Home > Uncategorized > Finally, a Google Whistleblower, Part 2

Finally, a Google Whistleblower, Part 2

May 3, 2014

This post is a continuation of “Finally, a Google Whistleblower, Part 1” that I recommend you read first and then come back to this one.

In a nutshell, we finally have what appears to be someone who is willing to take on Google’s Adsense business practices from the inside of Adsense.  (Adsense is the “publisher” side of Google’s advertising business–publishers being the sites who offer advertising space for sale.)

Remembering that Adsense/Adwords is over 90% of Google’s revenue–if true, the revelations by the Pastebin whistleblower are kind of important.  And like Enron’s derivatives or Milken’s junk bonds, Google has a very complex financial instrument called Adsense using the currency of page views.  And like “cleans” in the music business, there is a very strong temptation to abuse the counting of that currency.  Since Google is the only one who really knows how much money is changing hands, where and for which reasons, Google is right in the middle of a major moral hazard.  And as we have seen, Google doesn’t do too well with moral hazard.

The whistleblower posted on Pastebin, ironically a site that is a favorite dumping ground of Google’s hacker buddies when they have something to say anonymously.  The whistleblower tells us that a few years ago when Google was going to miss its revenue numbers, Adsense essentially started cancelling or at least disabling publisher accounts that were about to be payable.  The whistleblower says essentially that this became a standard and routine business practice in the Adsense unit for years and still is part of Google’s business model.

What the Pastebin whistleblower suggests is that Google is essentially stealing money from Adsense publishers in situations that may be subject to an obligation on Google’s part to refund that money to advertisers.  Because the whistleblower has not published any documents as evidence for the claims, we don’t have much to go on.  So in this way, it’s like almost everything else with the highly, highly secretive Google.

Also in a nutshell, I think there is some credible evidence that Google is doing something that looks like cancelling Adsense accounts with relatively low earnings that are probably replenished by new Adsense accounts.  That is, the “lost” revenues from “cancelled” accounts are replenished and replaced by fresh money from new Adsense accounts (this plan has certain attributes of a Ponzi scheme).  It’s unclear whether the new Adsense accounts include previously cancelled publishers who are reinstated.

My view is that there are parts of the whistleblower’s story that could very well be true, mostly the stealing part.  I’m skeptical of the cause for the program that the whistleblower gives:  Google needing to prop up its revenues, and in a later post, they were told that the money was to invest in a competitor to Facebook:

pastebin 4

This is the kind of thing corporals come up with to explain a larger strategic move because the troops need some kind of understandable rationale to motivate them.  A simpler explanation is that Google stole the money because they could.

Avarice is one of the deadly sins, but stupidity is omitted.  Now there’s a pity.

When a Cancellation is Not A Cancellation

Even if the Pastebin Adsense Whistleblower is a complete fake, there are still some interesting questions raised.  The number one reason that I’ve heard given for why the whistleblower has to be a fake is because by cancelling Adsense accounts, Google would be digging a hole for itself long term.

I’m not so sure I buy that one, either.  That’s a hole that could easily be filled through replenishment. As we’ve seen in Part 1 of this post, using the $5,000 and $10,000 levels of earnings for cancelled accounts could get you into the hundreds of millions if not billion just using the numbers of apparently cancelled accounts that Google has acknowledged.  But even this is not as straightforward as one might think.

First of all, in Google’s two public discussions I’m aware of regarding what appear to be Adsense account terminations, Google never uses the words “terminate” or “cancel”.   In the piracy report, Google says:

Google Piracy Ad CancellationIf you meant “cancelled” as in terminated and not to be renewed, why would you say “disabled ad serving.”

