Internal emails show Google didn't refund defrauded advertisers for years, says one of the search company's clients

Sundar Pichai

Internal Google emails allegedly show that engineers at the company knew credit was being generated for clients whose money was wasted on invalid clicks. That money was not returned, the emails allegedly show.
The emails come from a federal lawsuit filed by AdTrader, a Google advertising client.
The CEO of AdTrader recorded a phone call in which a Google sales staffer said his clients would be refunded for invalid clicks. The money never arrived.
Now Google has decided to return $75 million to clients who were allegedly ripped off.
Alphabet, Google's parent company, denies that it intentionally defrauded any publishers or advertisers.
See more stories on Business Insider's front page.

Internal Google emails show that for years the company failed to return credit or refunds to advertisers when they were billed for fraudulent advertising activity, according to US federal court documents obtained by Business Insider.

The emails were introduced or quoted in litigation between Google and a company called AdTrader, which has in the past handled online advertising for clients such as Citroen, Allianz, Nestle.

AdTrader sued Google in 2017, claiming that $476,622 paid by its clients for ads on web sites that contravened Google's rules was not refunded after Google discovered the clicks that generated the bills were invalid.

Google denies the claims.

A taped phone call

AdTrader discovered the alleged non-payment after its CEO, Martin Stoev, recorded a phone call in which a Google staffer assured him that his clients' money would be returned. AdTrader acted as both a buyer and a seller of ad space for clients, so it was able to check whether the $476,622 actually arrived in client accounts. It did not. "It was clearly a lie," Stoev said.

Listen to the phone call here.

The litigation also revealed that Google now intends to refund $75 million to advertisers who were defrauded prior to late 2017. Google will call some of the biggest advertisers by phone to inform them how much they are owed. Clients will have a July 15 deadline to register for credits. The company's position is that the refunds are being issued after a historical analysis of traffic activity, and not because of the lawsuit.

Martin Stoev of AdTrader

"While we have had a longstanding policy of refunding advertisers for invalid traffic, we recently expanded this policy to include ads purchased via Display & Video 360. As part of this change, we decided to issue historical invalid traffic credits to our Display & Video 360 partners," a Google spokesperson told Business Insider. (D&V360 is an advertising management tool offered by Google.)

"They're hiding the total amount of the refund"

The planned refund has angered AdTrader because in its proposed message to affected advertisers, Google does not want to mention the lawsuit or the total amount of money that went awry. AdTrader's lawyer, Randy Gaw, wants the judge in the case to alter the message to mention the suit.

"We're not trying to prevent the refunds from going forward. We're trying to prevent them from hiding it," he told Business Insider. "They're hiding the total amount of the refund."

As the litigants prepare for trial, AdTrader has obtained some internal documents from Google in the discovery process. It has also deposed a Google principle software engineer, Felix Chang, who worked on DoubleClick Bid Manager (DBM), a Google tool that clients use to buy ads.

"Any idea what we do with any refunds issued to us from AdX for accidentally served spam?"

The emails show that Chang and a colleague discussed in December 2015 the issue of credits for advertisers whose ad campaigns had been affected by spam. AdX, Google's ad exchange system, was generating the credits for advertisers placing campaigns via DBM. "Any idea what we do with any refunds issued to us from AdX for accidentally served spam?" Chang was asked.

He told his colleague the credits would not be passed back to the advertisers, the emails show: "No, we don't directly pass any AdX credit back to DBM partners and DBM advertisers," he wrote at the time.

That's a smoking gun, AdTrader believes. "For two years before this lawsuit they knew," Gaw said. "When they catch ad fraud they just sit on it."

Chang did not respond to messages requesting comment.

"Nobody knew that there is a pipeline ... that is generating refund requests"

Another email, from 2017, shows Chang describing in some detail Google's internal ignorance about whether it should have been refunding money to advertisers whose budgets were wasted on abusive or spam web sites.

"Nobody knew that there is a pipeline on one hand that is generating refund requests saying refund this, refund this, refund this to specific F1 customer IDs, but nobody on DDM billing or DBM reporting knows that such a system exists and never built a system to read that output and map, its F1 customer ID to DBM advertiser ID. Now we are, and we are required to reprocess all historical entries as much as humanly possible," he told a colleague at the time.

The lawsuit is still in its early, pre-trial stage.

"We're really happy that advertisers are finally being refunded," AdTrader's Stoev told Business Insider. "$75 million is just a drop in the bucket. I think there is a lot more under the couches, we can discover as the lawsuit progresses."

Here is a selection of text from Google's internal emails that have been published or quoted in the litigation so far:

September 24, 2014 email between Google staffers Phillippe Rivard and Vegard Johnsen: "On platforms such as DBM [] advertisers don't get refunds."

2015 presentation by Google AdSpam Team advising recipients that, "All invalid activity needs to be refunded to advertisers, so that will happen 100% of the time, Why? Lane's Gift Settlement in 2006[.]"

August 24, 2015, email from Diogo Farinha to a Google colleague: "there is not such a thing as spam credits in the product DBM."

December 9, 2015, email from Steve Suppe, a product manager at Google: "Any idea what we do with any refunds issued to us from AdX for accidentally served spam?" Chang responded: "No, we don't directly pass any AdX credit back to DBM partners and DBM advertisers."

suppe > Chang 2015

October 20, 2017, email from Chang to "Mr. Maymudes": "We currently are looking at around 75 million USD of previously unprocessed refunds. Around 40 million USD for Skyray-migrated advertisers and another 35 million USD for pre-Skyray migration. Because nobody knew that there is a pipeline on one hand that is generating refund requests saying refund this, refund this, refund this to specific F1 customer IDs, but nobody on DDM billing or DBM reporting knows that such a system exists and never built a system to read that output and map, its F1 customer ID to DBM advertiser ID. Now we are, and we are required to reprocess all historical entries as much as humanly possible."

chang > Maymudes