All Things Digital

Microsoft’s Live Search Cashback may not be doing much to improve the company’s share of the search market, but it’s doing wonders for its marketing reach. Microsoft bested University of Phoenix and LowerMyBills.com (the company responsible for those silly dancing cowboy ads that festoon the Web) to claim the title of top display advertiser in June, according to comScore. Microsoft (MSFT) ads were viewed 5.5 billion times by 126.4 million unique visitors during the month. That’s 1.7 percent of all the online display ads served in the states and a reach of nearly 70 percent of the total unique audience. Comscore said the company’s 5.5 billion display ad views in June were “due in large part to its promotional campaign for Windows Live Search, including ads for Windows Live Search Club games and the new Windows Live Search cashback program.”

Incidentally, June, as Todd Bishop notes over at The Seattle Post Intelligencer, happens to be the last month in Microsoft’s fiscal year, which means it’s also the end of the period in which Microsoft executive bonuses are calculated.

The days of measuring Internet usage with panels and surveys are finally coming to an end. Good thing too, because those media-measurement techniques–which were developed to gauge radio audience size 70 years ago–were getting, you know, a bit old.

Google (GOOG) today unveiled a new tool that promises to measure Internet usage more precisely. Called AdPlanner, it combines search engine and audience measurement data to create a richer, more intelligent picture of Internet usage, one that may prove far more useful to advertisers looking to identify the best places to buy ads that will reach their target audiences. Slap it together with the recently announced Google Trends for Web Sites and what use is there for traditional advertising-research suppliers?

Great news for media buyers and advertisers who’ve long relied on comScore (SCOR) and Nielsen/Netratings and their shallow, inconsistent metrics. Ugly news for comScore and Nielsen/Netratings, which now seem destined to be disintermediated by Google in much the same way the company disintermediated the rest of the online advertising industry. Sadly, they’ve no one to blame for this but themselves. It’s not like they haven’t been hearing complaints about discrepancies in audience measurement for nearly a decade now (some, presumably, from Google itself).

“We in the marketing-media ecosystem have spent too many years trying to clean up the residue of flawed media-research methodologies,” Randall Rothenberg, president & CEO of the Interactive Advertising Bureau wrote in a scathing letter to comScore and Nielsen//NetRatings back in 2007. “We simply cannot let the Internet, the most accountable medium ever invented, fall into the same bad customs that have hindered older media and angered advertisers for decades–customs such as inadequate samples, accepted out of begrudging convenience; or phantom metrics, like ‘pass-along readers,’ that add shadowy bulk to audiences that cannot be measured directly; or metering technologies and processes that are easy to game.”

Coming as it does after news of Microsoft’s plan to bribe consumers to use its search engine, reports of Google’s (GOOG) continued dominance in search aren’t all that surprising. Google’s share of the U.S. search market in April grew to 61.6%, up from 59.8% in March, comScore announced today. And it grew at the expense of rivals Yahoo (YHOO), Microsoft (MSFT), AOL (TWX) and Ask.com (IACI). Yahoo’s share dropped 0.9 percentage points to 20.4%, Microsoft dropped 0.3 to 9.1%, AOL dropped 0.2 to 4.6% and Ask dropped 0.4 to 4.3%.

A pretty dismal showing for the other four “major” search engines, which apparently bleed and sweat search market share. As noted here last week, the IT industry used to say that IBM (IBM) wasn’t the competition; it was the environment in which you compete. Today the adage seems equally applicable to Google, which dominates the search market just as IBM once dominated the computer industry.

We see little to stop Google from reaching 70% market share eventually; the question, really, comes down to, ‘How long could it take?’ ”

–RBC Capital Markets analyst Jordan Rohan, March 2006

Not long at all, really.

They’re not the competition; they’re the environment in which you compete. The IT industry used to say that about IBM, but today the adage seems equally applicable to Google (GOOG), which dominates the search market just as IBM (IBM) once dominated the computer industry.

According to new metrics from Hitwise, Google’s share of the U.S. Internet search market grew to 67.9%–a 4% increase year-over-year. Google’s growth apparently came at the expense of rivals Yahoo and Microsoft. Though it claimed the second-largest share of the search market, Yahoo (YHOO) slipped to 20.28% from the 20.73% share it held a year ago. Microsoft’s (MSFT) Live Search, ranked third behind Yahoo, fell to 6.26% from 7.77% in that same period.

Seems the two companies’ recent efforts to differentiate their search offerings from Google’s haven’t done much to boost their respective market shares. Nor will they ever if the Google juggernaut continues as it has. As Credit Suisse analyst Heath Terry once noted, search is a natural monopoly business and there’s a decent chance that over time, Google will continue to gain share until it’s claimed most of the market.

And that may happen sooner than we think. Google’s closing in on 70% market share already. “By this time next year,” Silicon Alley Insider’s Henry Blodget writes, “Google’s search business will be larger and more profitable than the most profitable and legendary monopoly in history–Microsoft Windows.”

AOL’s ad revenue may be “falling off a cliff,” according to CNBC’s David Faber, but its traffic’s not half bad. AOL (TWX) said today that page views to its Web sites hit an all-time high in March, according to comScore (SCOR) Media Metrix. Page views grew 28% during the month, and are up 35% year-over-year. Unique visitors rose 11% year-over-year to 56.5 million.

AOL attributes the double-digit growth to a year-long redesign and rebranding effort, which ironically included a de-emphasizing of the AOL brand. “If I call a hip-hop site AOL Hip Hop,” said Bill Wilson, executive vice president of AOL Vertical Programming, “that just won’t resonate with consumers.”

