WSJ: Google Execs Knew of Illegal Drug Ads

When Google agreed to pay $500 million last August to settle charges it carried ads for illegal drugs, the story that went untold was that the charges grew out of a sting operation conducted by a prison inmate operating under the watchful gaze of federal agents.

The Wall Street Journal tells that tale today, including allegations that Google co-founder Larry Page, now the company's CEO, and other top executives were aware of legal problems with the drug ads. 

Mr. Page knew about the illicit conduct, said Peter Neronha, the U.S. attorney for Rhode Island who led the multiagency federal task force that conducted the sting.

"We simply know from the documents we reviewed and witnesses we interviewed that Larry Page knew what was going on," Neronha said, according to the Journal.

Narcotics, steroids

As the Journal tells it, convicted con artist David Whitaker spent $200,000 of government money to buy ads on Google, promoting narcotics, steroids, human growth hormone and other illegal substances.  Google initially rejected some of the ads but reportedly relented following conversations between Whitaker and Google ad executives.  

Google has long contended that it is not responsible for the actions of its one million advertisers but in the half-billion-dollar settlement, which headed off potential criminal charges against the company, agreed to pay not only its profits on the ads but also the proceeds that flowed from the illegal drug sales.

That, says Neronha, set an important precedent: "Where evidence can be developed that a search engine knowingly and actively assisted advertisers to promote improper conduct, the search engine can be held accountable as an accomplice," the Journal reported.

So is Google taking a more cautious approach in its advertising policies? Not according to some of its critics.

"Google is highly motivated to turn a blind eye to all sorts of dubious advertising on its search engine because AdWords is such a cash cow," said John M. Simpson, director of Consumer Watchdog's Privacy Project, after the August settlement.

Perhaps presciently, Simpson cited a study by his group that found Google had become "a leading purveyor of ads by scammers who prey on struggling homeowners."

Bogus mortgage ads

A few months later, in November, under pressure from federal prosecutors, Google shut down bogus mortgage ads from companies that claimed to offer assistance to homeowners who were behind on their mortgage payments and facing foreclosure.

Google acted in November after a federal agency opened a criminal investigation of at least 85 companies that used Google AdWords to sell mortgage modification services. 

"Google should never have published these ads, but its executives turned a blind eye to these fraudsters for far too long because of the substantial revenue such advertising generates," said Simpson. "The company cannot be allowed to benefit from these ill-gotten gains. Google must donate the money to aid homeowners who were victimized because of its callous quest for profits."

It's not only Google that profits from ads for illicit, illegal or fraudulent products, of course.  Besides displaying advertisements on its own sites, Google has a vast network of Web sites -- so-called "content partners" -- that display the ads on their sites as well.  (ConsumerAffairs.com is a Google content partner). 

The content partners range from major newspapers like The New York Times to the smallest local news or special interest site.  In fact, thousands of sites have been created -- so-called "Made for AdWords" sites -- that serve no purpose but to show up in search engines and to present site visitors with so little useful information that they are driven to click on the Google ads to escape.

Thus, if Google mounted a truly extensive effort to root out misleading and fraudulent advertisements, it would have an impact not only on Google's revenue but on those of its hundreds of thousands of content partners. 

Just wants to be free?

"Information just wants to be free."  That was the credo of the cyberprophets back when the Internet was just pulling itself together. Like Grateful Dead fans milling around a parking lot, early Internet proponents proclaimed that, at last, information would be freed of corporate influence and society would at last be, well, free.

A decade or two later, information is stolen and redistributed with reckless abandon and search engines -- which were going to be the roadmap to the cybersphere of free information -- are increasingly driven by advertising.

Google still provides information for free to the end user but, increasingly, that information is paid for, with advertising providing 96 percent of Google's 2011 revenue.  

In fact, companies which must constantly find new customers for their products and services now have little choice but to spend, and spend big, with Google.

The No. 1 source of advertising revenue for Google is the finance and insurance industry, which spent $4.0 billion last year, according to WordStream, a search-advertising firm. State Farm spent an estimated $43.7 million on Google AdWords, followed by Progressive at $43.1 million.

Retail and general merchandise was the second-biggest category last year, at $2.8 billion, and travel and tourism at $2.4 billion. Amazon.com spent $55.2 million, and eBay spent an estimated $42.8 million.