When Google announced strong Q1 earnings last week, some financial and media analysts wrote that Comscore’s reports of slowing growth in Google’s paid clicks missed the mark. That conclusion is patently false. Unfortunately, many pundits attempted to draw conclusions about Google’s worldwide revenue performance based on Comscore’s domestic paid click data, resulting in an apples-to-oranges comparison. Had they used Comscore's domestic paid click data to better understand Google's domestic revenue trends, they wouldn't have missed an important U.S. story and they also likely would have avoided making the wrong call on Google’s worldwide business.
Following several historical quarters of strong sequential domestic revenue growth (including the seasonally equivalent Q1 2007), Google’s Q1 2008 revenue growth was essentially flat, which represented a significant change for Google’s domestic business. Such an important trend was also evident in Comscore’s paid click data.
The chart below shows the directional association between Comscore’s domestic paid click trends as compared to Google’s domestic revenue trends, representing a 94% correlation.
Of course, this is not a perfect correlation because the Comscore data do not include the impact of changes in Google’s price per click and do not include paid clicks from partner sites like AOL, Ask, Washington Post, etc. nor paid clicks from the AdSense network. But the strong relationship of the two trends is undeniable.
There is of course a lesson to be learned here. To extrapolate a single data point across all aspects of a company's business can lead to wildly inaccurate conclusions. Finally, to confirm the accuracy of the Comscore paid click data, we previously published an apples-to-apples reconciliation on this blog. This analysis reconciles the Comscore data with metrics shown in Google’s Q1, 2008 financial report. In short, Comscore got it right – both quantitatively and qualitatively. What was wrong were the conclusions that some people drew based on inherently flawed comparisons.