One of the promises of the Internet is the ability to target an exact individual. After all, unlike radio or TV, where messages are simultaneously broadcast to a broad audience, online advertising is served one impression at a time. Theoretically, if you know who the user is, you can perfectly target your message, or choose not to deliver it at all. A trend has recently emerged, whereby agencies can buy a ‘guaranteed’ online audience, in the sense that the people exposed fit specific audience criteria, such as male teenagers, females 18-34, or auto intenders, etc. The sellers are responsible for the guarantee, which they base on what they “know” about their users or visitors. It is however often the case that the level of knowledge about the individual user is less than perfect, and there is a substantial discrepancy between promise and reality. This naturally results in a lot of consternation and finger pointing that is ultimately bad for the industry.

To understand the source of discrepancy, we need to remember that user identification on the Internet is ultimately based on a cookie. If the cookie can be associated with some level of information about the visitor, it opens the door for targeting. The problem, however, is that a cookie is associated with a visitor at a particular point in time, such as a registration or a transaction, but may point to a different person at a later time. For example, you may register as a user of the Washington Post on your home computer, an event captured by a Washington Post cookie set at the time you registered. However, any user that visits the Washington Post from your computer at a later point, whether a spouse, a child or a friend, will be represented to the Washington Post by your registration cookie, which naturally leads the Washington Post to think it is actually you. If a campaign on the Washington Post seeks to target an adult like you, it may be actually reaching a different user on the same machine, which could be a person with very different characteristics – such as a child or teenager.

This situation happens much more frequently than many people realize. To quantify the incidence, we conducted a study on a number of popular sites to assess how frequently a cookie on the site is associated with multiple users. (Note: comScore identifies users in its panel based on a series of unique biometric identifiers including mouseclick and keystroke patterns and does not rely on cookies.) We found, as the table below illustrates, a site-average of 44% of cookies corresponding to a single user. In other words, a cookie points to a given user with certainty only 44% of the time. An average of 56% of cookies point to multiple users, which means they will point to a different user than the one who originally registered at least 50% of the time. That indicates an overall probability of at least 28% that a cookie will point to the wrong user.

Even if a cookie points to the right user, there is no guarantee that the self-reported demographics of the user are accurate. The degree of accuracy of registration information varies depending on the site and demographic variable. Many people misrepresent their age and income. Some teenagers represent themselves as adults to avoid access restrictions. Many people overstate their income and understate their age on a dating site. Others just enter the wrong information out of privacy concerns. The following example, based on comScore panel data, shows a handful of individual teenagers, each with conflicting self-reported age across a handful of popular social networking sites. The uncertainty about the accuracy of self-reported information compounds the errors caused by the cookie issues discussed above.

Where this leaves us is that it is virtually impossible to “guarantee” an audience 100%. Based on our experience, a delivery of 80% of the target is best-of-class. More often than not, the real delivery is typically around 50%, depending on the campaign, the quality of registration data, and whether login cookies are used or not.

Rather than setting unrealistic expectations, the industry might be better served with a measure of targeting lift – such as has been used in the direct mail industry for decades. A campaign that promises a 300% target lift means that the targeted audience has 300% the incidence of the target that would be achieved without targeting. These kinds of impressive target lifts are unique advantages for the Internet, and yet they represent goals that can be realistically met.

We strongly urge ad buyers and sellers to start a productive dialogue about this issue. The absence of a common understanding only serves to undermine the confidence traditional advertisers have in using online media -- which is obviously something none of us desire.

This post was originally published at MRWeb.com on October 6, 2009.

It is often said that the Internet is the most measurable medium. This is certainly true of measuring ad impressions and click through rates, which are critical elements of advertising measurement. However, measuring audiences has been far more challenging, particularly in light of the ongoing differences between server logs, which represent a census of usage, and panel based estimates provided by third party companies including comScore. The purpose of hybrid measurement is to derive audience projections that reconcile to census usage counts and deliver the key metrics of unduplicated reach and audience demographics required for media research.

An obvious question is why not use server data alone since it represents a census of usage? Server data accurately measures usage tonnage: page views (PV) and sessions, but its measurement of usage time is inaccurate. Furthermore, unique user counts are primary based on unique cookies. Cookies are well known as a poor surrogate for persons. Multiple users on the same machine are represented by one cookie, whereas a single user using multiple browsers on the same machine or using multiple machines can be represented by multiple cookies. When users delete cookies they get counted multiple times, which can be as often as they visit a site, if they set their browsers to delete their cookies after every session. Finally, there is a problem with machines that reject cookies. In addition, a key requirement for audience measurement is to measure the audience of not just one site, but the unduplicated reach of multiple sites, to enable the evaluation of media plans t spanning multiple sites. Server logs typically record usage of sites owned or operated by a single publisher, and therefore do not allow for cross-site overlap with third party or competitive sites that could be used as part of campaign.

Panel measurement tracks an individual person with known demographics across sites and time without reliance on cookies. Audience reports include demographic composition, unduplicated reach and frequency, and rich segmentation based on behavior such as content consumption or purchasing activity. However, a panel is based on a sample of people and therefore is subject to bias and sampling errors. In particular, it is difficult to represent work usage at large enterprises where IT security policies prohibit the download of panel metering software. Finally, niches sites may be difficult to represent via a panel designed to mirror a mainstream audience.

