Aussie small businesses consider legal action against Google over click fraud

Small businesses suspicious of click fraud are pursuing a legal battle with Google, against a backdrop of increasing concern by Australia’s consumer watchdog about Google’s dominance across the ad tech supply chain.

Mark Stanarevic, lawyer and advisor at Melbourne-based Matrix Legal, says he has been contacted by a number of small businesses that are worried Google is not doing enough to stop the use of fake clicks.

Click fraud, which occurs when advertisers are billed for invalid clicks, including clicks by competitors or bots that imitate genuine users, drive up the cost of pay-per-click ad campaigns without bringing advertisers potential sales.

“Some of these customers spent up to tens of thousands of dollars a month with Google and are concerned with the transparency of their platform and the algorithms being used,” Stanarevic tells SmartCompany.

It is estimated that Australian marketers lost $756 million last year due to invalid clicks on their paid search campaigns, according to a study by cyber security company CHEQ.

Led by Roberto Cavazos, a professor of economics at the University of Baltimore, CHEQ’s research found 18% — or nearly one-in-five — clicks on ads in Australia was invalid in 2020 due to competitor clicks or bots.

Stanarevic is closely watching a case that is playing out in the United States, where a federal appellate panel allowed the appeal of small business owner Gurminder Singh, who alleged Google’s AdWords misrepresented the effectiveness of its click-fraud detection system.

The decision, handed down by a panel of judges in the Ninth Circuit Court of Appeals in September last year, allowed the small business owner to proceed with a lawsuit that he brought against Google in 2016.

In that lawsuit, Singh alleged Google had violated California state laws on unfair competition and false advertising, after noticing his ads were being manipulated despite Google’s promise to protect consumers from fraudulent clicks.

“We will be keeping an eye on this case as it progresses to trial,” Stanarevic says.

“And [we] encourage any Australian businesses who feel they have been unfairly charged for invalid clicks from Google to reach out,” he adds.

A spokesperson of Google Australia told SmartCompany they were “unable to provide a statement on any potential legal action at this time”.

Google takes invalid activity very seriously and has an Ad Traffic Quality team, which works to stop all types of invalid traffic so advertisers do not have to pay for it, the spokesperson said.

Google’s dominance across the ad tech supply chain recently came under fire by Australia’s consumer watchdog, with a new report warning a lack of transparency and competition could affect prices.

The interim report from the Australian Competition and Consumer Commission’s (ACCC) digital advertising services inquiry released last Thursday found Google’s leading position is due to its presence across the ad tech supply chain and its ad targeting capability.

The report states that Google’s acquisitions of digital advertising providers and services — including YouTube, DoubleClick, AdMob and AdMeld — contribute to its dominance.

A major concern among participants in the inquiry was about the fees charged by ad tech companies.

While there is some publicly available information on the average level of fees and the amounts shared by different players across the supply chain, the report says fees can vary drastically by size and metric.

The ACCC will release the final report of its digital advertising services inquiry on August 31.