The online advertising industry has been buzzing over the recent introduction of a couple of new media planning tools and whether or not they had the potential to shake up the industry. Now that advertisers and media planners have had the opportunity to examine the tools, the reviews are beginning to roll in. Here are two interesting articles examining ad industry reaction: David Smith’s take in Mediapost’s Metrics Insider and Mike Shields’ article in MediaWeek.

Many of the readers of this blog will probably remember comScore’s report on Radiohead’s “pay what you want” distribution model for their 2007 album “In Rainbows” back in November. The results of this study precipitated a lively debate in the blogosphere on the merits of this groundbreaking approach to music sales.

It was clear that this “pay what you want” model represented a fascinating case study in both economic theory and human nature. Harvard Business School evidently agreed that it warranted further academic exploration in formulating a new case study entitled “Radiohead: Music at Your Own Price,” based on the comScore data. The two parts of the HBS case study can be found here and here.

The publication of this case study comes on the heels of comScore’s recently published article by our CEO Magid Abraham in the Harvard Business Review on the offline impact of online advertising.

I’m delighted to tell you that if you are an academic interested in using comScore data for a B-School case study or other academic research purposes, please feel free to contact us online.

Background

We have received numerous inquiries about the paid click data released by Google on 4/17/08. Some inquiries focused on reconciliation: How could comScore and Google figures be seemingly so different? Others, recognizing that comScore’s data reflected domestic paid clicks only, questioned why we release data that only partially represent Google’s global business. Others asked about our plans for offering our own analysis and training on the proper usage of our data. Our answers to these questions are provided below.

Summary

The main difference between the paid clicks trends reported by Google and comScore can be traced to the fact that the comScore paid click data cited in financial analysts’ reports (and subsequently reported by the media) are U.S. data only. Analysts’ efforts to use comScore’s domestic data to estimate Google’s global trends were misguided. In fact, a detailed analysis by comScore of the global paid click data publicly reported by Google indicates that Google’s U.S. trends are:

1) Weaker than their global trends, but
2) Are consistent with comScore’s U.S. paid click data

It also needs to be noted that comScore does not currently provide a measurement of global paid click data and has never claimed that its U.S. data can be used to “predict” global trends. In fact, in late February, comScore posted on its blog a warning of the potential misuse of its U.S. paid click if used to predict Google’s first quarter global financial results. Unfortunately, despite this, many in the financial community and in the media have chosen to do otherwise.

A) Making the Right Comparisons
To do a fair and accurate comparison, it is first important to understand the differences between the comScore and Google paid click metrics. Google’s publicly reported “aggregate paid clicks” refers to global paid clicks that come from search on owned and operated sites and partner sites, as well as paid clicks that come from the Google Content Network (O&O + AdSense). On the other hand, comScore’s paid click report currently refers to domestic paid search clicks only. The following table summarizes the differences:

Measurement Metric	comScore Reported	Google Reported
U.S. Web Search	√	√
AOL and Ask Reply Page Search		√
Search on 3rd party site such as NYTimes.com		√
AdSense, Gmail, Other Content		√
International Web Search (O&O or 3rd Party)		√
International AdSense, Gmail, YouTube		√
Percentage of Google Reported Clicks	15%-30%	100%

To reconcile the two data sets, it’s clear that we need to do a comparison based on U.S. trends only and try to make the comparison as “apples to apples” as possible. While comScore is working hard to develop a measurement of AdSense paid clicks, at present we only report on paid search clicks and try to get as close as we can to the definition of what Google reports. When we include U.S. paid clicks for AOL and Ask in the comScore data, the trends in Google’s paid clicks change as follows:

comScore Reported U.S. Paid Search Clicks	Y/Y	Q/Q
Google Only	1.8%	-9.3%
Google + AOL + Ask Reply Page	5.4%	-5.8%

To get to a comparable U.S.-only figure based on Google’s publicly reported data we started with Google’s reported U.S. revenues and adjusted for CPC price increases. While Google reported Q1 ‘08 total revenue growth of 7% vs. Q4 ’07, international revenue was up approximately 14% and domestic growth (excluding the DoubleClick acquisition) was flat. Based on Google’s publicly reported data, one can conclude that Google’s CPC prices increased by 18% Y/Y and 3% Q/Q. The following table provides a trend summary:

Google Reported	Y/Y	Q/Q
U.S. Revenues	29.8%	0.3%
CPC Prices (estimate)	18%	3%
Inferred U.S. Paid Clicks	10%	-2.6%