Hybrid measurement is a solution that combines the best aspects of server side census measurement, and of person based panel measurement. The basic idea is that census measurement provides an actual count of PVs which can be used to anchor audience measures. On the other hand, panels provide rich information on person-level usage and demographics. The combination allows to match the PV counts and to estimate number of unique persons visiting a site or a group of sites, in a manner that reconciles with the census level page views. It offers a ‘one number’ solution that eliminates the inherent conflict in estimates between web analytics and audience measurement reports and allows publishers to focus on building their business rather than argue about metrics.

There is general industry agreement that this the right conceptual approach. However, the devil is always in the details and a number of requirements must be met for this to fulfill industry needs:

1. Audience counts must reflect people, not machines, browsers or cookies.
2. Rigorous standards must be used to ensure that a site’s tags fairly represent its audience. Tagging is an error prone process, and care must be exercised to ensure that all pages are tagged, but also that only legitimate pages, those that are actually requested by user, are tagged once and only once in order to prevent rival web sites from gaming the system to boost their audience. Audit safeguards must be systematically deployed to ensure accuracy and fairness across sites.
3. The hybrid estimation methodology must fundamentally account for the drivers of differences between panel and census pages views include not only differences in unique visitors, but also differences in usage frequency and usage intensity. Just patching census usage metrics and panel unique visitors on the same report is naïve and misleading.

Hybrid measurement can be used to measure all types of digital media where a census count is available. This includes the web, online video, the mobile web, online games, and digital advertising campaigns. It will be also increasingly applicable to TV measurement as census counts of TV usage become readily available from digital set-top boxes. It is the dawn of a true revolution in media measurement.

As occurred at the Davos World Economic Forum conference earlier this year, the global economic crisis was a pervasive subject at last week’s “Summer Davos” meeting in Dalian, China. I was asked to share my thoughts on what companies like comScore can do to continue growing in rocky economic times.

I’ve always believed that every cloud has a silver lining, and so it is with a recession. Or, to paraphrase Paul Romer, the noted Stanford economist: “ A crisis is a terrible thing to waste”.

As a company, the majority of comScore’s revenues come from North America and Western Europe, where the Internet Media and e-commerce markets have been hit pretty hard and their growth has slowed significantly. Needless to say, in this environment some of our customers are hurting. Many young Internet companies are having funding difficulties. Established companies are reducing their marketing budgets. Some financial services clients such as hedge funds are in a state of crisis. It all makes for a challenging marketplace. However, in the midst of these economic challenges there are some attractive opportunities. For example, the Internet’s lower cost offers marketers the opportunity to obtain the same advertising reach, frequency and sales impact as traditional media -- but at a lower cost. The economic headwinds are causing many companies to revaluate their investment in digital marketing -- and comScore is the right partner that can provide them with the proof of performance that’s needed to justify the movement of their ad dollars to the Internet. In fact, the Internet offers such economic advantages in both advertising and e-commerce that we are seeing the Internet’s share of total media and retail spend increasing at a rapid clip.

One adjustment strategy that is paying us dividends is increasing our focus on international growth in markets such as Brazil, China, and other Asian countries that are growing faster than the rest of the world. These geographies represent a new growth opportunity for comScore. Consider that, today, 85% of all Internet users reside outside of the United States but only 15% of comScore’s revenue comes from outside the U.S. This is clearly a very attractive long term opportunity for us, but one that also acts as a short term counter to the domestic and European challenges.

Jack Welch once said: ‘Buy your competition or bury them’. I think that is excellent advice. Acquiring competitors can often be helpful when you can get it done. Acquisitions can open up adjacent markets, help accelerate international growth, or provide strong distribution synergies. When the economic crisis began, we found it was often a challenge to acquire private companies because their valuation expectations had not been reset commensurate with the lowered valuation of public companies. That is now changing and it’s clear that acquisition opportunities can be pursued at attractive valuations and leveraged to stimulate growth.

Finally. the abundance of talent that has been freed up in this labor market offers companies the opportunity to hire top notch people in key technical, operating or management positions, not to mention junior positions. The quality of available talent today is the highest it has been in a generation and no one should miss the chance to upgrade human capital, and raise overall corporate IQ and capabilities.

Bottom line, there is a genuine silver lining to this recession. The strategies I have outlined, coupled with rigorous cost reductions to maintain margins and fund necessary investments, will certainly help in the short term. More importantly, they offer the best recipe for generating far stronger growth when the clouds clear and the general economy begins growing again.

