CNET is reporting that, while Google joined with the White House and other companies in forming a non-profit to combat illegal online pharmacies, the company was under investigation by the Department of Justice for accepting advertising dollars from those same entities.
Last week, Google's 10-Q disclosed a $500 million charge "in connection with a potential resolution of an investigation by the U.S. Department of Justice into the use of Google advertising by certain advertisers." The amount of this potential fine is of a magnitude rarely seen.
Google has certainly profited from selling advertisements to rogue pharmacies, but that's just one of many areas where Google sells unlawful advertisements. While others focus on the sexier questions of 'who knew what and when', I thought it would be helpful to provide background on six other areas where I've also seen widespread unlawful AdWords advertisements:
- Advertisements charging for something that's actually free. I've documented scores of AdWords advertisements that attempt to trick users into paying for software that's widely available for free -- charging for RealPlayer, Skype, WinZip, and more.
- Advertisements promising "free" service but actually imposing a charge. I have also flagged dozens of advertisements promising "100 percent complimentary" "free" "no obligation" service that actually comes with a monthly charge, typically $9.99/month or more. Promising "free" ringtones, these services rarely ask users for their credit card numbers. Instead, they post charges directly to users' credit card bills -- combining carrier-direct billing with deceptive advertising claims in order to further the deception.
- Copyright infringement -- advertisements touting tools for infringing audio and video downloads. For example, in 2007 media companies uncovered Google selling advertisements to various download services, typically Bittorrent clients. These programs helped users download movies without permission from the corresponding rights-holders -- a double-whammy to copyright holders: Not only do labels, studios, artists, and filmmakers get no share of users' payments, but users' payments flow to those making tools to facilitate infringement.
- Copyright infringement -- advertisements touting counterfeit software. For example, Rosetta Stone in six months notified Google of more than 200 instances in which AdWords advertisers offered counterfeit Rosetta Stone software.
- Advertisements for programs that bundle spyware/adware. At the peak of the spyware and adware mess a few years back, distributors of unsavory software used AdWords to distribute their wares. For example, a user searching for "screensavers" would receive a mix of advertisements -- some promoting software that worked as advertised; others bundling screensavers with advertising and/or tracking software, with or without disclosure.
- Mortgage modification offers. Consumers seeking for mortgage modifications often receive AdWords advertisements making deceptive claims. A recent Consumer Watchdog study found AdWords advertisers falsely claiming to be affiliated with the U.S. government, requiring consumers to buy credit reports before receiving advice or help (yielding immediate referral fees to the corresponding sites), and even presenting fake certification logos. One prominent AdWords advertiser had previously faced FTC litigation for telemarketing fraud, while another faced FTC litigation for falsely presenting itself as affiliated with the U.S. government. Other advertisers suffered unsatisfactory BBB ratings, and some advertisers falsely claimed to have 501(c)(3) non-profit status.
Google's Revenue from Deceptive Advertisements
Google does not report its revenues for specific sectors, so it is generally difficult to know how much money Google receives from particular categories of unlawful advertisements or from particular unlawful practices. That said, in some instances such information nonetheless becomes available.
When AdWords advertisements deliver users into unlawful sites, the majority of the profits flow to Google, not advertisers. Consider a keyword for which several advertisers present similar unlawful offers. The advertisers bid against each other in Google's auction-style advertising sales process -- quickly bidding the price to a level where none of them can justify higher payments. If the advertisers are similar, they end up bidding away most of their profits, and Google collects most of the advertisers' revenue.
In 2006 I ran an auction simulation wherein I found that advertisers, on average, paid 71 percent of their revenue to Google. Drawing on litigation documents, the WSJ reports similar values: EasyDownloadCenter and TheDownloadCenter collected $1.1 million in revenue from users, but they paid $809,000 (74 percent) to Google for AdWords advertising.
I've been writing about Google's unlawful ads since 2006. Since then, Google's revenue and profit have more than doubled. But Google's users aren't twice as safe -- quite the contrary, deceptive and unlawful advertisements remain all too widespread. Kudos to the Department of Justice for holding Google accountable for unlawful pharmacy advertisements -- but there's ample more work to be done in light of Google's other unlawful advertisements.