Unfortunately, this is as close as we can get to an apple to apple comparison based on Google’s publicly reported data. We cannot, at present, make adjustments for paid clicks on the Google Content Network (AdSense, Gmail, etc.) and search partner sites other than Ask and AOL. Nevertheless, the differences between the comScore and Google data have narrowed considerably and are directionally the same:

Best Available Comparison	Y/Y	Q/Q
Estimated U.S. Paid Clicks (Search + Content) as Reported by Google	10%	-2.6%
comScore U.S. Search Paid Clicks including AOL and Ask	5.4%	-5.8%

This contrasts with what an inexperienced comparison would, at first glance, believe to be a large difference:

Incorrect Comparison	Y/Y	Q/Q
Google Reported Global Search + Content Paid Clicks	20% 4% 1.8% -9.2%
comScore U.S. Search Paid Clicks (Google Only)

B) Key Takeaways

Quantitatively, we have shown that when we compare the comScore and Google data on a consistent basis the differences in the trends of Google’s U.S. paid clicks are small. But, one might ask: what about qualitative analysis? Did comScore’s interpretation of its own data accurately anticipate the key conclusions from Google’s actual first quarter results? We believe the answer is a resounding “Yes”. While many in the media and the financial community had originally interpreted the comScore U.S. paid click data to foretell a negative impact from the U.S. economy and a disappointing Google first quarter, comScore’s own diagnosis can now be seen to have been remarkably accurate. comScore’s analysis, originally posted on the comScore Voices blog and dated February 29, 2008, asserted:

• Google’s growth in U.S. paid clicks has decelerated.
• The softening in Google’s U.S. paid clicks was not driven by the economy:
  “While we do not claim that these concerns are unwarranted, we believe a careful analysis of our search data does not lend them direct support.“
• The key driver was Google’s own quality improvement efforts:
  “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.”
• CPC’s are likely to increase due to the reduction of sponsored ad supply:
  “The reduced supply, as well as the higher minimum bids, contributes to an increase in the price per paid click, which is what helps counteract the slowdown in the absolute number of paid clicks. Therefore, Google’s revenue will not necessarily suffer from this.”
• Google’s first quarter revenues will likely be strong despite the sequential decline in paid clicks:
  “It is entirely possible, if not likely, that the improved revenue yield will continue to deliver strong revenue growth in the first quarter.”

It is ironic that this blog posting was criticized by some readers when it was first published. It seems that too much attention was myopically focused on just one data point, the trend in Google’s U.S. paid search clicks, an admittedly important metric, but one which quantifies just a single element of a multifaceted revenue equation. This was accentuated by the coincidence of two major changes that were happening in parallel and which can also have had a negative impact: 1) The deteriorating U.S. economy stoked fears of a slowdown in online advertising that was previously assumed by some to be immune to an economic downturn, and 2) Google’s own advertising quality efforts negatively impacted paid clicks – just as a poor economy might have. In statistics, they call it collinearity. It always wreaks havoc with data analysis!

Regardless of who took what position, there are important lessons for us. While comScore’s first priorities are to provide our clients with the highest quality data and unparalleled innovation in measurement, it’s clear that we can also do a better job of explaining the meaning and the limitations of the statistics we publish, not only to the financial community but also to the media. comScore’s data has become so widely used by so many different constituencies that it is incumbent on us to do this.

In addition, we will continue to strive to become the first company to provide the desired and more complete picture of the global search market, beyond that obtained from U.S. paid search clicks, by providing international estimates and reporting of contextual ad clicks. We have been working on this challenge ever since we released qSearch 2.0 last August, when we became the first and only company to measure worldwide search queries. Though we are getting close to measuring paid versus algorithmic clicks globally, the effort has been no easy task. Nevertheless, we should all remember that paid click data provide only part of the picture when trying to understand and forecast search revenues. For example, in the comScore database we currently have no way to directly measure CPC prices, which are necessary to accurately translate paid clicks into revenues. While we believe that many of the financial analysts using our data understand this, we should all be mindful that the primary uses of comScore’s data are for marketing and media analysis purposes, where being able to accurately measure Internet users’ online behavior is the key objective. We know we do that with excellence. That said, the commentators who pointed out that other data points need to be added to comScore’s data so as to paint Wall Street’s optimal financial picture, got it right. We agree, and have never pretended otherwise.