Many small brands are never advertised on TV and do not get to experience the glamour and rewards of brand advertising. Often, the reason is the unattractive economics of trying to reach a low incidence buyer base. For instance, in a product category with only a 5% buyer penetration, a brand using a gunshot advertising approach on TV will reach 95 out of 100 people who are not category buyers. Unless the product has a very high lifetime value like diapers, advertising on TV would be prohibitively expensive. Fortunately, those neglected, advertising deprived brands now have a cost effective means of reaching their audience. The medium, as you might have guessed, is online advertising.

comScore just completed a study where we built mathematical models to identify CPG product category buyers based on their surfing history. We used the single source database we’ve built with IRI where we track online behavior for a large sample of households who also record their grocery purchases using handheld UPC scanners. The results were very encouraging for categories with buyer penetrations around or below 5% of the population. Based on their online browsing activity, our predictive model “scores” people on their likelihood of buying a particular category and it turns out we can use the model to identify category buyers with a high degree of accuracy. If we take the people with modeled scores in the top 20% (i.e. these are people that our model says are in the top 20% in terms of the likelihood of being category buyers), we get targeting lifts between 250 and up to almost 500 (where an index of 200 represents an increase of 100% in precision over no targeting). For example, Nail Treatment is a category with a 5.3% penetration. By targeting the likeliest 20% of buyers, one can achieve a targeting lift of 341. Another way of looking at this is to say that a campaign targeted to 20% of the scored population reaches 68% of the category buyers, significantly improving the economics of advertising as a result of a targeting lift of 341 (i.e. 68/20). The following table summarizes a few category examples:

This is a win-win scenario. The good news for brands in these types of smaller categories is that they may be able to advertise affordably for the first time by using the Internet They represent new potential ad dollars that can be cost effectively spent online, and which were never captured by TV due to its more limited targeting ability.

Last Monday I spoke to a packed room at Federated Media’s Conversational Marketing Summit in New York, where I announced comScore’s new digital audience measurement initiative, Media Metrix 360.

I’ve known John Battelle for many years and was delighted to announce this initiative at his conference and receive his support. John said, “As one of its first participants, Federated Media is firmly in support of comScore’s Media Metrix 360 measurement initiative. This new hybrid approach represents a critically important evolution in online audience measurement, especially for publishers and content networks, by better accounting for niche audiences, distributed content and the mobile environment. We view it as an important leap forward for the industry.”

Media Metrix 360 will offer a best-of-breed approach to digital measurement that continues to revolve around measuring what matters most to the online advertising industry – people. This ‘panel-centric hybrid’ solution combines person-level measurement from comScore’s proprietary 2 million person global panel with Web site server metrics in order to account for 100 percent of a Web site’s audience.

Even in the initial stages of implementation of the total system, we already have server-side coverage of over 80 percent of the total U.S. Internet audience, or approximately 160 million people. And we have observed 400 million unique comScore cookies among this group of users in a month. There are two quick points I’d like to make about these facts. The first is that if we do the math (400 million cookies/160 million people) it equates to approximately 2.5 unique cookies per person. If that number sounds at all familiar to you, it might be because that was the same cookie inflation factor we identified in our 2007 study of cookie deletion rates. The second point I will highlight is that the phenomenon of cookie deletion ends up creating many more unique cookies than there are Internet users. Put another way, cookies alone cannot be used to accurately count unique visitors to a web site. The use of cookies inevitably leads to an overstatement of the actual visitor base.

After my presentation I received a number of interesting and insightful questions concerning our new measurement initiative. I’ll share the most interesting one with you.

Will this initiative enable comScore to perform deeper analysis on individual advertising campaigns?
Yes, the integration of the highly granular server data with the understanding of the characteristics of the people exposed to a particular campaign (that only panel data can provide) will enable an unparalleled understanding of campaign performance. We will be able to view the actual delivery of ad campaigns faster and in great detail, which will ultimately result in more actionable analysis and the design of more effective online media plans.

Finally, we’ve received many inquiries and requests for the slides from my presentation since our announcement, so I’d like to invite you to download them here if you are interested in finding out more about comScore’s industry-changing initiative.

Two weeks ago, I was invited to speak on a panel at the World Economic Forum’s conference on Latin America. Readers of this blog will remember that comScore was named by the WEF in 2007 as a technology pioneer, the only market research company to have received this honor. So, it was a particular pleasure for me to make the trip to Rio to discuss the role that technology can play in helping businesses in Latin America navigate the economic downturn.

The consensus view of the panel was that information technology is a key enabler that can boost productivity, and that companies in Latin America are indeed well poised for such an evolution. Nevertheless, more can certainly be done on this front. I pointed out that the use of the Internet as a marketing tool is still lagging in Latin America and that expanding its availability and use would help disseminate knowledge about products and make them available to more consumers in the region.

Latin America is already one of the fastest-growing Internet markets, with its online population and time spent online increasing faster than most other regions of the world. In order to effectively capitalize on this growth trend, marketers must be able to understand and quantify digital consumer behavior. The need for sound metrics and enhanced media accountability in the Latin American market has never been more evident.

At comScore, we’re working hard to help achieve that end. We now report Internet behavior in a number of countries in Latin America, including Brazil, Mexico, Colombia, Venezuela, Argentina and Chile. We’re seeing a very enthusiastic response from companies in the region, as well as from the large multinationals, to the availability of robust data on this important market.

Alex Banks, comScore Managing Director for Latin America, is fluent in English, Spanish and Portuguese, and will be happy to address any questions you might have about our services in the region. Please don’t hesitate to reach out to him at abanks@comscore.com.

