comScore Defends Measurement of Google’s Paid Click Data
comScore’s stock was red hot coming out of the gate, and has yet to trade below its IPO price, unlike more heralded deals like the Blackstone IPO :
June 27, 2007
The company’s IPO priced today at $16.50. The deal went off above the anticipated $14-$16 range, an impressive feat in this tape, via a syndicate lead lead by Credit Suisse. The stock will trade under the ticker symbol SCOR.
The company has a long history of defending itself against critics of its web analytics and measurement methodolgy; the recent controversy over Google’s paid click data should eventually blow over. But they are fighting back, and blogging about the hullabaloo:
comScore reported that Google’s U.S. paid clicks in Q1 were up 2% vs. year ago, and down 9% vs. Q4 ’07. During the earnings call, Google noted a 20% increase in aggregate paid clicks vs. year ago and a 4% sequential gain.
Why the discrepancy, you may ask?
As is always the case, we need an apples-to-apple comparison. comScore’s paid click report refers to domestic paid search clicks only, while Google’s “aggregate paid clicks” refers to global search and also includes affiliate site ads (i.e. AdSense). Two fundamental components of Google’s reported number – international clicks and AdSense clicks – are not currently included in the comScore report.
Google reported Q1 ‘08 revenue growth of 7% vs. Q4 ’07, with international revenue up approximately 14% and domestic growth (excluding the DoubleClick acquisition) essentially flat. If we take Google’s overall revenue growth of 7% and their reported 4% increase in aggregate paid clicks, we can estimate that the average cost-per-click (CPC) increase during the quarter was approximately 3%.
Now, if domestic paid click revenue was flat while CPC was up 3%, we can conclude that aggregate domestic paid clicks declined about 3% during the quarter. This brings us a lot closer to our estimated 9% decline in paid clicks. The remaining delta can likely be partially explained by strong revenue growth from Google’s YouTube and the Adsense network. In fact, comScore’s U.S. Video Metrix numbers show YouTube is up ~20% vs. Q4 in terms of video views.
comScore has always cautioned that there are multiple factors that needed to be considered when projecting Google’s earnings this quarter. In a February blog post on the subject, comScore CEO Dr. Magid Abraham and SVP James Lamberti concluded “There is no obvious reason why the economy would negatively impact” Google’s paid clicks, based on our analysis of the paid click activity at other search engines. comScore Blog
comScore’s numbers were reasonably accurate; their estimates of Google’s revenue growth were reasonably close. And paid click data has softened somewhat, as they predicted.
Give it a read and draw your own conclusions; the hysteria over anything to do with Google should not necessarily turn comScore, or the stock, into a scapegoat. In my experience web analytics are more art than science, something investors might need to consider lest this happen again.
The sellers likely got out of the way prior to Google’s earnings announcement, and I will be kicking the tires here trying to figure out if the stampeding herd created another opportunity. The first one was Google, this opportuity is comScore.
The WSJ breaks down the Google action:
Reconciling comScore’s and Google’s Paid Click Data
comScore
comScore Prices IPO
1440 Wall Street
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