Many investors are breathing a sigh of relief after Google announced earnings on Thursday beating the consensus street estimates. In recent months, investors have become understandably concerned that the decline in U.S. consumers’ spending could translate into a cutback in online advertising, an industry many thought would be immune from an economic downturn. And with the dearth of public information available on Google’s key revenue drivers, the market turned much of its attention to comScore’s paid click report to help understand what might be going on with one of the key determinants of Google’s revenue.

comScore reported that Google’s U.S. paid clicks in Q1 were up 2% vs. year ago, and down 9% vs. Q4 ’07. During the earnings call, Google noted a 20% increase in aggregate paid clicks vs. year ago and a 4% sequential gain.

Why the discrepancy, you may ask?

As is always the case, we need an apples-to-apple comparison. comScore’s paid click report refers to domestic paid search clicks only, while Google’s “aggregate paid clicks” refers to global search and also includes affiliate site ads (i.e. AdSense). Two fundamental components of Google’s reported number – international clicks and AdSense clicks – are not currently included in the comScore report.

Google reported Q1 ‘08 revenue growth of 7% vs. Q4 ’07, with international revenue up approximately 14% and domestic growth (excluding the DoubleClick acquisition) essentially flat. If we take Google’s overall revenue growth of 7% and their reported 4% increase in aggregate paid clicks, we can estimate that the average cost-per-click (CPC) increase during the quarter was approximately 3%.

Now, if domestic paid click revenue was flat while CPC was up 3%, we can conclude that aggregate domestic paid clicks declined about 3% during the quarter. This brings us a lot closer to our estimated 9% decline in paid clicks. The remaining delta can likely be partially explained by strong revenue growth from Google’s YouTube and the Adsense network. In fact, comScore’s U.S. Video Metrix numbers show YouTube is up ~20% vs. Q4 in terms of video views.

comScore has always cautioned that there are multiple factors that needed to be considered when projecting Google’s earnings this quarter. In a February blog post on the subject, comScore CEO Dr. Magid Abraham and SVP James Lamberti concluded “There is no obvious reason why the economy would negatively impact" Google’s paid clicks, based on our analysis of the paid click activity at other search engines.

Moreover, when asked by the Wall Street Journal’s Kevin Delaney on Wednesday – one day before Google reported -- what our paid click data might indicate for Google, Dr. Abraham said he believed that comScore’s paid click data were consistent with 5-10% revenue growth. In retrospect, the prediction proved to be quite accurate.

In summary, a closer analysis of the Google results confirms that: 1) U.S. paid clicks have indeed softened, 2) that the softening is not due to the economy, and 3) Google’s overall revenue performance was driven by strong international growth and CPC increases. comScore has been consistent in its assessment that U.S. paid clicks alone would not tell the full story without considering CPC increases, that macroeconomic factors did not appear to be weighing on Google, and that Google might well have solid revenue growth in Q1.

I caught an interesting article by Matthew Mosk in the Washington Post today discussing Barack Obama’s success at fundraising online during this Presidential primary season. His campaign’s success at attracting online donations is likely a function of several factors, including the general enthusiasm for his candidacy and the demographics of his supporters, many of whom are younger and more tech-savvy. But the article focuses on another key factor, which is that his campaign has been very adept at understanding and using the online channel in a way that hasn’t really been done in the past.

In a lot of ways, political campaigns are like traditional advertisers. They have an inherent aversion to risk and are therefore reluctant to try out new tactics, relying – perhaps too heavily – on strategies that they’re comfortable with. The irony of this approach, however, is that the campaigns that challenge the status quo and understand the dynamics of the changing landscape are usually the ones that perform better than expected. Before anyone had any idea that the Internet could be used effectively as a political tool, Howard Dean rode it to his unlikely frontrunner status for a good portion of the 2004 Democratic primary campaign. And we see similar examples in the business world of companies who start doing things differently, in ways everyone said couldn’t be done, that suddenly emerge as top dogs. Google, of course, comes to mind.

Perhaps because of these similarities, Barack Obama has drawn comparisons to companies like Google and Apple – a reflection of his brand and a newer, more cutting-edge approach to politics and campaigning. Both anecdotally and empirically, I’ve seen abundant evidence that this is the case with respect to his campaign’s online efforts.

The Post article said that the Obama campaign spent $2.6 million in online advertising in February, more than Hillary Clinton by a factor of 10. In January, he spent about $768,000, still outpacing Clinton by a factor of 4. I decided to do a little digging in our Ad Metrix advertiser data to see what it showed, and not surprisingly the Obama campaign was way out front in his online advertising efforts, serving about 58 million display ads in January.

And Clinton? Her display advertising efforts didn’t even register above our minimum reporting threshold, indicating display ads are an immaterial part of her advertising strategy. What a lost opportunity for her campaign!

