Google is under legal fire and is preparing to defend against a new lawsuit that paints AdSense in a criminal light. AdSense is the search engine giant’s platform that allows Web site publishers large and small to earn money by displaying targeted ads.
Google got hit with the suit, which alleges that the technology giant is involved in massive fraud by closing AdSense accounts right before they are scheduled to pay commissions, on Tuesday.
Given that AdSense makes up about 25 percent of Google’s annual revenue, this is no small accusation and could have large financial repercussions from a public relations front alone. In 2013 the online advertising drove a whopping $57.86 billion to Google’s top line.
Take the Money and Run?
According to the suit, Google’s AdSense program translates annually to billions of dollars payable to Web site operators that host its ads. The complaint claims that the contracts and terms of service Google requires Web publishers to sign are “unconscionably one-sided” and give Google free reign to embark on what the suit claims are “actions devoid of good faith or fair dealing.”
"Google's actions constitute breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and violation of the California Unfair Competition Law," said the filing with the U.S. District Court for the Northern District of California states. The law firm of Hagens Berman Sobol Shapiro filed the suit on behalf of Free Range Content, which owns Repost.us.
Free Range Content claims it saw a $40,000 rise in AdSense earnings last February. The company reportedly contacted Google to discuss the spike and had an appointment with an AdSense agent on March 6. Suddenly, the company claims, its account was closed and Google would not respond to pleas for communication.
“We have heard from Web publishers who tell us the same thing: Google cuts them off right before a payment is due, and stonewalls them when they object,” said Steve Berman, founding partner of Hagens Berman. “Google’s company motto is ‘Don’t be evil.’ Knowing what we know, I think they have a lot of work to do to be true to that goal.”
This is not just any lawsuit. Attorneys are seeking class action status, so AdSense users from coast to coast who feel their accounts were unfairly closed -- and claim Google owes them money for advertising that appeared on their sites -- can seek retribution from the giant.
Indeed, according to the complaint, given Google’s contractual terms purportedly permitting it to withhold payment to publishers with disabled accounts, and in light of the experience of the plaintiff, “the total of earned funds that Google has refused to pay its AdSense publishers could be enormous.”
“This wrongful practice has sparked numerous bitter complaints from Web site owners across the Web, with some reporting losses reaching thousands of dollars a pop,” said Berman. “What we believe to be true from our research is that Google’s practice is likely hurting thousands of Web site owners and operators who feel they have no way to fight a giant company like Google.”
Google was not immediately available for comment. But we caught up with Greg Sterling, principal analyst at Sterling Market Intelligence and a former attorney, to get his take on the suit. He told us these first allegations surfaced a couple of weeks ago.
“The belief was that they were made by a disgruntled publisher posing as a former Google employee,” Sterling said. “They sound far fetched but we'll need to see the factual evidence supporting the claims before any sense of their credibility can be determined.”