Last month, as part of their 12th annual report on growth rates of the world’s largest market research firms, Inside Research recognized comScore as the fastest growing global market research firm over the last five years. We at comScore are proud of this recognition and have our clients and my fellow employees to thank for helping us achieve this record growth. Over 1,100 companies are drawing value from the market intelligence that we provide. Their need to stay on top of the ever-changing digital landscape is the fuel for our exceptional growth.

I would also like to thank each member of the comScore team for their hard work. Your brainpower, effort and dedication have made comScore the acknowledged industry leader that it is today. I am proud of the company that we have become and look forward to furthering our track record of cutting-edge innovation.

Finally, I’d like to thank both Jack Honomichl and Larry Gold at Inside Research. Their coverage of the market research industry is highly respected and we sincerely appreciate the recognition.

While in New York for the NASDAQ Opening Bell Ceremony last week, I had the opportunity to sit down for an interview with CNNMoney.com reporter Poppy Harlow. We talked about everything from Google’s paid click data to the many ways in which the world’s leading companies use comScore data. Click below to watch the interview.

I'm very proud to tell you that comScore rang the opening bell at the NASDAQ this morning. It is a special day for comScore, and I'd like to sincerely thank all of the comScore employees and clients that helped us get to this point.

In addition to going public in June 2007, comScore recently reached other remarkable milestones: we have now produced 100 consecutive months of data, have almost 500 employees, nearly 1000 clients and offices in 8 cities around the globe. We truly measure the digital world, powered by a panel of 2 million people from 170 countries.

Kudos to the hard work and creativity of everyone that has contributed to comScore's success. .

The following is a letter that I published today which may be of interest to readers of our blog:

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.

I published an article in the Harvard Business Review this month, summarizing some of the work comScore has been doing with clients to evaluate the effectiveness of online advertising. As with most things in business, the return on investment is what drives future plans, especially advertising plans. One of the benefits of our two million person online panel is the ability to match our panelists with clients’ sales databases to measure the purchases that people exposed to online advertising make in bricks and mortar stores. The results of these studies help quantify the ROI from the online advertising. The studies demonstrate consistently positive results showing that online display ads work to build traffic to an advertiser’s website, to increase sales on their website, and to increase sales through their in-store channels.

Use this link to read full article. A summary chart of the findings runs below.

Results from 18 studies in the finance, travel, telecommunications, and retail sectors collectively show that online ads have a powerful effect on off-line sales. Running search ads tends to be more effective than using display ads, and combining both types is more effective still. From the Harvard Business Review, April 2008.

I would like to take this opportunity to respond to a comment from Willy Quintinella posted in response to my recent blog entry “Why Google’s surprising paid click data are less surprising.” Willy raises an important question when he asks why comScore didn’t include any interpretive analysis when we initially issued our monthly paid click data and I believe his question deserves a response.

It is important to put in context how this Google episode came to be. It resulted from instantaneous market reaction to the comScore January paid click data – a regularly released comScore statistic – that we released to our clients, which include search engines, sell-side financial analysts, and advertising agencies (comScore does not release its paid click data to the media). comScore’s Wall Street clients use our data to draw their own conclusions, and, as in the case of financial analysts on the sell-side, incorporate it into research reports they publish to the investment community. Typically, comScore’s data represent one of many elements that analysts rely on to formulate their opinions. For example, comScore does not have access to important data elements such as price-per-click for forecasting revenues or to costs for forecasting earnings. This is why there is a great synergy between the services we provide and the final research product delivered by financial analysts.

We provide billions of numbers to our clients every month and we view our primary mission as ensuring that the information we release is as accurate and actionable as possible. While some clients buy additional advisory services that we provide on a case-by-case basis, we typically do not publicly comment on the financial or the competitive performance of our clients. In this particular case, however, we felt obligated to do so because there was such a dramatic public reaction to a few statistics, with a few financial analysts (in their published research reports) -- and subsequently the media -- citing these statistics as proof of weakness in online advertising as a result of a softening economy. The majority of media articles even attributed this conclusion to comScore (“comScore said”), whereas the reality was that we had never stated any conclusion. The data were certainly provided by comScore, but the conclusions were not. As we looked deeper into our data, we found much stronger support for what some industry observers have hypothesized regarding the impact of Google’s own quality efforts on the negative trends in their paid clicks. Because of this, we felt we needed to set the record straight on two counts: 1) Our data did not support the conclusions that were being incorrectly attributed to us, and 2) The number of paid search clicks is only one driver of revenue for a search engine. Pricing is also a critical component and, as later confirmed publicly by Google executives, one that turns out to be closely related to Google’s quality efforts, since these efforts affect minimum bid prices and overall supply / demand.

But this issue had, for the most part, been ignored or discounted by Wall Street and the media in their analysis and reporting. So, we stepped up to the plate and provided our interpretation of what we thought was happening. I am happy that recent comments from Google, appear to support our explanation of the reason for the decline in paid clicks and the impact on click conversion and value.

