Back in November of last year, I wrote a blog post suggesting that the use of the “same store sales” metric as a barometer of retail health could lead to erroneous conclusions regarding the performance of individual retailers or the retail economy in general. My rationale was that many retailers don’t include online sales in such a measure and e-commerce has grown to the point where it represents a material contribution to the growth of many retailers’ businesses.

So, I was particularly pleased when I recently read in the Wall Street Journal and International Herald Tribune that my “recommendations” were being taken to heart by Moody’s, who will now be including online sales as an important factor in their credit ratings. I think this is precisely the correct thing to do. E-commerce has come of age.

Last Friday, Jim Cramer invited me to be on his show - Mad Money on CNBC - to discuss how some financial analysts misinterpreted comScore's paid click data and used our U.S. data to incorrectly draw conclusions about Google's world-wide performance. As we've shown previously on this blog, the paid click data that comScore published were for the U.S. only, not worldwide, and have a high (0.94) correlation with Google's U.S. revenues.

Click here to view the interview.

Last week, I gave the opening keynote presentation at OMMA Hollywood titled "Warp Speed: Online Media, Marketing and Advertising by the Numbers." In this presentation, I addressed the state of Internet advertising and the need for metrics other than “clicks” when measuring the ROI of online display advertising that is focused on brand-building objectives as opposed to direct response. In the presentation, I also discuss the benefits of using search as a branding tool.

I would be happy to share the presentation with you. If you are interested, please request a copy at www.comscore.com/request/OMMA.asp

This last Monday, I delivered the opening keynote at OMMA Hollywood, a presentation titled "Warp Speed: Online Media, Marketing and Advertising by the Numbers." Joe Mandese of MediaPost caught up with me shortly after the presentation. Click here to check out the interview: we discuss the offline and latent impacts of online ad campaigns and how to prove their ROI.

I think it was H. L. Mencken or Albert Einstein (a quick search showed me that they are both cited as authors) who said: “For every complex problem, there is one simple – but wrong – solution.”

I was reminded of this quote when I read a blog posting on the Adify site where the discussion focused on how to measure the effectiveness of online display advertising.

For me, the quote sums up the challenge. While it’s alluring to believe that there is one simple, easily-obtainable metric that will accurately and reliably predict advertising success, I believe this is a siren’s song. And, I suspect that most experienced researchers who have spent decades searching unsuccessfully for advertising’s Simple Holy Grail have also come to the conclusion that, while there certainly are simple metrics that can give you some insight, they’re far, far from foolproof as a measure of advertising’s impact on sales. And sales, I would argue, is the one undeniably relevant metric for evaluating ad effectiveness. Unfortunately, however, measuring advertising’s sales impact is something that’s often difficult to do – especially since it’s often vital to measure advertising’s cumulative impact on sales across time and channels and to cleanly separate this from the impact of everything else that’s going on in a brand’s marketing mix.

This brings me to the validity of the click as a measure of advertising effectiveness. For many years, the click was used as a supposedly accurate measure of the effectiveness of display advertising. Now, I would be the first to agree that – for some direct response ad campaigns – the click remains a relevant metric. However, when it comes to measuring the impact of brand building advertising, the idea that consumers’ immediate response via a click is hard proof of the effectiveness of display advertising is just plain wrong. Perhaps, in the early days of online advertising when click through rates were running at levels of 5% or so, it was easy to believe otherwise. But, as click rates have dropped to a fraction of one percent it has become clear that some other metric is urgently needed. To believe otherwise today would be to acknowledge that display advertising has no impact at all. Perish that thought!

comScore’s objective in conducting the click study with Tacoda and Starcom was to prove – once and for all – the limitations of the click as a relevant metric to use to measure display advertising effectiveness. I believe this is a critical step in the evolution of online advertising because if our industry is to continue its torrid growth, we have to look beyond direct response advertising dollars. We have to convince the brand-building advertisers that they should move more of their ad dollars from traditional media to the Internet. Rest assured, we’re not going to be able to do that using clicks as the metric of choice. Instead, we have to be able to show that display advertising increases brand sales over time and across both online and offline sales channels. I think that Einstein would agree.

For good reason, concerns about privacy and data security have become an increasingly visible issue for the marketing industry in recent years – perhaps most notably in the online sector. The unprecedented access to data provides innumerable benefits to both consumers and businesses alike. It also demands a great deal of responsibility regarding how that information is gathered, protected and used. In this context, I think it’s critical to draw specific attention to the discipline of market research, its use of data and the many benefits it provides to corporations, academia, and the overall economy.

