A lawsuit filed in US court last week by ActiveCast Media against Google provides an inside glimpse at just how opaque and complex the world of online traffic acquisition ecosystem can be.
ActiveCast, a subsidiary of Web Integrated Net Solutions and headquartered in the British Virgin Islands, is suing Google for breach of contract, claiming the Internet giant is unlawfully withholding payment for traffic ActiveCast sent to Google advertisers as part of its contract agreement with Google DoubleClick AdExchange (AdX).
In June, Google flagged the account for invalid activity and retroactively put a hold on ActiveCasts’ payments totaling $1,029,852.26.
ActiveCast refutes Google’s claim, stating its “publisher clients purchased Web traffic from reputable companies such as CNN and Fox.” The court filing states that Google has not provided any evidence or account of what it’s claiming as invalid activity or that the company returned the costs to its advertisers for the purported invalid traffic.
All told, ActiveCast is suing Google for more than $1.3 million for breach of contract and loss of expected revenue during the contract period.
“Programmatic display buying is increasingly boiling down to two massive inventory pools: Google AdX, which aggregates inventory from its own sites and hundreds of thousands of publisher sites, and Facebook Exchange, which is 100% Facebook owned and operated inventory,” says Chris Zaharias, CRO at Triggit, an FBX partner. “Since its IPO in 2004, Google has steadily marched down its traffic acquisition costs (TAC), from 37.6% in Q3 2004 to an all-time low of 23.7% in Q3 2011. TAC has recently crept up to 25% and risks going higher as display becomes a bigger and bigger part of Google’s business.”
Zaharias says of the lawsuit, “There are two possible outcomes: ActiveCast will be found to have invalid clicks that Google was right to not pay them for, or Google illegally and opaquely deemed ActiveCast’s traffic to be invalid as a way to lower TAC. The court will decide the matter, but the bigger picture is that Google is the judge, jury and executioner when it comes to paying AdX publishers. No one but Google knows the three things necessary to assess ActiveCast’s claims: whether or not traffic was invalid; which advertisers paid what amounts for that traffic; and whether Google’s TAC reduction strategy affects its conduct.”
Most of the focus on display advertising’s problems centers on fraud from botnets, adware and other malicious activity. What’s discussed less often is the hold inventory aggregators, Google being the largest among them, can have over those supplying the traffic. The industry as a whole is plagued by a lack of transparency
It’s quite possible ActiveCast will be found to have supplied invalid traffic. However, the suit raises the question of whether the entire ecosystem would benefit from greater transparency from all players, including the gatekeepers.