On the positive side, there is learning coming out of this experience. We are studying service enhancements in the form of additional metrics that make it easier for financial analysts to reach a thoughtful opinion under extreme time pressure. For example, I found that aggregating Google’s search engine competitors together provided insights that were otherwise harder to see because of the variability that exists across individual search engine. While all the components to do this are available as part of what we already deliver, we can, by directly providing the aggregation, make it easier to draw a comparison between Google and the rest of the market. In addition, in the future we plan on delaying the release of comScore’s data until after the close of the day’s trading. This will provide analysts more time to analyze the data and publish their reports before the financial markets open the following day.

James Lamberti, SVP of Search and Media at comScore, is a co-author of this post.

Earlier this week, comScore released its January 2008 qSearch paid click report, which showed a 7% sequential decline vs. December ‘07, and a flat annual growth in paid clicks for Google. Moreover, the number of paid clicks per Google search query declined by 8% from December to January, suggesting that consumers are clicking less on search ads, possibly reflecting a weaker buying appetite. The information triggered a flurry of reactions in the media and the financial community that centered on two concerns: 1) a potentially weak first quarter outlook for Google, and 2) an indication that a soft U.S. economy is beginning to drag down the online advertising market.

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. More specifically, 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. In addition, the reduction in the incidence of paid listings existed progressively throughout 2007 and was successfully offset by improved revenue per click. It is entirely possible, if not likely, that the improved revenue yield will continue to deliver strong revenue growth in the first quarter. Separately, there is no evidence of a slowdown in consumers clicking on paid search ads for rest of the US search market, which comprises 40% of all searches.

The most puzzling data element is that Google’s U.S. paid clicks dropped sequentially by 7%, while, at the same time, its total number of search queries grew by 9%. At the same time, Google’s market share of all search queries grew slightly from December, and its annual query growth remains very strong. All indicators point to the company continuing to do very well as far as consumer usage and competitive position. The drop in paid clicks becomes even more puzzling when it is normalized on a per query basis: The number of paid clicks per search query drops by 16% in one month! The corresponding metric for the rest of the market drops by 4%. What accounts for this dramatic difference?

We must remember that a paid click does not happen on a search results page unless there is an ad on that page. Since not all pages have ads on them, it is important to look at an ad coverage index, defined as the percent of all queries that have at least one paid ad. This index dropped by 8% for Google, going from 52% to 48%. In addition, even when a query result page contained at least one paid ad link, the paid click rate, defined as the average number of clicks per such an ad supported query, declined by another 8%, going from .24 to .22. Figure 1 shows the trend in these two metrics over a one year period. The graph illustrates two time periods where both measures declined together: first from January ‘07 to May ‘07, and then from December ‘07 to January ‘08. The remainder of the year was essentially flat.

Evidently, January ‘08 is not the first time this decline has happened. The compounded impact on paid clicks per search query (whether or not ad supported) for the entire year, is a whopping 33% decline in 2007. The decline in the first half of 2007 clearly cannot be traced to a weak economy. And, despite this decline, Google managed to grow its worldwide search revenue by 68% in 2007. (The company does not separately report U.S. search revenues.) The revenue growth was achieved through a 21% increase in revenue per paid click.

Why and how is this happening? It is common knowledge in the industry that Google has been targeting what it deems to be low quality ads. It has introduced a ‘quality score’ that it uses to prioritize placement of ads or to decide to suppress an ad altogether. A suppressed, or ‘non active’ ad, can be reinstated by raising the bid above a quality-based minimum bid. In addition, the real estate available for ads is being reduced, squeezing the supply of available spots to bid on. 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. In fact, Google wins by providing more relevant ads for consumers and a less cluttered ad environment for marketers.

This policy is explained by Google on their website at https://adwords.google.com/select/qbb.html.

But wait! If this improved quality is real, should we not expect an increase in the paid click rates? Not necessarily. If the ads are more relevant, consumers would need fewer clicks to get what they are looking for. Perversely, a high number of clicks means that the ads are not delivering what the user is looking for on the first try, which induces additional clicks on the second or third try. The benefits to marketers are real, but also counterintuitive. If the users get to what they want with fewer clicks, it means those clicks have a higher conversion rate, or deliver higher quality leads. Hence, a lower number of clicks will likely generate more revenues or better leads for the marketer, justifying the higher average cost per click. Naturally, the changes will not benefit everyone. Rightly or wrongly, some marketers win and some lose, venting their frustration in the blogosphere. The users, on the other hand, will mostly win with improved relevancy and user experience, which helps explain Google’s continued overall query growth and share dominance.

What about the impact of the economy? One might argue that the lower number of paid clicks per ad-supported query indicates that consumers are less interested in buying what is being advertised and lends credence to a worsened economic situation. The trouble is that the pattern does not hold for the rest of the search market. As Figure 2 shows, the paid click rate for the other search engines actually increases slightly. There is no obvious reason why the economy would negatively impact Google’s users and not those of Yahoo!, MSN, AOL, Ask and others. Furthermore, we don’t need a weak economy rationale to explain the recent decline -- since a similar decline occurred earlier in 2007 when a weak economy wasn’t an issue.

In summary, the evidence points to a counterintuitive trend caused by Google’s own program for improving the quality of paid listings.

While I attended the World Economic Forum in Davos, representing comScore as a 2007 Technology Pioneer, the following question was posed to the attendees: “What can countries do to improve the world?”

