Google announced late Wednesday that it has reached a settlement with plaintiffs in one class-action lawsuit charging that the search engine giant has not policed its pay-per-click ad programs well enough to eliminate substantial fraud.

Under the terms of the proposed settlement in the case, Mountain View CA-based Google would set aside a pool of funds up to $90 million and would use that to credit any losses that advertisers in its pay-per-click program could show they had incurred from fraudulent clicks since Google began offering performance-based ads in 2002.

According to a post by Google associate general counsel Nicole Wong, the company reached this settlement in talks with the primary plaintiffs in the case, Lane’s Gifts and Collectibles of Texarkana AR and Fort Lauderdale FL-based Caulfield Investigations. The parties will now ask a state court judge to approve the agreement.

The parties filed their suit in April 2005, accusing the defendants of overcharging advertisers in their pay-per-click ad programs with clicks that did not come from legitimate sales prospects, and then knowingly concealing the extent of those overcharges. In May, attorneys representing the plaintiffs launched a Web site, LostClicks.com, which asked other advertisers who felt they had been victims of click fraud to join the suit.

The $90 million would be applied to all click-fraud claimants against Google, not just the two plaintiffs in this case. According to Wong’s post, “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…This agreement covers all advertisers who claim to have been charged but not reimbursed for invalid clicks dating from 2002.”

That comprehensive reach, and the fact that claimants would receive credits against their Google AdWords accounts and not cash reimbursements, appear to make the proposed settlement a very good deal for Google. Since the Lane’s Gifts case had been granted class-action status, participants would have to take action to opt out of any approved settlement in order to pursue their own claims against Google.

One unresolved question is how the proposed settlement would affect the other search companies named in the lawsuit, including Yahoo!, Lycos, AOL, Ask.com, LookSmart, Miva and Go.com. Ask.com and AOL were quoted in separate reports to say that since they syndicated pay-per-click ads from Google, they expected their liabilities would be covered by any settlement that Google reached.

Another open question is what effect a Google settlement in this case would have on other pending click-fraud suits against it. The company faces at least one other legal battle over allegations that it has profited improperly from bogus clicks: a suit filed in June 2005 in U.S. District Court in Northern California by Web analytics firm Click Defense. Last December, Web hosting firm Advanced Internet Technology applied to move into the lead plaintiff spot in that case. Attorneys for the plaintiffs in that suit would only say they are looking at the proposed Google settlement.

Advertiser complaints about click fraud have been around almost as long as the pay-per-click ad model itself, but the problem began getting widespread attention in December 2004, when Google chief financial officer George Reyes told an audience of investors that click fraud was “the biggest threat” at that time to the Internet economy as a whole and to Google’s business model in specific.

Click fraud can occur when an advertiser’s rivals click on its ads in order to deplete the marketer’s search advertising budget. Perhaps more commonly, Web operators often set up Web pages—often containing nothing but spam or useless content– and sign up to join the publishing networks of Yahoo!, Google and other sponsored-listing providers. The network leaders place pay-per-click ads on those Web pages, and the operators then reap a share of the payments advertisers make to the network. Some click-fraud artists of this type set up software to click their own ads automatically, mimicking the behavior of real Internet users.

Advertiser complaints about click fraud have been around almost as long as the pay-per-click ad model itself, but the problem began getting widespread attention in December 2004, when Google chief financial officer George Reyes told an audience of investors that click fraud was “the biggest threat” at that time to the Internet economy as a whole and to Google’s business model in specific.

Click fraud can occur when an advertiser’s rivals click on its ads in order to deplete the marketer’s search advertising budget. Perhaps more commonly, Web operators often set up Web pages—often containing nothing but spam or useless content– and sign up to join the publishing networks of Yahoo!, Google and other sponsored-listing providers. The network leaders place pay-per-click ads on those Web pages, and the operators then reap a share of the payments advertisers make to the network. Some click-fraud artists of this type set up software to click their own ads automatically, mimicking the behavior of real Internet users.

Google announced late Wednesday that it has reached a settlement with plaintiffs in one class-action lawsuit charging that the search engine giant has not policed its pay-per-click ad programs well enough to eliminate substantial fraud.

Under the terms of the proposed settlement in the case, Mountain View CA-based Google would set aside a pool of funds up to $90 million and would use that to credit any losses that advertisers in its pay-per-click program could show they had incurred from fraudulent clicks since Google began offering performance-based ads in 2002.

According to a post by Google associate general counsel Nicole Wong, the company reached this settlement in talks with the primary plaintiffs in the case, Lane