Google (GOOG) has finally gotten its say about comScore’s (SCOR) “surprising” reports on its lousy paid-click performance. Published on Feb. 26, that report suggested a material weakening in Google’s paid-click advertising business. It sent investors fleeing into the woods and singlehandedly knocked 7% off Google’s share price.

ComScore subsequently backed off its claims a bit, publishing a blog post called “Why Google’s surprising paid click data are less surprising” which explained that the decline in Google’s paid clicks it charted could have been the result of the company’s click-quality initiatives and not a slowdown in its business. But on Tuesday, comScore published another report that showed growth in paid search clicks is slowing. One of its key data points: Google’s paid clicks grew by just 1.8% year-over-year.

Well, Google reported earnings yesterday and according to its metrics, paid-click growth grew by about 20%. And CEO Eric Schmidt did not let that discrepancy between those two figures go unremarked: “The business model continues to work very well,” he said. “It’s also interesting to note that paid-clicks growth is much higher than has been speculated by third parties.”

“Third parties” in this case being comScore. Now, granted comScore’s metrics included U.S. clicks alone, while Google’s included worldwide clicks, so comScore’s estimate, in all likelihood, isn’t off by 18.2%. That said, it’s still off according to Google–which, with that one little quip from Schmidt, sent comScore’s shares down more than 7%, the same decline it suffered at the research outfit’s hands back in February.

Now that the markets have had their say about comScore’s (SCOR) wonderfully dramatic report on Google’s (GOOG) lousy paid-click performance, the traffic tracker has circled back to take another look at it and concluded that the decrease in Google’s paid clicks it observed doesn’t necessarily suggest a slowdown in the company’s business.

In a blog post today, comScore CEO Magid Abraham and senior VP James Lamberti argue that the decline in paid clicks is likely the result of improvements in Google’s click programs. “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,” the two wrote. “In addition, the reduction in the incidence of paid listings existed progressively throughout 2007 and was successfully offset by improved revenue per click. … Separately, there is no evidence of a slowdown in consumers clicking on paid search ads for rest of the U.S. search market.”

What’s more, the comScore execs write, Google’s click-quality initiatives don’t necessarily translate into more clicks. “If the ads are more relevant, consumers would need fewer clicks to get what they are looking for,” they explain. “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.”

Ah. Well, if that’s the case, why didn’t you say so in the first place? Or at least before you singlehandedly knocked 7% off the company’s share price.

Google (GOOG) took a nasty slide this morning as comScore released new data that reveals what appears to be a material weakening in the company’s advertising business. How material? Google’s sponsored clicks were down 7% month-over-month, effectively flat year-over-year and down 12% quarter-over-quarter.

Perhaps the slowing economy is having an impact on Google’s growth after all. Certainly the continued deceleration in the company’s paid click growth suggests as much. In October of 2007 Google showed 37% click growth. In November it showed 27%. Then in December it showed 12%. And in January it showed no growth at all. As Henry Blodget notes over at Silicon Alley Insider, that sort of steady decline seems more a trend than “a wacky one-month comScore aberration.”

Google shares are down more than $34, or about 7%, at $451 as I write this.

Facebook shed some 400,000 members between December and January in the United Kingdom. This according to new figures from Nielsen Online, which charted a 5% decline in U.K. traffic month-to-month.

Which begs the question: Is Facebook nearing its saturation point? Is enthusiasm for the social-networking phenom finally wearing off? Have we all been spammed by the ironically named “Funwall” one time too many? Are the site’s privacy issues finally taking their toll? Or are its zombified members too busy seeking human flesh to bother updating their profiles?

Or were they simply on winter holiday?

That last scenario seems the most obvious explanation. December and January are the months at issue here. And Nielsen’s figures show that there are 712% more Facebook users than a year ago. Still, this is the first drop the firm has recorded in Facebook’s user numbers in the U.K. since the site became large enough to track. There wasn’t a similar drop in usage last year. Or the year prior. So maybe there is something more here. The early beginnings of a long-term erosion, perhaps?

“One month of falling audiences doesn’t spell the decline of Facebook or social networking,” said Nielsen’s Alex Burmaster. “However, most of the leading social networks are less popular in the U.K. than they were a year ago. It was inevitable that early growth rates couldn’t be sustained and the larger networks have been plateauing over the last few months.”

Seems the leading social networks to which Burmaster refers were also less popular in the U.S. According to the latest stats from comScore, Facebook attracted 33.9 million unique visitors stateside in January–down 2% percent from 34.7 million in December. That’s a decline of approximately 800,000 users. Again, this drop could also be chalked up to Seasonal Facebook Defection Disorder. Or not. After all, it’s not like we haven’t seen this sort of thing before. Remember Friendster?

UPDATE: Facebook disputes Nielsen’s metrics. “The number of users for Facebook continues to climb in the U.K.,” the company said. “Our internal monthly active user numbers rose between December and January in the U.K. and are now at more than 8.3 million. Facebook tracks active monthly users, rather than registered users or unique visitors. Active users reflect those who have used the site in the past 30 days.”

… I am serious. And stop calling me Shirley.

Well this is interesting, given the big news of the day. According to new research from comScore, Yahoo is the Web’s No. 1 publisher of display ads. The company’s network of sites claimed 18.8% of display ad views in November. In contrast, Fox Interactive Media claimed 16.3%, Microsoft 6.7%, Facebook 1.5% and Google 1.0%.