For generations, market research professionals have conducted invaluable studies of consumer attitudes and behavior for both the public and private sectors. Surveys and behavioral tracking studies provide the information necessary to ensure sound economic and social policies in the public sector. Information on consumer behavior and preferences helps the private sector develop new and improved products, identify new health care needs, improve the ergonomics of the products we use, spend their marketing dollars more efficiently and create countless products and services that improve the quality of life for everyone. Without market research, corporations would be operating “in the dark”, inefficiencies and error rates would increase, more new products would fail and the resulting increased marketing costs would have to be borne by the consumer. That’s not a pretty picture.

The Internet is a good example of an industry that is critically dependent on credible third party research that provides anonymous information on issues such as e-commerce trends, Web site visitation statistics and audience demographics, search activity, online advertising effectiveness and insight into countless other online behavior patterns. As with traditional media, advertisers demand such independent information in order to confidently invest in advertising-supported Web sites, which depend on advertiser support to offer free services to consumers.

However, the growth of the Internet as a powerful new medium also introduces the need to define specific practices of privacy protection and data security, to create an environment in which market research can continue to play its vital role. At comScore, we adhere to strict tenets that the market research industry has fundamentally observed for decades. As such, we:

• Provide research participants with clear notice of software functionality and data collection practices;
• Obtain consent from participants prior to installation of any data collection software or collection of any behavioral data;
• Collect and use data exclusively for market research purposes, and not for purposes of marketing or advertising products and services to our research participants;
• Neither divulge, nor sell, personally identifiable information (PII) in any fashion to our clients;
• Strictly safeguard the personally identifiable information, privacy and anonymity of panelists through technological means and established security practices;
• Provide an easy method through which participants can cancel participation; and
• Participate in review and certification of our practices by recognized and objective third party authorities

I believe that the relationship between a research participant and all reputable market research companies that adhere to these practices is important, and should be preserved. Market research tracking software (we have dubbed it “researchware”) needs to be differentiated from “adware,” “spyware,” and “malware” and should not be treated in the same way as these intrusive and potentially harmful applications. We must not let the purveyors of spyware – the rotten apples – give market researchers a bad name.

There is clear precedent for such differentiation in the U.S. Federal Trade Commission’s creation of the Do Not Call (DNC) Registry and the Telemarketing Sales Rule (TSR). Following a comprehensive review process, the FTC clearly differentiated survey research from telemarketing calls, thereby excluding market research from TSR and DNC prohibitions.

comScore will continue to safeguard the future of online market research as a crucial source of information and insights for industry, government and academia. I urge other market research and marketing firms, universities, industry and consumer associations – and the media – to join us in supporting the researchware initiative, thereby ensuring the continuation of legitimate forms of research that benefit society and the global economy.

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.

Recently spotted: comScore data in Times Square from our first e-commerce report of the holiday season.

As promised in an earlier blog post, I want to share with you an analysis of the display advertising delivered on MySpace and Facebook that I recently presented at the Forrester Consumer Forum. The data are based on comScore’s Ad Metrix service, which captures and classifies the ads seen by the comScore panelists. We think this is a more accurate approach to measuring the number and types of ads delivered on sites than the spidering approach favored by other research companies because spiders miss much of the targeted ads that sites deliver today.

What the comScore data reveal is that MySpace is far more developed as an advertising platform than Facebook – along a variety of dimensions. For example, in September MySpace attracted 68.4 million unique visitors, 2.2 times the 30.6 million that visited Facebook. But, MySpace visitors also consumed 1.4 times more pages per visitor and MySpace delivered 2.2 times more ads on each page viewed (with each ad being about twice the size of the ads run on Facebook). Cumulatively, this translates into MySpace delivering 6.6 times more display ad views than Facebook.

Clearly, these data point to the huge upside that exists for Facebook to increase its advertising business relative to MySpace by continuing to build its user base (Facebook unique visitors in September were up 129% versus year ago while MySpace increased by a slower 23%) and by increasing the number of ads they’re delivering per page viewed. Of course, it can be expected that, as the number of ads delivered on Facebook increases, astute marketers will also begin paying more attention to changes in the “share of advertising views” that they’re getting within their particular product category and target audience to see if their “share of voice” is declining.