The second instance, Google lawyer Katherine Oyama says:

Oyama Testimony 2

Again, if you meant “cancelled”, why would you say “ejected”?  Is “ejected” more stylish?  In both these statements, there is a certain ephemeral nature to the separation.  And what does “our own proactive screens” mean exactly?  Could that be the same or a similar process to the system that the Pastebin whistleblower describes?

pastebin groups

And wouldn’t you just love to know who was on the Green Group list?  The top Transparency Report pirate sites, perhaps?  That would indeed be a very interesting list for the FBI or Interpol to review–if it exists.

Further evidence: one Adsense publisher commenter on the Pastebin whistleblower I read described his experience:

The stealing of money by Google is something going on for a very long time. No matter how much your advert earns on blogs, money always decreases. At one time I earned $70 and they put in 52 cents in my account. They asked me to confirm how much was put in the account for them to know is mine and I did. This happened three years ago, the rest of the seventy dollars never came. Today I discovered the $5 I earned last month is completely gone, but left with 82 cents. It worth [sic] to take away every advert from blogs or websites because they make sure you don’t earn anything from them. Professional white-collar thieves.

So in this case, the publisher’s account was not “cancelled” as the account was still open.  Google just took the money according to the comment.  Was he “ejected”?  Who knows.

But if the money in the accounts was just cleaned out and then the accounts were “disabled” or “ejected” or “banned” (e.g., for click fraud as the whistleblower suggests) but never cancelled, does that mean that Google could avoid an obligation to refund the seized money to advertisers?  And how would the advertisers ever know they were entitled to a refund?  And if the advertisers didn’t know, how would Google’s shareholders ever find out?  Or more importantly perhaps, how would Google’s public accountants know how to treat this money on Google’s financial statements?

But let’s say that the choice of words is just a question of style and Google really meant what it appears they meant to convey:  The accounts were terminated.  If the magnitude of cancellations was in the 50,000 to 75,000 range annually out of the millions of Google Adsense accounts, it seems that a pruning of even 100,000 accounts annually would probably be replenished by new account sign ups.  If Google could pick up an extra $500,000,000 a year or more with this plan, then it’s quite plausible that they’d take that risk.

Because you know what’s really cool?  A billion dollars.

Again, we’re assuming for the sake of argument that Google’s advertising group actually is a corrupt organization.  Not everyone in Google’s entire company–just a few.  Not “bad apples” either.  No this group seems to have a sustained and abiding problem with business ethics.  And you know, they have to report to somebodySomebody is telling them this stuff is OK.  Why would we make that assumption?

A fish rots from the head down.

Google’s Adsense/Adwords Ethical Problems

I first began to notice how bad things were at Google’s advertising group when an affidavit surfaced in 2006 in the “Easy Download” case.  (The Pastebin whistleblower tracks the problems with Adsense from 2009–although that could also be the date that the whistleblower was hired at Google.)  As the Wall Street Journal noted in 2007 (reporting on a case that may date back to 2003):

“Instead of relying on spam emails to drive traffic to [EasyDownloadCenter.com and TheDownloadPlace.com], [these rogue sites] decided to rely on Google advertising. The high volume of traffic on EasyDownloadCenter.com and TheDownloadCenter.com caught Google’s attention, according to people familiar with the [case]. To help stoke the traffic further, Google assigned the sites account representatives who suggested keywords they could bid on. Google also offered [the sites] credit so they didn’t have to use their credit cards to pay Google’s fees….The defendants in the case, Brandon Drury and Luke Sample, said in sworn statements that Google representatives offered them credit to buy advertising on Google’s search engine. They also said Google supplied them with keywords, including terms such as “bootleg movie download,” “pirated,” and “download harry potter movie,” which boosted traffic to their sites, according to people familiar with the case. In court filings, both men deny any wrongdoing.” (Emphasis mine.)

Of course–this case settled.

