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February 29, 2008 9:56 AM
Posted by Benjamin J. Romano
Earlier this week, news stories across the Internet and in every major business publication had Google on the rocks. A comScore report on paid clicks showed an 8 percent decline from December to January and flat annual growth. Google's shares tumbled $22.25 on the news Tuesday to close at $464.19, wiping $5.2 billion off the company's balance sheet. It was also viewed as another sign of the economic slowdown dragging on the lifeblood of Web 2.0, online advertising.
Today, comScore posted a blog explaining why that reaction misinterpreted the Internet measurement company's data, and behind the decline in paid clicks actually is a positive trend for Google.
While comScore isn't saying everything's rosy in the broader economy, the company is correcting the record, in some detail, on what's going on at Google:
"The evidence suggests that the softness in Google's paid click metrics is primarily a result of Google's own quality initiatives that result in a reduction in the number of paid listings and, therefore, the opportunity for paid clicks to occur. In addition, the reduction in the incidence of paid listings existed progressively throughout 2007 and was successfully offset by improved revenue per click. It is entirely possible, if not likely, that the improved revenue yield will continue to deliver strong revenue growth in the first quarter."
And in the broader economy?
"Separately, there is no evidence of a slowdown in consumers clicking on paid search ads for rest of the U.S. search market, which comprises 40% of all searches."
Not everyone is buying comScore's interpretation of its own data, however. At Silicon Alley Insider, Henry Blodget continues "to view the comScore report as supporting the theory that Google is exposed to economic weakness."