I believe that education must be a major part of the solution. We also need to foster the exchange of ideas with young students around the world. This will help us all reach common ground on what problems need to be solved and how best to solve them. Students could even be selected by a sort of a “Davos Idol,” to bring the voices of the best and brightest out and to generate interest and participation.

My full response to the question is below. What do you think countries can do to improve the world?

Last year, comScore was honored by being named a Technology Pioneer by the World Economic Forum (“WEF”) and I was invited to attend the annual WEF meeting in Davos, Switzerland. I just returned from my second trip to Davos and wanted to share some observations with you.

Every Davos annual meeting tends to be dominated by one or two major issues that get discussed at many sessions, including a plenary session where participants debate and choose the most important near-term issues facing the world. Last year, the focus was on global warming. This year, the state of the world economy and the potential recession in the United States, with its worldwide impact, took center stage. The main questions were:

1. How likely is a U.S. recession in 08?
2. Will we see a decoupling of the U.S. economy from the global economy, with the rest of the world continuing to grow even as the U.S. stalls?
3. What are the implications of investments in major U.S. banks and by Sovereign Wealth Funds (“SWF”) such as those owned by Singapore, China and Dubai?
4. Have the regulatory bodies, particularly the Fed and other central banks, lost their ability to influence the global economy?
5. Is there a need for more financial regulations to prevent the kind of financial crises we have recently seen?

As in every debate, opinions were quite varied. Most people believed that a mild U.S. recession would occur in 2008 and some thought that it might have already started, even though most business leaders thought their businesses had not yet been affected. A significant concern was expressed that the drumbeat of recession, amplified by the media, will undermine consumer confidence and result in a recession even if the economic fundamentals did not really justify one. The most extreme opinion was espoused by George Soros who predicted that this will be the worst economic crisis since the depression. Of course, it was hard to tell if he was serious, or whether he wants to contribute to an acutely negative psychological mood that would benefit a possible bet his hedge fund has made on a recession.

Many participants believed that the torrid growth in Asia’s developing economies will compensate for any slowdown in the U.S. economy. India was thought be the most immune country, followed by China -- despite the huge dependency of Chinese exports to the U.S. Europe and Japan were thought to be moderately affected.

There was a lot of anxiety about foreign governments owning a stake in major U.S. and western financial institutions such as Citibank and Merrill Lynch. The SWF were said to control over $3 trillion today and that this could reach $9-10 trillion in three years, as petrodollars and export surpluses continue to grow. The question was asked whether such ownership could lead to foreign control? Here again, the opinion varied. Some speakers reminded the audience of the exaggerated U.S. fears during the 1980’s about Japanese control of prime American real estate properties such as Rockefeller Center. Others argued the more common view that the SWF investments are small in ownership percentage terms, and would remain harmless as long as they did not exceed 15-20%.

There was a televised debate on CNBC that focused on the influence of central banks over markets and national economies. One view held that central banks are ineffective and have failed to prevent the current financial crisis, despite high profile liquidity injections, just as they failed to moderate the drop of the U.S. dollar. However, the majority view held that while central banks made errors in steering the regional and global economies, they still wield a lot of influence -- as the Fed has shown with its recent aggressive interest rate cuts. There was a sharp difference in opinion about whether monetary authorities should intervene to burst emerging bubbles such as the current sub-prime bubble, the recent housing bubble, or the stock market bubble in 2000-2001. Some argued that central banks might ‘prick the wrong balloon’ and that they should not second guess the price levels determined by the free market. Still, there was a consensus on the need for stricter regulations on lending standards and derivative instruments.

It’s worth noting that there was a pervasive view that U.S. power, as well as moral leadership, is rapidly declining both politically and economically. Anti-Americanism sentiment runs rampart, particularly among Europeans, Middle Easterners, and most Muslim nations. The majority believe that the U.S. has lost its influence in the world and is unable to get anything done. That it is drowning in a deficit that foreshadows its economic decline. That it preaches to the world principles it violates every day. That it is militarily over-extended in Iraq and Afghanistan. Some asserted that the decline is irreversible. It was highly ironic that a South Korean university professor was the only defender of the U.S. on a panel that included a Harvard professor who led the U.S. bashing. One of the most outrageous assertions was that the U.S. created the conflict between Sunnis and Shias, who lived in peace, unity and harmony until the U.S. created an artificial divide between them. In several sessions, I found myself rising to defend the U.S. and cautioning against writing America’s obituary too soon.

Believe me, I would much rather argue about the impact of cookie deletion!

comScore's cookie deletion white paper is now available to the public.

This white paper goes into much greater detail than previously released, and is a must-read for those serious about understanding Web measurement. Please visit www.comscore.com/request/cookie_deletion.asp to download the study.

Who would have thought, a few weeks ago, that Randy Rothenberg, President & CEO of the IAB, would refer to comScore and Netratings as “the heroes of the interactive marketing and media ecosystem”?

