Now that the 2007 holiday shopping season has finally come to a close, it’s worth taking a look back at what transpired. Depending on how you look at it, there’s a strong argument to be made that the glass was both half-full and half-empty.

The optimist will look at the fact that online holiday spending during the months of November and December came in at more than $29 billion, representing a 19% gain versus 2006. Certainly it would be very difficult for anyone to complain about that level of growth, especially when considering that comScore’s forecast made at the beginning of the season was for a 20% growth rate.

However, when you look at the 19% growth rate in relation to previous years for online holiday retail, the picture isn’t quite as rosy. Each of the prior 4 years has seen holiday spending increase between 24%-30%, with last year’s growth rate a robust 26%. Clearly 2007 marked a substantial drop-off compared to prior years, despite the fact that 19% is still a very healthy growth rate.

So what caused this nearly 7 percentage point decline versus 2006? We believe there might be three primary factors.

The first factor is that the economic uncertainty in the U.S. (i.e. declining house prices, rising gas prices, a jittery stock market, etc.) had a clear negative impact on consumer behavior this holiday season, and online retail was certainly not immune from these effects. In fact, when we examined the differences in spending growth among different income segments, the results were stark:

While households making at least $100,000 showed strong growth in spending, with a 28% gain versus year ago, the middle and lower income segments showed much softer spending growth. Households making between $50,000-$100,000 increased their online holiday spending 17%, while households earning less than $50,000 increased their online spending by just 10%. It’s pretty clear which households are feeling the pinch.

The second factor is that the total seasonal growth rate was dampened by a particularly soft start to the season. Unseasonably warm weather in early November saw sales of apparel & accessories – one of the largest online retail categories – really flat, leading to a very low growth rate to start the season, from which it never fully recovered. (I should note that the period between Thanksgiving and Christmas did see 21% growth – a solid number in its own right) A look at the cumulative growth rate shows how the early season softness prevented us from ever breaking through the 20% threshold during the season.

The third factor is that – as with most aggressively growing markets – very high growth rates are difficult to sustain as the base gets bigger. (Even Google isn’t growing its revenues over 100% annually like it was a few years ago, but you’d be hard-pressed to find an analyst that would tell you that Google’s momentum has slowed.)

So what’s the outlook for online retail this year? Based on what happened in 2007, it’s likely to depend on the economic realities that present themselves in 2008. An AP Poll in late December found a 26% gain in credit card delinquencies. While this segment only represented 4% of the total outstanding debt, it’s clear that these consumers – with maxed out credit cards and likely no home equity to borrow against – will have virtually no recourse but to curtail spending. But, I think the bigger concern raised by this AP research is that it does suggest that consumers may be increasing their level of debt to maintain their spending power, which clearly doesn’t bode well for the consumer economy in 2008.

This blog post originally appeared as my column in MediaPost's Online Metrics Insider on January 7.

Over the holidays, everyone (by which I mean, my wife's family) was asking me, "What exciting new developments can we expect to see in online metrics in 2008?" From my perspective, I do see something important bubbling up on the Internet, something that is going to affect online metrics because existing metrics are insufficient to measure it.

I'm talking about video.

I've been in meetings over the last couple of months with some of the biggest general market agencies in the world — the kind of agencies that make the bulk of their money on TV, that typically leave interactive to that digital shop they own out on the coast. Suddenly the Internet has become front and center for these guys, and the reason is video.

It seems like every morning when I scan the MediaPost headlines, some big new video/Internet convergence deal has just been announced. Half of all U.S. ad dollars are spent getting TV commercials in front of viewers, and that pool is poised to spill over into the Internet. In fact, it is not difficult to envision the day when the Internet has become a TV distribution channel, and maybe even the preeminent one — with the flat-screen, wall-mounted monitor in your living room wholly agnostic as to whether the episode of "Lost" you are watching came from the local ABC affiliate, your DVR, on-demand from your cable head end, or streamed from the Internet.

But let's just focus on 2008.

The Internet is not a medium; rather, it is a bundle of media sharing a common distribution platform. I can read the paper online, watch TV online, listen to online radio. I can visit a Web site, use a widget, search for a plumber, or check my Facebook page. I believe that as each of these things emerges as a platform for advertising, we are going to find that one measurement solution does not fit all, any more than a magazine has a program rating, or a radio station has an average issue audience.

