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A $500M Settlement Isn't the End of Google's Woes

If Google had been hoping it could put behind it the $500 million settlement with the Department of Justice over the illegal pharmaceutical ads its accepted from Canadian companies, it is mistaken. Most immediately, it is being sued by shareholders over the matter. In the court filing, they have cited Google’s breach of its fiduciary duty by facilitating illegal imports of prescription drugs and false annual reports from 2003 to 2009 that didn’t disclose revenue from this improper advertising, according to Bloomberg.

The bigger picture, though, may be more dire. The settlement, one of the largest of its kind, may have opened the door for more investigations, Boston.com says. “Many state attorneys general are probably now looking at Google very closely, wondering whether there are deceptive ads worth investigating and prosecuting,’’ said Ben Edelman, assistant professor at Harvard Business School told the publication. "Google could be sitting on billions of dollars of ill-gotten gains."

An Investigator’s Magnifying Glass

Google is under investigation in various venues for anti trust issues. However if Edelman’s speculation — and previous research — is correct, its online ad practices are also ripe for scrutiny as well. Edelman has made a career out of uncovering what he says is fraud at Google.

He conducted research that found Google profits from typosquatters - at the expense of online advertisers. The scheme is a simple one for the perpetrators: owners of such typosquatting sites place ads on them in the hopes that people who accidentally navigate there will click on them. The study estimated that Google earns about $500 million a year in such misplaced revenues, and that 57% of typo domains include Google pay-per-click ads.

Edelman also identified a new breed of click fraud that not only simulates clicks on a Google ad - but also seemingly generates a 'real' customer purchase on the advertiser's website. Much of the culpability for this fraud, Edelman said, can be attributed to a search engine that Google uses to broker ads.

He also unmasked sleigh-of-hand tactics used by websites to sell more advertising than they have space for. These publishers use so-called invisible ads created by computer codes. To marketers it appears that their ads are running on the actual website - but in fact they are on special sites created with deception in mind. Edelman said that Kraft Foods, Greyhound Lines and Capital One Financial were among the firms victimized.

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