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Posted by Nicole Wong, Associate General Counsel

You may remember that last February, Google was sued in Arkansas over what is commonly called click fraud. We’re very near a resolution in that case, so we thought we’d offer an update.

We’ve been discussing the case with the plaintiffs for some time and have recently come to an agreement with them which we believe is a good outcome for everyone involved. As a result, Google and the plaintiffs are going to ask the judge to approve the settlement, which would resolve the case.

Until the settlement is approved by the judge, it is not final. And the details are confidential, but will become public when it is formally filed for the judge’s consideration. However, we can share the major pieces of our proposed agreement.

Google currently allows advertisers to apply for reimbursement for clicks they believe are invalid. They can do this for clicks that happen during the 60 days prior to notifying Google. Under the agreement with the plaintiffs, we are going to open up that window for all advertisers, regardless of when the questionable clicks occurred. For all eligible invalid clicks, we will offer credits which can be used to purchase new advertising with Google. We do not know how many will apply and receive credits, but under the agreement, the total amount of credits, plus attorneys fees, will not exceed $90 million.

This agreement covers all advertisers who claim to have been charged but not reimbursed for invalid clicks dating from 2002 when we launched our “cost per click” advertising program through the date the settlement is approved by the judge.

For the finance folks out there wondering how we’ll account for this, we can say that the attorneys’ fees (which will be determined by the judge) will be charged as an expense, most likely in the first quarter, once the amount is determined. The credits will be recorded as a reduction to revenue in periods in which they are redeemed.

We have said for some time that we believe we manage the problem of invalid clicks very well. We have a large team of expert engineers and analysts devoted to it. By far, most invalid clicks are caught by our automatic filters and discarded *before* they reach an advertiser’s bill. 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.

You can find more information on invalid clicks and how we manage them here or here.

Update: Added second link to more information.