I should also point out that even online video is going to become at least two distinct media; for now, let's call the split "TV on the Internet," and "consumer-generated video." All the debate about how to monetize 2-minute clips of guys putting Mentos into Coke bottles, that falls under consumer-generated video, and I'm not thinking about that right now (and I'm not sure that putting home movies on the Internet turns them into viable advertising vehicles.) I'm focusing on TV on the Internet, and I'm pretty confident that the networks will figure out how best to include advertising in their video content, such that with the right metrics, monetization will follow.

So what kind of metrics are necessary to support a robust marketplace for advertising in TV on the Internet? Obviously, the measurement moves away from page views and toward something more duration-oriented. I think the relevant inputs into measurement will be:

• Start and stop times (the building blocks of duration metrics for all audio and video media).
  
  
• Content identification, at the program level, and at the episode level within programs.
  
  
• Program source: to whom should a stream be credited, and how should discrete streaming sources be rolled up into the appropriate ad sales entities? (At comScore, we use something called the Client Focus Dictionary to make these aggregations for urls, pages, and Web entities.).
  
  
• Commercial identification. I think we have two choices here. We can identify the commercials embedded within a stream discretely via some unique identifier; or, we can take second-by-second audience and cross-reference it against a log of occurrence time for ads within the video stream. If a spot airs from the 12-minute mark to 12:30 of a given episode of "Lost," we attribute the audience during that time period to the spot. This latter approach is essentially the way it works in TV, but I'm betting online we align around the first model.

• Who's out there watching? As I've written before, measuring those people out there in front of the screen remains the true challenge for online metrics. But we'll need to do it in order to facilitate online video ad sales markets.
  

I suspect that, at least with respect to advertising and media, video is going to be a major game-changer for the online business in 2008. Is anyone else out there thinking about video? How do you see metrics emerging for the measurement of online video?

The topic du jour for Search in 2007 was clearly universal search: the inclusion of different types of search results such as news stories, maps, local information, images and video alongside the web search results you are used to seeing.

We recently discussed the implications of universal search – AKA “mash-up” or “blended” search – on a panel at SES Chicago. What we found is that search marketers are excited about the prospect of more creative options and better use of the entire page, but also have concerns about the changes that will take place in marketing practices and measurement.

Those of us in the search marketing industry are eagerly anticipating the arrival of creative tools like images and video as additions to the staid list of text links we have today. And as search ads get more visually arresting and persuasive, we’re hopeful that marketing efforts will also be more engaging and hence more successful. Even agency creatives – sadly missing in the first 10 years of search marketing – will want to play in this new interactive environment.

However, this new scenario will not come without growing pains. Today we have a huge repository of knowledge about the consumer interaction with our “old school” text-only page. Details like how and where they click, where they look on the page, and how we measure the impact will change in this new search experience. We have not seen changes like these in more than 10 years!

For example, common metrics like success rate, click rates and even our beloved PPC model will be unhinged when demonstration videos play on the result page, product images appear and a map to the closest “Best Buy” shows up. A more involved experience on the search engine result page (SERP) aims to keep consumers at the engine, not send them off as quickly as possible. Goodbye clicks, hello SERP engagement! Isn’t that the opposite of what we’ve been trying to accomplish during the last 10 years?

My bet is that the major engines will likely manage this transition slowly to protect the user experience. Ask is already embracing this movement and has seen a modest uptick in share. We’ll see if it continues and if it can be linked to the new Ask experience.

Make no mistake: universal search will eventually arrive in full force, even if it takes until 2010 or 2012. However, we’ve all seen evidence that the good old text link is a very effective way to deliver a message – text links are not going away anytime soon!

To date, there is limited data on universal search. comScore plans to apply a concerted effort to understand its impact. We will be releasing our findings throughout 2008. We’ll keep you posted.

I was recently interviewed by Surinder Siama of ResearchTalk Podcasts about current trends in Internet market research, and thought I’d share the video with you below. Much of our discussion focuses on a recent study that comScore conducted with P&G, Yahoo! and SEMPO that explored the potential for the CPG industry to invest in, and benefit from, search advertising. We also discuss the role of the click in online advertising, the measurement of the offline impact of online advertising as well as the benefits of advertising on social networking sites. I hope you find the discussion interesting.

In October 2007, the NFL history books were re-written, as the first ever regular season game to be played outside the U.S. was staged on the hallowed Wembley turf in London.

