expertSEM

Could it be that reports of Google’s flat year over year click growth are true? In recent articles from Slate and Silicon Alley Insider, much has been made of the downturn in Google stock price stemming from ComScore’s estimate that click growth essentially stopped from Q4 ‘07 to Q4 ‘08. Both commentators, Wilson and Blodget, astutely recognize the fatal flaw in relying on ComScore’s numbers, their methodology is essentially a black box. Changes to ComScore’s algorithm or measurement model, changes in Google’s algorithms or click delivery, or innocent statistical error could all contribute to these un-anticipated results.

As an example, I have written extensively on MSN AdCenters claims of narrowly focused demographic targeting. Their claims do not hold up if one understands the method for delivering a targeted ad to a targeted customer. That customer must have (as far as we know) an MSN Passport, have logged in with it within the cookie window (probably 30 days), and must not be a regular cookie deleter (more on that from ComScore here). That’s a lot of assumptions, but MSN intentionally conceals this information, allowing the uncritical SEM professional to simply believe as told.

A similar problem is at work with any webtraffic firm’s data, they are not privy to all websites’ individual statistics, only to broad statistical data which is often prone to error, and the collection of which is rarely transparent. I saw this personally just the other day while researching a pool equipment company on HitWise with my boss. One of the top referring URLs to this pool equipment supplier, according to HitWise, was BigBootyCheerleaders.com. Now, I have far less statistical knowledge than HitWise on the subject, but I regard it as EXTREMELY UNLIKELY, that many people are leaving that site to go to this pool equipment supply firm. Call it a gut feeling.

Regarding the reaction from Wall Street to the ComScore data, Chris Wilson aptly recognizes the money manager’s error: “It’s impossible to avoid the conclusion that Wall Street types put way too much stock in the reliability of Web traffic stats… Next time you see a press release that says clicks are going up or down, take it for what it is: a guess—as far as we know.”

Furthermore, the fundamentals for Google have not changed, search is the most targeted advertising method ever devised, and there will be continually more users with growing internet penetration. Further, while a recession may decrease sales revenue, Google doesn’t rely on sales for it’s profits, they make money when somebody is interested enough to click on an ad.

It’s near impossible to know exactly what’s going on in this intensely data driven industry, and that is reflected in the volatility of the search stocks. Don’t look to me for advice on when it’s a good buy and when it isn’t, but I can assure you, dear reader, Google’s business is a lot less volatile than the stocks lead us to believe.