Google Disaster: Comscore Reports Awful January*

Comscore reported shockingly bad US paid click performance for Google in January: flat growth year-over-year versus a 25% increase in Q4. Even if Comscore is only half right, this is a disaster.

Flash note from analyst Bob Peck at Bear Stearns:

comScore reported 532mn domestic paid clicks in Jan. 08, flat YoY, but down 12% sequentially (Jan. 08 vs. Oct. Oct. 07). The click through rate was the lowest since comScore stated reporting this data and was down 200bp from levels in 4Q and down 400bps from levels in 1Q of last year. While this is one data point for domestic google.com only and from one source, which may or may not be accurate, it is a concerning data point and somewhat reflects what we have heard from SEMs - that they were not seeing a high volume of clicks from consumers possibly due to the economic slowdown.

Note that Google reported a 30% YoY growth rate in overall (global) paid leads in 4Q07 and comScore reported growth of 25% YoY for domestic google.com paid leads for 4Q. While not an apples-to-apples comparison, we will continue to monitor the comScore numbers for Feb and Mar before definitive conclusions can be drawn.

This report is so shocking it bears repeating: ComScore said Google's US revenue units (paid clicks) grew 25% last quarter--a quarter that disappointed Wall Street. In January, the same source, ComScore, says the same revenue units were flat.

What could be the explanation for this? Strapped shoppers not clicking on as many links. This is exactly why one insider argued last week that Google is very exposed to economic weakness--and why we have been concerned for six months that Google was not "immune" to a recession.

Yes, Comscore could be wrong, and, yes, it's only one data point. But hard to imagine how the bulls are going to spin this one.

UPDATE: AmTech (Google bull) weighs in to say that Comscore has been wrong in the past:

While comScore click-through data for GOOG was reasonably accurate last quarter, it has not been historically. We do not believe the sample has suddenly gained statistical significance. Nielsen has also shown dramatic month-month swings in share and growth. The weakness from this data was compounded by the technical struggle for the stock to maintain $500 and decline through this psychological threshold on reasonably high volume. Paid click volume reported by GOOG did indeed show deceleration in December. In our view, efforts by GOOG to improve search quality and make online retail a more eff icient experience for consumers will deflate paid clicks and inflate price-per-click. As long as lower volume continues to come with higher pricing (as it did in Q4), we are not concerned with GOOG’s ability to grow revenue. As GOOG continues to be a black-box model with no reliable inputs, third-party surveys get more investor attention than deserved especially following a disappointing quarter.

UPDATE 2: Jeffries adds Comscore's monthly data on Google click growth for October through January. This adds more fuel to the theory that Google's click growth has ground to a haltl:

October: 37%
November: 27%
December: 12%
January: Flat

It is hard to see how this deceleration could possibly be explained by "accidental click reduction" and other quality programs (An explanation that never made sense for the Q4 shortfall anyway). The steady deceleration also makes it hard to argue that the January report is just a wacky one-month Comscore aberration.

See Also:
Google Bulls Try to Spin Comscore Disaster, Fail
Google Very Exposed to Economic Weakness