It was also the month that produced another NFL first, as U.K. based fans flocked to the NFL Internet Group property (owner of NFL.com) in record numbers.

And, whilst the 291,000 fans who visited the property from within the U.K. in October might seem like a drop in the ocean compared with the some 16 million fans that visited from within the U.S. that month, interest on this side of the pond is undoubtedly growing.

They say it’s not the size of the left tackle but the weight of the heart he throws into it that counts – a logic that might explain why Washington’s Clinton Portis averaged more than twice as many yards per game than LaDanian Tomlinson during the regular season!

Here in the U.K., it is not necessarily the increasing size of the online NFL audience that will be of particular interest to advertisers, but its value. As comScore CEO Magid Abraham revealed at the DLD conference in Munich earlier this week, more than half of the Internet’s audience is represented by “long-tailers”, that is to say infrequent, occasional users, which is a notoriously difficult segment for advertisers to reach.

Not so in the case of U.K. NFL fans, who have been staying up into the wee small hours to watch the games being beamed over by satellite since the mid-eighties. Online they are a highly engaged lot, averaging 42 minutes, 4.7 visits and 32 pages per month on their favourite American Football site.

But it is when you examine the heaviest segment of U.K. online sports fans that the really interesting stuff starts to shine through. Heavy U.K. Sports site users are what you might call “die-hard” NFL fans, 466% more likely to show up on the NFL Internet Group property than your average Internet user. To put this in perspective, this is 61% higher than their likelihood of visiting the Guardian “Soccer” pages, 73% higher than TheFA.com, and 78% higher than the fabled Football365.

With the BBC announcing to screen the Super Bowl for the first time in its history this February, and the NFL planning to roll back into town later in the year, expect to see U.K. traffic to NFL Internet Group grow even more in 2008.

Last year, comScore was honored by being named a Technology Pioneer by the World Economic Forum (“WEF”) and I was invited to attend the annual WEF meeting in Davos, Switzerland. I just returned from my second trip to Davos and wanted to share some observations with you.

Every Davos annual meeting tends to be dominated by one or two major issues that get discussed at many sessions, including a plenary session where participants debate and choose the most important near-term issues facing the world. Last year, the focus was on global warming. This year, the state of the world economy and the potential recession in the United States, with its worldwide impact, took center stage. The main questions were:

1. How likely is a U.S. recession in 08?
2. Will we see a decoupling of the U.S. economy from the global economy, with the rest of the world continuing to grow even as the U.S. stalls?
3. What are the implications of investments in major U.S. banks and by Sovereign Wealth Funds (“SWF”) such as those owned by Singapore, China and Dubai?
4. Have the regulatory bodies, particularly the Fed and other central banks, lost their ability to influence the global economy?
5. Is there a need for more financial regulations to prevent the kind of financial crises we have recently seen?

As in every debate, opinions were quite varied. Most people believed that a mild U.S. recession would occur in 2008 and some thought that it might have already started, even though most business leaders thought their businesses had not yet been affected. A significant concern was expressed that the drumbeat of recession, amplified by the media, will undermine consumer confidence and result in a recession even if the economic fundamentals did not really justify one. The most extreme opinion was espoused by George Soros who predicted that this will be the worst economic crisis since the depression. Of course, it was hard to tell if he was serious, or whether he wants to contribute to an acutely negative psychological mood that would benefit a possible bet his hedge fund has made on a recession.

Many participants believed that the torrid growth in Asia’s developing economies will compensate for any slowdown in the U.S. economy. India was thought be the most immune country, followed by China -- despite the huge dependency of Chinese exports to the U.S. Europe and Japan were thought to be moderately affected.

There was a lot of anxiety about foreign governments owning a stake in major U.S. and western financial institutions such as Citibank and Merrill Lynch. The SWF were said to control over $3 trillion today and that this could reach $9-10 trillion in three years, as petrodollars and export surpluses continue to grow. The question was asked whether such ownership could lead to foreign control? Here again, the opinion varied. Some speakers reminded the audience of the exaggerated U.S. fears during the 1980’s about Japanese control of prime American real estate properties such as Rockefeller Center. Others argued the more common view that the SWF investments are small in ownership percentage terms, and would remain harmless as long as they did not exceed 15-20%.