The above quote was included in a statement that Randy made in the press release about the summit meeting we attended with the IAB last week. comScore met with the IAB to discuss the issues related to measuring the size of online audiences. We did indeed commit to an MRC audit and are currently in the process of completing the pre-audit. From the IAB’s press release, it is easy to see that the meeting was not simply about accepting MRC audits. A lively discussion that covered a wide range of issues resulted in new IAB commitments that we believe will solve many of the problems cited in its April 2007 open letter.

comScore has invested millions of dollars in research and development in the building of our measurement capabilities. Our management team includes leading market researchers with rigorous research and scientific training. In fact, we’ve created many of the innovations that are fixtures in Internet measurement today, while maintaining strict standards for data quality. Nevertheless, there is some confusion in the marketplace about what we (and Netratings) do and how we do it. We have naturally been protective of our propriety methods, because many times we’ve seen competitors rush to copy a methodology or a product that we pioneered. However, we are willing to disclose what we do to certified auditors under strict confidentiality protections, so that they can verify that we deliver what we say we do.

One of the chief elements in the controversy is the discrepancy between the estimates of Web site unique visitors using a panel approach compared to the approach used by the publishers of these Web sites. Many of the publishers’ numbers, derived from their server logs, indicate audience levels much higher than what our data show. Because of this, a few months ago we initiated a research project to examine why there are systematic differences. We believe we have found the main causes.

With the server-log approach, cookies are placed on visitors’ computers to identify “unique visitors,” so that repeat visitors are not counted more than once. This approach only works, however, until the user clears the cookies from their PC -- either in the course of normal PC hygiene or through the use of security scanning software (a common practice today). It turns out that the frequency of clearing cookies is much higher than many might previously have believed. About 30% of Internet users clear their cookies at least once in a month, but some users clear them at every session and can be counted as unique visitors by server logs more than 10 times in a month. This multiple counting dramatically inflates unique browser estimates derived from web logs -- which are, essentially, counts of unique cookies. Furthermore, about 12% to 15% of machines block cookies completely. A publisher who follows the methods described in the appendix of the “IAB Ad Impression and Audience Measurement Guidelines“ (2004) would identify such machines with a unique combination of an IP address and a user agent string. But, here again, the result is tremendous inflation as our research shows the average home PC has 10.3 IP addresses in a month. This group is similar to the group deleting cookies, only with more inflated audience counts.

Finally, we find that some publishers fail to remove international traffic from their domestic web logs. When they compare their worldwide traffic to our reported U.S. estimates, they naturally find differences. When each of the above factors are present, the overstatement by web logs can be as high as 1000%.

To summarize, we can explain most differences between our numbers and web logs with the following simple equation:

Difference ≈ Unfiltered international traffic + Inflation due to cookie deletion + Inflation due to cookie blocking

The accuracy of comScore’s data has been confirmed many times. For example, when we examine measures that are easy to define – such as how many dollars were spent on a site or how many advertising impressions are served – we are typically close to what site operators report. Our online sales projections are also within a few percent of what the U.S Department of Commerce reports in their quarterly e-commerce sales estimates.

Overall, we believe that the IAB meeting had a positive outcome. We communicated our views on the causes of web log inflation and pointed out that the IAB’s own guideline appendix would lead to inflated numbers and should therefore be revised. We also made the case about the critical role that panel data plays in measuring the interactive industry and the ROI from online marketing. As usual, when reasonable people sit down together, mutual understanding can occur. The IAB now recognizes the value of panel data:

“The IAB acknowledges that there is a role for both panel-based and server-based metrics in the measurement of audience and both will continue to be used by agencies and advertisers as a combined decision-making tool.”

The IAB has also committed to revising outdated standards for server-based measurement and has suspended audits based on existing standards. The IAB is also committed to auditing all measurement techniques, including web logs. We believe these audits will eliminate the use of inflated server log data – affected by cookie deletion rates, international traffic, spiders and bots, and other factors – and will help reduce the magnitude of the measurement gap, thereby reducing the measurement controversy that currently undermines the credibility of the industry. In addition, the IAB has committed to promoting efforts to educate the industry about the differences between panel and web log estimates, and the likely causes of those differences.

“The IAB agreed to intensify its efforts to arrive at a definition of unique visitors, page views and time spent. This process will include reviewing the impact of cookie deletion, international traffic, spiders and bots and other potential factors.”

"... The IAB agreed, in response to requests from the audience measurement companies, that it will recommend suspending further audits against the initial audience-metrics guidance in the appendix to the 2004 Ad-Impression Guidelines. Auditing should take place once industry accepted guidelines have been created.”

Although this meeting started out as a challenge to our methods, we hope that it may prove to be a turning point for the industry. By gathering together representatives from publishers, advertisers, and measurement companies – using both server-log data and panel-based data – we participated in an important moment to confront the issues of different measurement techniques. We look forward to moving beyond the stage of debating measurement techniques and toward using all of the data to its fullest potential.

To bring clarity to these issues, in the coming months I will post a series of “Web Measurement 101” briefs, which will further address topics such as disparities in Web logs data versus panel-based measurement.

If you would like a copy of comScore’s white paper study of cookie deletion, please visit www.comscore.com/request/cookie_deletion.asp and we will forward it to you.

Recently, comScore was asked by the IAB to provide clearer transparency with regards to our panel methods for measuring the size of online audiences. comScore welcomes the objective outlined in the IAB Open Letter. We have already had positive and productive discussions with the IAB to initiate a thoughtful and cooperative process for achieving greater transparency and understanding of the root cause of the difference between Web site server logs and panel-based measurements.

