Google to ComScore: You owe us $15-billion

Earlier this week, comScore released a report looking at Google’s click-through rates for January, which showed a precipitous decline — and that in turn caused a similar precipitous decline in the company’s share price, slicing about $15-billion or so worth of market value from the stock in a single day’s worth of trading. Now, the traffic-measuring company says that it has looked more closely at the report and come to the conclusion that the decline was the result of Google’s attempts to improve the quality of the ads that are generated when people do a search.

The slide in Google’s shares wasn’t all comScore’s fault, of course. In some ways, it was like the proverbial straw that broke the camel’s back. Investors have spent the past few months getting progressively more and more concerned about the U.S. economy and the effects of a recession on online advertising — and Google is the poster child for online advertising, since that makes up about 90 per cent of its revenues, and therefore justifies about 90 per cent of its multibillion-dollar valuation. All those fears were crystallized with the comScore report.

Still, it seems more than a little disingenuous for the company to be coming out with a fuller investigation of the click-traffic results after the horse has already stampeded from the barn, in a sense. Couldn’t comScore have seen this one coming? Given the nervousness around online ads, the news that click-through rates had fallen by 7 per cent in a single month was almost sure to set off a firestorm. It might have been nice to throw a few of those caveats in there at the time. Oh well — a billion here, a billion there. C’est la vie. I’m sure Google will get over it.

20 thoughts on “Google to ComScore: You owe us $15-billion

  1. Pingback: Taking the Bridge » Google stock drops $15-billion, but do bloggers make more?

  2. comScore lost a lot of credibility by trying to create news without providing all of the facts or analysis at the same time.

  3. yawn.

    you're only getting to this story now?. zdnet, techcrunch, cnet, and a cast of thousands had it yesterday.

  4. Pingback: Why ComScore owes Google $15 Billion |

  5. Interesting analysis, Matthew. Always better to be best than first.

    You raised a key point no one else has addressed: comScore sells the proprietary research and didn't release it publicly. So only a few i-bankers reviewed the data.

    That led to an uninformed media frenzy that relied on a couple analyst notes.

    The outcome was predictable: doomsday scenarios for Google paid search advertising, wild speculation, anonymous “insider data” and finally, an intelligent discussion of what comScore data truly indicates.

    Great headline, by the way.

    Kevin Heisler
    Executive Editor
    Search Engine Watch

    • Thanks, Kevin. Henry Blodget made that point too, I think, when he
      pointed out that comScore hadn't talked to anyone at Google before
      they put together the report.

      On Sat, Mar 1, 2008 at 10:20 AM, Disqus

  6. Pingback: Blue Moat: The Market Makes Mistakes: Eg. GOOG

  7. I really respect what Google is doing with their position on the online advertising space. They aren't afraid to take 3 steps forward and then take 1 step back for the goal of making the 'internet a better place'.

    Last year, they pulled the plug on arbitrage and it killed a few companies like Geosigns that ran linkfarms and splogs. I'm sure it had adverse effects on Google also, but they did it anyways.

    The more transparent they are about such moves, I believe would make stories like this one non-existant.

  8. I like the straw breaking the camel back idea because the market should know better than to 1) trust a single report from Comscore that 2) the market watchers appear to have misinterpreted anyway. I'm still confused though – it almost feels like Comscore is covering their *ss in case of a lawsuit. The re-interpretation of the results is not very clear, in fact my read is that they are suggesting the data suggests that Google's Q1 will actually be better due to higher per click yields.

  9. Pingback: w3boy’s blog » Blog Archive » Googleholic for March 4, 2008

  10. AdGooroo just released their quarterly research report on Google and Yahoo. It clearly shows that Google's quality algorithm cost them quite a few advertisers since July, but that they bounced back in Q1 (at Yahoo's expense). This seems to support the idea that earnings will be up.

  11. Exactly! The future of social media is in promoting content with the highest value. The current mass media model promotes content with too much emphasis on speed and not enough emphasis on authority.

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  13. I will always be on the Google's side and I think so far they would have been planned some strategy up to cover this if it really has existed. I think Google knows the right time to do things and this could be their major strength with this success.

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