There was a televised debate on CNBC that focused on the influence of central banks over markets and national economies. One view held that central banks are ineffective and have failed to prevent the current financial crisis, despite high profile liquidity injections, just as they failed to moderate the drop of the U.S. dollar. However, the majority view held that while central banks made errors in steering the regional and global economies, they still wield a lot of influence -- as the Fed has shown with its recent aggressive interest rate cuts. There was a sharp difference in opinion about whether monetary authorities should intervene to burst emerging bubbles such as the current sub-prime bubble, the recent housing bubble, or the stock market bubble in 2000-2001. Some argued that central banks might ‘prick the wrong balloon’ and that they should not second guess the price levels determined by the free market. Still, there was a consensus on the need for stricter regulations on lending standards and derivative instruments.

It’s worth noting that there was a pervasive view that U.S. power, as well as moral leadership, is rapidly declining both politically and economically. Anti-Americanism sentiment runs rampart, particularly among Europeans, Middle Easterners, and most Muslim nations. The majority believe that the U.S. has lost its influence in the world and is unable to get anything done. That it is drowning in a deficit that foreshadows its economic decline. That it preaches to the world principles it violates every day. That it is militarily over-extended in Iraq and Afghanistan. Some asserted that the decline is irreversible. It was highly ironic that a South Korean university professor was the only defender of the U.S. on a panel that included a Harvard professor who led the U.S. bashing. One of the most outrageous assertions was that the U.S. created the conflict between Sunnis and Shias, who lived in peace, unity and harmony until the U.S. created an artificial divide between them. In several sessions, I found myself rising to defend the U.S. and cautioning against writing America’s obituary too soon.

Believe me, I would much rather argue about the impact of cookie deletion!

I’ve just returned from the World Economic Conference (“WEF”) in Davos, Switzerland, where the world’s leaders gather to discuss important issues, and to draw attention to, and devise solutions for, the world’s most pressing problems. For five days, from early morning to very late in the night, people gather in formal and informal sessions to address key questions or to share leading-edge developments in almost every conceivable area, ranging from economics to politics to technology to neuroscience to cancer research to education …just to name a few.

The invitations are quite exclusive, so for those of you who are wondering “so how did you get invited?” I’ll tell you: I wasn’t. My husband, Magid Abraham, CEO of comScore, was invited as a result of comScore being selected as a Technology Pioneer by the WEF in 2007. However, spouses were also invited, so I had the good fortune to attend with him. Because most sessions were open to spouses, we were able to divide and conquer (I am a member of the management team at comScore). Collectively, we came away with a wealth of new business contacts, knowledge and ideas.

This year, of course, the economy was front and center and sparked a lot of spirited debate. Global warming and world poverty were discussed in a session jointly led by Bono and Al Gore. Another major theme was social entrepreneurship – companies innovating ways to give back to the community as a basic part of their business model. Bill Gates delivered a keynote talk on that topic.

Because Davos represents such a unique opportunity to learn about so many things -- literally around the clock – extended sleep is simply not an option for most people. Two to four hours is the norm. At any given time, there are five to seven sessions running, and the biggest challenge is deciding which ones to attend.

The spirit of Davos is terrific: informal, friendly, and with the expectation that everyone there wants to meet everyone else.

Time after time, I met prominent people in everyday situations. At one point, the person next to me on a bus was the Prime Minister of a small Asian country. Another person I sat down next to, and ended up having coffee with, was the President of a developing country in Africa, and the person in front of me that handed me a plate in the buffet line was the CEO of a Fortune 100 company. One night, Magid and I were invited to a small, private dinner by Gloria Arroyo, President of the Philippines.

Basically, the norm is you introduce yourself and you chat. In a few cases, egos prevent the conversation from progressing much more. However, in most cases there is a genuine curiosity about the other party – giving birth to business relationships and friendships with very interesting individuals.

Next: My “Davos Moments”

While I attended the World Economic Forum in Davos, representing comScore as a 2007 Technology Pioneer, the following question was posed to the attendees: “What can countries do to improve the world?”

I believe that education must be a major part of the solution. We also need to foster the exchange of ideas with young students around the world. This will help us all reach common ground on what problems need to be solved and how best to solve them. Students could even be selected by a sort of a “Davos Idol,” to bring the voices of the best and brightest out and to generate interest and participation.

My full response to the question is below. What do you think countries can do to improve the world?