Google is so relentlessly tight-lipped about its performance that Wall Street analysts basically have to read tea leaves and consult psychics to figure out how the company's quarter is shaping up.
ComScore, a market research firm, is one of a handful of sources that Wall Street desperately turns to for guidance. The market research firm tracks paid clicks on Google -- or the percentage of sponsored ads that are clicked on across the Google network. When comScore reports a drop in paid clicks, Google shares plummet. And when comScore sees a rise in click-through rates, the market goes nuts. Last Thursday, for example, Google shares shot up $14.76after comScore said Google's paid clicks climbed 20 percent in April.
Problem is, it's all sort of a crock. What sort of significance does comScore data really have? Not much, as far as we can tell.
Looking back at comScore's research over the last few months, it's clear that the data doesn't broadly reflect Google's performance. The research firm said paid click went from flat in January to up 3 percent in February; up 2.7 percent in March, fueling Wall Street's expectation for a stinker of a quarter. As it turned out, though, Google's first-quarter was surprisingly profitable.
So we were somewhat skeptical when comScore reported a 20 percent increase in Google's paid clicks in April -- could Google really have gone from a sluggish 2.7 percent increase in paid clicks to 20 percent over the course of four weeks? Apparently, we're reading way too much into the numbers, says Bernstein analyst Jeffrey Lindsay.
"ComScore's projections (like everyone else's) generally improve over the year and the first quarter samples tend to be the worst because they have the smallest numbers of observations," says Bernstein analyst
Jeffrey Lindsay. "It doesn't take much when making projections from a relatively small (yet still
statistically significant) sample size to really amplify a trend -- we think that generally people attribute too much accuracy to data in these types of reports. The other thing to remember of course is that these
data refer to the U.S. only."
For it's part, comScore says the problem isn't with the data, but rather with the analysts who misunderstand it.
"Unfortunately, many pundits attempted to draw conclusions about
Google’s worldwide revenue performance based on comScore’s domestic paid click data, resulting in an apples-to-oranges comparison. Had they used comScore's domestic paid click data to better understand Google's domestic revenue trends, they wouldn't have missed an important U.S.
story and they also likely would have avoided making the wrong call on
Google’s worldwide business," said Magid Abraham on the official comScore blog.
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