Google Enters ComScore's Turf
Monday, June 30, 2008
Suddenly having Google as a competitor could quickly spell death for a smaller firm. When the search giant last week unveiled a tool that measures audiences for various Web sites, Reston-based ComScore saw its stock drop by 23 percent in one day.
Now the Web analytics company is working to convince shareholders and clients that its services trump those offered by Google and that its business will not be harmed.
"I think Google's main interest is to sell more display advertising rather than be in the audience measurement business," ComScore chief executive Magid Abraham said in an interview Friday. "I don't think this will change what we do a whole lot."
ComScore has become a major player in the Web measurement business. The company, which went public a year ago, collects detailed data about consumer behavior on the Internet by tracking what panels of people do online, from the sites they visit to the products they purchase. Along with that of its chief competitor, Nielsen Online, ComScore's data are widely used by both publishers and advertisers to quantify Web traffic -- a key metric in online marketing.
Google's new Ad Planner service is designed to help ad buyers decide where to place advertisements. For example, if a media buyer had found success placing ads on iVillage.com or WebMD.com, Ad Planner could identify other sites that attract similar audiences. It provides general traffic and demographic data such as the gender, age, education and household income of visitors to particular sites. It's not clear how Google is collecting that data.
Separately, the Silicon Valley company recently introduced a new layer of Google Trends, which calculates a site's audience by using a combination of search data, opt-in panel data and other third-party market research.
Unlike ComScore's data, Google's services are free.
"Anytime Google appears as a direct competitor and gives away a product for free, the initial reaction is that it's a terrible thing," said Todd Greenwald, senior analyst at Signal Hill Capital Group in Baltimore, who said he expects ComScore's stock to bounce back. It ended down 22.8 percent for the week, at $21.48.
Greenwald said free measurement tools are offered by companies such as Compete and Alexa, but "that has not swayed people away from using ComScore."
In general, Web measurement services have been questioned because there are often wide discrepancies between companies' data and because the results often differ from the figures Web site owners record based on their own internal logs. That was brought home earlier this year when ComScore's numbers for Google differed from those from the Web giant's own count.
ComScore has gone through a rigorous audit by the Media Rating Council, an industry group that reviews major audience counters for a variety of media. It's not clear whether Google will also undergo the audit process, nor is it clear how Google is collecting its data, said Jason Helfstein, an analyst at Oppenheimer & Co. in New York. The company may be using its own information gathered by its widely distributed toolbar, searches and other products, as well as data from Internet service providers, he said.
"This is likely to create quality of data and privacy issues," he wrote in a note to investors. Google Ad Planner puts the company in the position of recommending sites to advertisers while also selling ads on those sites, which could present a conflict of interest for big advertisers, he said.
Other Web-measurement companies say they don't feel threatened by Google's entry into the market. Nielsen Online has a partnership with Google to help quantify TV ad audiences. "We have not analyzed the tool in great detail, but generally believe the marketplace benefits from services that support buying, planning and decision making," Nielsen said in a statement.
Konrad Feldman, chief executive of Quantcast, a media measurement service, two weeks ago launched its own Media Planner product that helps ad buyers search for audiences.
"We're in a big marketplace that's growing quickly," he said. "There's a lot of people who are keen on using Google's part of the business, but that doesn't mean we aren't going to be successful."
ComScore's Abraham said he sees Ad Planner as a way for Google to further dominate the online advertising industry by enticing ad agencies and smaller advertisers to put more dollars toward its own ad network. He said he sees the tool as more of a threat to established online publishers because it helps advertisers find their target audiences elsewhere on the Web.
"If you're a sophisticated advertising agency, you still need a neutral, third-party tool like ours," he said. "This may make us a lot more friends in the long run."