We began working with the MRC several months ago as part of an audit of our methodologies to provide that transparency. We intend to continue that effort. We are also in the final stages of an evaluation of our methodology by the Advertising Research Foundation and hope that the results will be publicly released in the near future.

comScore’s panel methodologies reflect the investment of millions of dollars and years of research and development. We are confident that they will stand the scrutiny of a third-party evaluation or audit.

As part of our own efforts at providing the Internet industry with insight into the various ways of counting online audiences, we recently published the results of a seminal study of the impact of cookie deletion on the accuracy of audience counts as obtained from Web site server logs.

The study revealed that cookie deletion is a serious threat to the accuracy of Web site server logs, leading to overstatements in the estimates of unique visitors as obtained from server logs by a factor of as much as 2.5. A representative group of industry experts agreed with our conclusions.

If you would like to view the complete findings of this study, please visit: http://www.comscore.com/press/release.asp?press=1389 .

Many of our clients are using comScore’s panel data to adjust their own server log data so as to eliminate the overstatement caused by cookie deletion and we would hope that this approach becomes a standard practice within the industry.

We look forward to demonstrating the quality of the comScore panel methodology to the IAB.

I want to assure the IAB members that comScore is committed to the digital media industry and strives to provide, to the best of its abilities, accurate and unbiased measurement. We look forward to working with the IAB and the rest of the industry on establishing acceptable measurement standards for all participants.

Hello, I’m Magid Abraham, and I’m the co-founder, president and CEO of comScore. Here on comScore Voices, I hope to share insight on the latest trends and advances in digital media measurement.

For my first post, I want to expand on our recent cookie deletion study and its implications for Internet audience measurement. The study shows that cookie deletion is much more frequent and indiscriminate than previously believed. Because of this, we can see that cookie-based measurement techniques, whether using Web site server logs or web analytics software, can over-represent the number of unique visitors to a site by a factor of 2.5x. For example, cookie-based measurement will count one typical site visitor who deleted cookies 5 times as 6 different visitors. Our study clearly validates what experts have been saying for years: to get accurate unique visitor counts, you need to track people, not cookies.

Some of the early promises of digital media compared to traditional media like TV and radio were measurability and accountability. And there certainly are examples where the promise was delivered. For starters, digital media can provide accurate counts of advertising impressions, a feat that has never been accomplished by traditional media. In addition, the impact of direct response advertising (e.g. credit card solicitations) can be measured accurately through click-through rates. These are huge advantages for digital media.

However, when one considers other types of measurement, the early promises have proven elusive. Even basic reach and frequency estimates which have been routinely delivered by ad servers are now shown by our study to be flawed, with reach inflated and frequency understated. The Internet industry has also found the impact of brand-building advertising harder to measure and certainly not as simple as counting click-through rates. The same is true for online ad campaigns that have an off-line impact or campaigns where there is a time lag between ad exposure and consumer action. Indeed, even something like search, which appears at first blush to be easily quantifiable, turns out to have an impact that extends in time far beyond the initial clicks on sponsored links. For example, in 2005 comScore did a study of the impact of search within the consumer electronics category, which showed that only 2% of searches resulted in a sale within the same Internet session as when the search was conducted, but an astounding 25% of product searches resulted in a sale if one included offline sales and sales that occurred online but after the immediate exposure session. That is an astounding 12.5x understatement of search effectiveness if one were only to measure immediate action such as click through rate or same-session conversion. Only consumer panels offer the ability to accurately track the same consumer over time, in order to fully measure ROI.

Accurate Web site audience measurement is one of those early promises that has routinely been claimed, but just as routinely falsely delivered. Many Web site publishers look at their ‘internal data’ (which is almost always based on cookies) and automatically assume it is correct, without considering the impact of dynamics such as cookie deletion. Unfortunately, many in the media have made the same erroneous assumption. It is common to find sites that over-represent their audiences by a factor of 5 or more when citing server log data. Cookie deletion alone can account for 2.5x overstatement. Failing to exclude visitors from outside the US is another common oversight that can typically induce an overstatement between 1.5x and 4x. The compounding of these two factors alone can lead to an overstatement of between 3.75x and 10x. And this is before we take account of the inflationary impact of including ‘bot’ traffic, ‘push’ traffic and other factors.

I strongly believe that the industry does itself a disservice by continuing to publicly use flawed measurement metrics based on site server counts of cookies. The practice leads to a widespread impression of wild inaccuracies in online audience measurement, something that can only undermine the transparency and accountability of online media. Some even go as far as ‘longing’ for something ‘more accurate’ such as -- perish the thought -- TV ratings!

I hope our study helps educate people to some of the flaws in site-centric measurement. Don’t get me wrong. Site-centric measurement offers benefits in terms of tracking granularity and helping improving site design, so I am the last one to recommend against its use. What I do not recommend, is using it to publicly boast about the size of a site’s audience using metrics such as unique visitors that are unadjusted for the impact of factors such as cookie deletion. This can only lead to confusion, suspicion and, ultimately, loss of credibility for our industry.