May 31, 2021 | 8 min reading time

Click fraud and invalid clicks are everywhere. And since digital advertisers are paying the price, click fraud lawsuits are just a natural consequence of this problem.

Mitigating the pervasiveness of click fraud will require both advertisers and corporations to act, and the good news is that a few major click fraud lawsuits have taken place in recent years as advertisers start fighting back against click fraud and holding large corporations accountable for the fraud taking place on their sites.

These lawsuits, brought against internet giants like Google and Facebook, are critical steps for progress in the fight for transparency and against click fraud. 

Is Click Fraud Real?

Unfortunately, click fraud is all too real. Digital marketers are increasingly at risk of becoming victims of click fraud even though they may not think so: According to Statista, the “estimated cost of digital ad fraud worldwide is expected to grow exponentially within the four years between 2018 and 2022, from 19 billion to 44 billion U.S. dollars.” 

Click fraud has been around for a long time and is becoming a commercial weapon in the digital economy, muddying the waters for online advertisers, marketers, and business owners.

As an online marketer or entrepreneur, knowing what schemes to look out for is half the battle. So, how exactly does click fraud work?

How Does Click Fraud Happen?

PPC fraud is an umbrella term that encompasses all the shady practices used to defraud you and your PPC advertising budget.

The most common type of PPC fraud is click fraud. Click fraud is when an individual, bot, or automated software repeatedly clicks on pay-per-click (PPC) ads. The clicking is done with no intention of using the advertised product or service; rather, the intent is to harm competitor ad budgets or boost publisher’s profits.

If a company hasn’t set up protections against click fraud, competitors can continually click on pay-per-click ads until the PPC daily budget is depleted, preventing real customers from viewing them. Actually, nearly 50% of all internet traffic stems from bots, and many of them are out to hurt your PPC campaigns.

Click fraud can be carried out on a massive scale through click farms, which are made up of large groups of people paid to click on ads or social media posts all day. They usually exist in developing countries and operate through the labor of vulnerable, low-paid workers. Other types of click fraud include viewbotting, fake streaming, ad injection, and click spamming (you can check out our other resource on click fraud schemes to look out for).

Why does click fraud happen so much? It’s lucrative. An individual ad fraudster can expect to make around $5-20 million per year. With ad fraud rings or corporations making multiples of that, ad fraud is more profitable than drugs and is estimated to be as much as $42 billion.

Ever heard of DrainerBot or Methbot? 

DrainerBot was a massive mobile ad fraud operation affecting millions of Android users. According to the technology company Oracle, the bot used infected code to download invisible video ads on Android devices and click on ads. The infected apps used tons of data and cost smartphone owners hundreds in overage charges. Methbot was an international cybercriminal ring traced to Russia and operating out of data centers in the U.S. and Netherlands making between $3 million and $5 million per day using bots to target the video advertising industry and fraudulently rake in ad revenue. 

Crazy, right?

Setting up protection for your business as an entrepreneur or marketer is necessary, but click fraud affects digital giants like Spotify, Twitch, Facebook, Google, and everyone who uses them. What else is being done to combat this pervasive issue and protect advertisers being defrauded? 

Below are a few major click fraud lawsuit cases that demonstrate how serious the problem is and how small businesses and advertisers are fighting back.  

Famous Click Fraud Lawsuit Stories All Advertisers Should Know About

Lane’s Gifts and Collectibles vs. Google

In 2006, 70 plaintiffs asserted that Google had misled advertisers about the steps it would take against fraudsters and that the search engine platform hadn’t done enough to combat fraud schemes. The class action lawsuit, filed by Lane’s Gifts and Collectibles, also claimed that Google had billed advertisers for invalid clicks on their ads, hurting their businesses and resulting in major losses.

Google settled the click fraud case for $90 million. $30 million went to lawyers, and the internet search giant provided the remaining $60 million in advertising credits. The credits equaled a $4.50 refund on every $1,000 spent in its advertising network over the past four years. Advertisers were able to apply for reimbursement on clicks they believed were invalid.

