ComScore, an analyst firm left holding the bag when Google's financial performance far exceeded analyst expectations, scrambled Friday to reconcile its pessimistic statistics with reality.
At the heart of the matter is a key Google advertising performance measurement called paid clicks--the number of times Web searchers clicked on one of the ads Google shows alongside search results. On Tuesday, ComScore reported Google's paid clicks grew 1.8 percent from the first quarter of 2007 to the same period in 2008. But on Thursday, Google said the growth actually was 20 percent.
The gap prompted Google Chief Executive Eric Schmidt to jab at ComScore on the post-announcement conference call. "Paid-click growth is much higher than has been speculated by third parties," he said. ComScore's stock dropped 8 percent in after-hours trading Thursday, but recovered most of those losses Friday.
Why were the numbers so different? Two major factors, according to a blog post Friday by ComScore's Andrew Lipsman.
First and most obvious, Google's 20 percent statistic was for the whole world, but ComScore was only measuring U.S. results, Lipsman said. (Collins Stewart analyst Sandeep Aggarwal said after Google reported results that paid clicks in the U.S. were up 10 percent.)
Second, Google includes clicks through its AdSense service, in which partner Web sites display Google ads and share resulting revenue, Lipsman said. He also said "strong revenue growth" from YouTube contributed to the difference and concluded that ComScore and Google actually were not that far off at all.
After walking readers through some math, Lipsman launched into the disclaimers.
"ComScore has always cautioned that there are multiple factors that needed to be considered when projecting Google's earnings this quarter," he said. "U.S. paid clicks alone would not tell the full story without considering cost-per-click increases, that macroeconomic factors did not appear to be weighing on Google, and that Google might well have solid revenue growth in the first quarter."
He tossed in a pointer to a February blog post by ComScore Chief Executive Magid Abraham and search Senior Vice Preisdent James Lamberti who tried to moderate the minor panic that ensued after ComScore released its January statistics.
Even if you don't understand ComScore's numeric analysis and don't like the disclaimers, there's one part you should definitely remember from Lipsman's post: Google's opacity places huge importance on ComScore's numbers.
So know what you're getting into before you use them as a basis to play the market.