What kind of suggestions did the Google account representatives make?  The Luke Sample sworn affidavit tells us:

Sample Affidavit 1

Why is this a problem?  Because thedownloadplace.com was an unlicensed site, and Google’s ad rep was suggesting that the site purchase dozens of artist names as sponsored links in order to drive traffic to the pirate site.  Did Google know this?  Sample appears to think so:

Sample Affidavit 2

Seems like somebody at Google was only too happy to help a customer do bad things to profit both.  Was it the account rep?  Probably not.  But pretty clearly nobody was telling him not to be “helpful.”  But by far the worst example of corruption in Google’s advertising business is the sting operation run against them by Peter F. Neronha U.S. Attorney for Rhode Island, the FBI, the FDA and the Internal Revenue Service that resulted in Google paying a $500,000,000 fine with the stockholders money to keep their executive team from being indicted for violations of the Controlled Substances Act by a Rhode Island grand jury.  An executive team that included Eric Schmidt, Larry Page, Sergey Brin and Sheryl Sandberg (now at Facebook).  The fine included a damning nonprosecution agreement in which Google made some very unsavory confessions.

Where It Stops, Nobody Knows

In order to implement the level of theft involved in the practices explained by the Pastebin whistleblower, it’s likely that the fraud would have to be known or authorized at high levels of Google–just like the drugs fraud was.

Google definitely has a drug problem–so far it has cost them $500,000,000 in fines, far more than their punishment for taking pictures of your house and post them on the Internet while they were snarfing down your WiFi to do God knows what with your personal data.

And the Google board and key executives (including Eric Schmidt, Larry Page, Sergey Brin and Sheryl Sandberg)  are currently being sued by several different stockholder groups for a variety of claims arising out of what I think was the conversion of $500,000,000 of the stockholders’ money to pay what really was a personal fine against top executives acting outside the scope of their employment.

But Google could have avoided all of this if they had just listened to the entreaties of Joseph A. Califano, Jr., former Secretary of Health and Human Services under President Jimmy Carter.   After his distinguished government career, Secretary Califano became Chairman and President of the National Center on Addiction and Substance Abuse at Columbia University.  In a 2008 letter to Google’s then CEO Eric Schmidt, Secretary Califano was clear that there was a drug problem online and Google was in a good position to do some good:

califano letter

I bet you’re wondering what Eric Schmidt said in reply to such a sympathetic voice?  I bet you’re thinking that this is right up Dr. Schmidt’s don’t be evil alley?  Right?

Actually not.  Schmidt never replied.

At all.

Well, you know.  Snail mail.  Anything could happen.

On the other hand–a fish rots from the head down, even the really big fish.

The most remarkable thing about the drugs case is how successful Google was at suppressing press coverage of the historic fine (as recently called into question by the Washington Post).  I will bet that a number of you reading this post are hearing about it for the first time.  Because, dude, that was like three years ago and only involved selling oxy to kids, why bring it up?

The Whistleblower Conclusions

I can go on with more examples of corruption at the highest levels of Google, but I don’t know as that’s really necessary.  This story is not over by any means, and we will continue to watch it.  But the whistleblower story does seem to be sufficiently developed to pose several questions to Google based on the Google piracy report and the statements of Katherine Oyama under oath to the people of the United States before the U.S. Congress independently of the Pastebin whistleblower:

1.  Which Adsense accounts were cancelled and for which reasons?  A comparison of Adsense accounts cancelled for piracy to Google’s transparency report of DMCA notices should yield a correlation.

2.  Which advertisers received refunds for which cancelled Adsense accounts?

3.  Were any accounts described as “ejected” or “disabled” reinstated or otherwise allowed to continue to earn advertising revenue?

4.  Why doesn’t the Internet Advertising Bureau publish lists of cancelled sites so that advertisers can compare their marketing spend to potential refunds?

5.  How are these cancellations reflected on Google’s financial accounting statements and how are they reported in Google’s earnings?

Because the whistleblower may have inadvertently raised one of the more interesting questions:

Is Google’s “transparency” on piracy and DMCA notices actually a coverup for massive Adsense account “ejections”?

Stay tuned, kids.

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