When the case was wrapping up, Google published a statement on their blog:

“We have said for some time that we believe we manage the problem of invalid clicks very well… And for the clicks that are not caught in advance, advertisers can notify Google and ask for reimbursement. We investigate those clicks, and if we determine they were invalid, we reimburse advertisers for them. We will continue to do that, and believe that this settlement is further proof of our willingness to work together with advertisers to reimburse invalid clicks.”

But in 2017, Google was in the hot seat again. This time it was a company called AdTrader that filed a lawsuit, alleging that Google had not provided refunds to select advertisers after fraud was discovered. Google had agreed to repay its platform fee, but AdTrader claimed that Google’s support team acknowledged that they “never had a system in place for such refunds.” 

What message does this send to advertisers? For one, protecting your advertising business from fraud should be at the forefront of your mind. And it’s important to see companies standing up against click fraud. Awareness is critical, especially when large corporations like Google are involved. 

Investor Village vs. Facebook

In 2018 the small business Investor Village filed a lawsuit against Facebook claiming that the social media company was inflating metrics to boost ad revenue, deceiving small businesses about the “potential reach” of the ads they pay for.

According to Pennsylvania television station YourErie, 62 percent of small business owners in the U.S. believed the Facebook ads they bought were missing their targets. YourErie published the following quote from Seth Lesser, co-lead plaintiffs’ attorney and Partner at the firm Klafter Olsen & Lesser LLP.

“Facebook is deceiving small businesses nationwide and profiting in the process…It seems clear that Facebook puts its own financial interests ahead of those of its advertisers, and so on behalf of countless businesses that rely on targeted advertising, we are seeking to hold the company accountable for its deception.”

Facebook argued that targeting accuracy can never be one hundred percent, but the metrics are relied upon by advertisers who use the platform to reach customers, and Facebook’s overestimation was apparently acknowledged internally but ignored. 

Motogolf.com vs. Top Shelf

Another interesting click fraud case involves two sporting goods competitors. Motogolf.com filed a lawsuit claiming that Top Shelf was repeatedly clicking Motogolf.com’s ads, running up their PPC expenses. Since the ads would stop appearing to customers if they had reached a maximum number of clicks per day, Motogolf also claimed that Top Shelf was preventing them from reaching potential customers.  

The claims were dismissed in part, but a judge determined that the defendant, Top Shelf, intentionally interfered within the business relationship through unlawful or wrongful means.

This stuff is serious.  

Conclusion

The $90 million click fraud lawsuit involving Google was a massive win in the fight against this digitized ad-budget weapon. Click fraud needs to be taken seriously and holding large corporations accountable is essential if advertisers are to make headway against it.  

Since Google makes money from clicks whether they are fraudulent or not, some advertisers believe that Google doesn’t have enough skin in the game, so to speak, meaning it doesn’t have the necessary incentive to truly take a stand and shut down click fraud.

But advertising accounts for the majority of Google’s revenue, so making sure that advertisers are operating on a transparent and fair platform is in their best interest. Click fraud lawsuits like this one demonstrate to all players involved that the issue won’t be taken lightly. Knowing that companies are banding together to fight click fraud is heartening.  

On a more individual level, you can protect your business by using an anti-click fraud protection program. A trusted anti-fraud partner like ClickGUARD will wipe out fraudulent activity in the form of fake clicks by monitoring and blocking click fraud threats and protecting your PPC ad campaigns.

Eliminating digital fraud entirely is impossible – as long as we do business online, there will be fraudsters and cybercriminals conspiring and coming up with new ways to exploit our businesses and attack our budgets. But with awareness and the right tools we can protect our businesses and work to thwart click fraud. 

ClickGUARD’s story started off with click fraud and wasted ad budgets. Today, our product makes it easier for Google Ads marketers to spot and eliminate not only click fraud, but also all sorts of invalid clicks, to optimize their ads and generate more ROAS. Click here if you want to learn more about what we do 😉.

Jason is the CMO @ ClickGUARD. He is passionate about all things PPC, SEO and has extensive customer acquisition experience. When not writing about SEM he can be found surfing the wildest ocean waves of the South American coast.