Google Redux

It is important to put in context how this Google episode came to be. It resulted from instantaneous market reaction to the Comscore January paid click data – a regularly released Comscore statistic – that we released to our clients, which include search engines, sell-side financial analysts, and advertising agencies (Comscore does not release its paid click data to the media). Comscore’s Wall Street clients use our data to draw their own conclusions, and, as in the case of financial analysts on the sell-side, incorporate it into research reports they publish to the investment community. Typically, Comscore’s data represent one of many elements that analysts rely on to formulate their opinions. For example, Comscore does not have access to important data elements such as price-per-click for forecasting revenues or to costs for forecasting earnings. This is why there is a great synergy between the services we provide and the final research product delivered by financial analysts.

We provide billions of numbers to our clients every month and we view our primary mission as ensuring that the information we release is as accurate and actionable as possible. While some clients buy additional advisory services that we provide on a case-by-case basis, we typically do not publicly comment on the financial or the competitive performance of our clients. In this particular case, however, we felt obligated to do so because there was such a dramatic public reaction to a few statistics, with a few financial analysts (in their published research reports) -- and subsequently the media -- citing these statistics as proof of weakness in online advertising as a result of a softening economy. The majority of media articles even attributed this conclusion to Comscore (“Comscore said”), whereas the reality was that we had never stated any conclusion. The data were certainly provided by Comscore, but the conclusions were not. As we looked deeper into our data, we found much stronger support for what some industry observers have hypothesized regarding the impact of Google’s own quality efforts on the negative trends in their paid clicks. Because of this, we felt we needed to set the record straight on two counts: 1) Our data did not support the conclusions that were being incorrectly attributed to us, and 2) The number of paid search clicks is only one driver of revenue for a search engine. Pricing is also a critical component and, as later confirmed publicly by Google executives, one that turns out to be closely related to Google’s quality efforts, since these efforts affect minimum bid prices and overall supply / demand.

But this issue had, for the most part, been ignored or discounted by Wall Street and the media in their analysis and reporting. So, we stepped up to the plate and provided our interpretation of what we thought was happening. I am happy that recent comments from Google, appear to support our explanation of the reason for the decline in paid clicks and the impact on click conversion and value.

On the positive side, there is learning coming out of this experience. We are studying service enhancements in the form of additional metrics that make it easier for financial analysts to reach a thoughtful opinion under extreme time pressure. For example, I found that aggregating Google’s search engine competitors together provided insights that were otherwise harder to see because of the variability that exists across individual search engine. While all the components to do this are available as part of what we already deliver, we can, by directly providing the aggregation, make it easier to draw a comparison between Google and the rest of the market. In addition, in the future we plan on delaying the release of Comscore’s data until after the close of the day’s trading. This will provide analysts more time to analyze the data and publish their reports before the financial markets open the following day.