet Inc. (GOOGL)
Quote : 1138.61  -6.73 (-0.59%) @ 11:32PM

Google to Refund Advertisers After Suit Over Fraud Scheme

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By Patience Haggin 

Alphabet Inc.'s Google has agreed to refund advertisers for ads purchased through its ad marketplaces that ran on websites with fraudulent traffic, following a lawsuit claiming the tech giant was withholding those back-payments, according to court documents and people familiar with the situation.

In 2017, Google offered limited refunds to hundreds of marketers and ad agencies who had purchased online ad space through its online ad-buying tool after the company discovered a wide-ranging fraud scheme that resulted in ads running on sites whose traffic was artificially boosted by "bots," software programs that mimic the website clicks of humans.

At the time, Google offered to refund the "platform fee" for its ad-buying tool, Display & Video 360, which represented a fraction of the total cost of the ad purchases. Google said it wasn't in a position to return money that had already flowed from its buying tool to third-party online ad marketplaces where publishers were selling ad space.

But some ad executives weren't satisfied. The online ad company AdTrader Inc. sued Google in California federal court, arguing the tech giant wasn't fully refunding everything it could repay, since some of the fraudulent traffic went to ad marketplaces that Google itself owns and fully controls: AdX and AdSense.

In internal Google memos detailed in the court proceedings, portions of which were unsealed this week and reviewed by The Wall Street Journal, a Google engineer said the company didn't pay about $75 million of refunds linked to its own products. The engineer blamed technical difficulties related to the links between the different arms of Google's vast ad operation.

Google has offered to pay refunds linked to its own marketplaces. the people familiar with the situation said. The company said in a statement, "while we have had a longstanding policy of refunding advertisers for invalid traffic, we recently expanded this policy to include ads purchased via Display & Video 360."

The revelations highlight Google's unique role in the online ad world, where it is dominant in multiple areas. It is a major player in facilitating ad buying on behalf of marketers and agencies, but also operates powerful marketplaces that serve up ad space for sale across thousands of sites, receiving about 37.2% of digital ad spending in the U.S., according to eMarketer. Google dominance, including its role in online advertising, has become an issue of interest for regulators around the world and some candidates on the 2020 presidential campaign trail.

The complexity of online ad purchasing -- which includes layers of middlemen separate buyers and sellers -- makes it susceptible to fraud and very difficult for advertisers to recoup money wasted on sites with invalid traffic. Some $5.8 billion in ad spending will be wasted this year to fraud, according to a report released this month by the Association of National Advertisers.


(END) Dow Jones Newswires

May 17, 2019 13:27 ET (17:27 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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