Let me begin this posting by saying I hope that those in the U.S. had a terrific Thanksgiving holiday. It’s a very special time of year and we have much to be thankful for.

Thanksgiving also marks the beginning of the busiest time of the year for the Marketing Communications group here at comScore, because it’s the kickoff to the media’s intense focus on trends in consumer spending. This scrutiny is understandable, because roughly two thirds of the U.S. GNP is generated by consumer spending. And, since the months of November and December together account for a disproportionately high percentage (20%) of each year’s total spending, there is, understandably, a sharp focus on holiday season spending patterns.

This is the seventh year that comScore has published online spending statistics and each year there is more interest from the media in our numbers. This year, the 2007 holiday shopping season is shaping up to be a particularly important one. And, an especially intriguing one if you’re a researcher like me. Everyone, it seems, is asking the same, fundamental question. Is the economy being crimped by a decline in consumer spending that can be traced to several problems, including the sub-prime meltdown, the decline in home values, higher gasoline prices, and a weak stock market?

To address this issue, a variety of shopping statistics will be discussed and evaluated in the coming weeks, most notably the percent increase versus year ago in retail sales and “same store” sales. While these are undoubtedly important measures, I think they no longer provide the complete view of consumer spending that they once did. The reason is the growing importance of online sales. To understand this, consider that if one excludes food, gas and autos, online sales will represent about 7.5% of consumers’ total spending this holiday season. So, if online holiday sales grow at a rate of 20% (comScore’s forecast), this means that the increase in online spending will represent about 1.5% of consumer spending.

To be sure, it’s likely that a substantial portion of this online growth represents spending that is being pulled from retail. But, the fact remains that traditional metrics which focus only on retail spending and don’t include online buying will understate the strength in consumer spending. We need to be sure to add the e-commerce growth numbers to the retail growth data to get an accurate picture of what consumers are doing. With economists projecting a growth of only 4% in consumer spending, the inclusion of 1.5 points of spending coming from e-commerce could make the difference between a so-so holiday shopping season and a strong one. E-commerce has definitely come of age.

Recently, I spoke at the Forrester Consumer Forum here in Chicago, titled “Winning in a World Transformed by Social Technologies.” I’d like to share with you some of the findings from my presentation, which focused on consumer trends in social networking.

I personally find the worldwide expansion of social networking sites fascinating. For example, it’s commonly thought that with the success of sites like MySpace and Facebook, the U.S. is the hub of social networking activity. However, Asia is not only the fastest-growing region for social networking, it is also the largest:

By contrast, fewer Latin Americans visit social networking sites, but are much more engaged:

Each region has a different leader as measured by total time spent. Friendster, for example, was once a pioneer in the U.S. but now attracts a relatively small U.S. audience (North Americans spent 4.4 million hours on Friendster in August 2007 - seventh overall in North America - versus MySpace’s leading 223.1 million hours). However, people in Asia spend more time on Friendster than any other social networking site.

If you are a global marketer, there’s a great opportunity to capitalize on the rapid adoption of social networking sites outside of the U.S. But you’re going to have to ‘get local’ and understand which sites will maximize your reach in a particular region.

Related: The receptivity to advertising on UGC Sites.

Next: How MySpace Monetizes More Than Facebook.

Josh Chasin, our Chief Research Officer, has taken the leap as a columnist, contributing the Online Metrics Insider column for MediaPost Publications. In his first post, he provides a review, at breakneck speed, of the state-of-the-metrics industry. Josh helps put most of the key issues in our industry into neat perspective. I highly recommend you give the blog a read.

Josh’s main thesis is that: “one of the consequences of being the most measurable medium is that the Internet ends up as the medium with the most measures. We tend to experience this as paradox - the Internet is inherently measurable, yet measures are abundant and widely divergent. When you think about it, though, this is not paradoxical at all. Measurability begets measures. We have to stop letting this abundance of metrics keep us from doing the business we need to do.”

Among the issues Josh addresses are…

• What are the key differences between the approaches of comScore, NetRatings, Alexa, Hitwise, Quantcast, and Compete?
• What is the essence of the audience measurement versus web analytics dispute?
• Why is there so much variation in web analytics results?
• Will the MRC audits and accreditation ameliorate the differences in the metrics reported by different sources?
• Do we need to standardize the standards?

Read Josh’s post to get his view on these and other pressing issues in the measurement of online behavior.