We’ve conducted several studies that have demonstrated the powerful brand-building impact of online display ads, and the Obama campaign seems to understand that. Here’s a look at their most-served ads in January.

What’s interesting is that each of the top ads being delivered includes an invitation to “Join Us,” which has probably been a very effective tool in building a broad email and potential donor base. That the vast majority of his ads (nearly 80%) ran on Yahoo! Sites and Microsoft Sites, both of which skew towards older than average age segments, is an indication that his campaign is using the Internet as a vehicle to reach out to new voter segments rather than going after the low-hanging fruit of young voters.

So it’s no wonder that Obama has been able to raise nearly $100 million during the first two months of 2008 alone tapping a large base of small dollar donors online rather than the more traditional model of prying large donations from a small base of wealthy donors. It’s also why the Obama campaign will serve as the model for how all future political fundraising efforts are conducted and why the Internet will be central to those strategies.

Like many of you, I’ve been following the 2008 presidential primary season with great interest. And while the first non-incumbent election in decades has made the early races even more intriguing than usual, it’s especially exciting for me to see the very important role the Internet has played in shaping the course of the primaries.

Back in 2004, former Vermont Governor Howard Dean’s campaign really woke everyone up to the power of the Internet in politics. The Washington establishment had become accustomed to the way elections had been won over the course of the past several decades –TV ads, newspaper media coverage, direct mail, and good old fashioned machine politics. But Dean, the firebrand Washington outsider who was never supposed to stand a shot at the nomination, managed to stir up a strong grassroots movement using the Internet and raised enormous sums of money online, propelling him to his unlikely status as the Democratic frontrunner. Though Dean’s campaign ultimately fizzled, it left an indelible imprint on American politics. The Internet was quickly changing the political landscape and candidates realized that they ignored it at their own peril.

Fast forward to the 2008 primaries. Every political candidate learned the lessons of Howard Dean and now has a well-organized Internet strategy, including high-powered, multimedia websites, personal profiles on MySpace and Facebook, and their own YouTube channels, as a starting point. But it’s not just about having a presence online -- the real significance of the Internet lies in its ability to cultivate a movement.

I’ve heard a few people call it “the Facebook election” in reference to the way this election -- and Barack Obama’s candidacy, in particular -- has excited young voters in a way that hasn’t been seen since the 1960s. The primaries have seen younger voters turn out in record numbers and take an active role in contributing their time, energy, and even money. The Internet is lowering barriers to entry and making it easier for many people to get involved and stay informed. It is also making it much easier for average folks to open their wallets and contribute with a few clicks of the mouse.

Money has played a more significant role than ever before, as candidates continue to set records for fundraising. In the past, raising money meant sending out mailers and making thousands of phone calls, which required a considerable investment in resources which typically yielded a slow trickle of contributions. Not anymore. Now the candidates can blast an email to the millions of people on their email list for a fundraising drive, and get them to contribute online in a matter of seconds. In the hours and days after Super Tuesday, both the Obama campaign and Clinton campaign parlayed their respective victories into massive online donor drives. Obama raised more than $7 million in just one day after Super Tuesday, while Clinton reportedly raised $10 million within just a few days. To date, both campaigns have raised well in excess of $100 million since the beginning of 2007.

Though the fundraising on behalf of both campaigns has been unprecedented, Obama has had a distinct advantage in online fundraising. This was apparent in the comScore data, which showed Obama with a 3:2 advantage versus Clinton in the number of visitors to his donation page in January (256,000 vs. 171,000). Interestingly though, if we assume that each visitor to the donation page was indeed a donor, Hillary’s website had a higher conversion rate (15% vs. 12%).

Looking at the traffic trends to the two candidates’ websites, there are a few interesting things to note. For most of 2007, visitation to their websites ran pretty much neck-and-neck even though Hillary was generally running much higher in the national polls and was considered by many the presumptive Democratic nominee. But as Obama’s campaign has seen a momentum surge in January and into February, we’ve actually seen visitation to his website display separation from Hillary’s, nearly doubling the number of visitors in January (2.2 million vs. 1.1 million).

The relative surge in activity at Obama’s site may be a function of a couple factors. In part, it reflects the overwhelming enthusiasm among his base of supporters. However, it probably also reflects the fact that he’s a newcomer to the national political scene, and many primary voters are seeking to find out more information on him. These lurkers are almost certainly less likely to contribute money right away.

With money of increasing importance at the latter stages of a campaign – especially to compete in the remaining big states like Texas, Ohio and Pennsylvania -- it will be interesting to see if Obama’s campaign can succeed in converting a large number of the newe