Right Research, Wrong Question

What happens when good data is used the wrong way? The data gets all the blame, as seen in the latest round of finger pointing about ComScore and their reporting of Google click growth.

In February, when ComScore, a market research firm that tracks online marketing and advertising, published findings that found growth in Google’s paid click traffic was down significantly versus the prior year, Google’s stock fell into a steady decline, retreating almost 45% from its 52 week high.

However, when Google announced recently that its 1st quarter profits were up 31% versus the prior year, Google’s stock shot up, while ComScore’s own stock was pummeled. Google’s CEO Eric Schmidt even made a veiled reference to “third party” data missing the boat when it came to predicting Google’s performance.

The problem was that what ComScore was measuring (Google’s paid click growth in the US) wasn’t matching what Google was reporting (global and third party paid click growth). According to Andrew Lipsman at Comscore:

“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.”

Additionally, when you do an apple to apples comparison, the trends between ComScore and what Google reports itself are directionally the same:

Not surprisingly, the nuance of research data can generally be lost on the investment community.

However, just because data is used in a wrong way, doesn’t make the data wrong itself.