Oh how we hang on a few stats and rush to wring our hands when the golden goose appears to lay too few eggs.
Numerous media outlets are covering comScore's Monday report that clicks on Google's paid search links fell 7.5 percent from December 2007 to January. Reporters did the same when IDC two weeks ago reported Google's ad share dipped 0.5 percent.
Is it time to cry recession?
Google made $16.6 billion from online advertising in 2007, so I would agree that Google losing 7.5 percent of its primary financial cash cow would be a big hit to the company coffers if the figure averaged out or grew over 12 months.
It is not a sign that something is wrong with Google or its advertising business per se, not anymore than the search vendor's absurd soar to a $700+ stock share price this summer meant the company had found the fountain of youth. Finance is a fickle fancy.
Financial analysts aren't even getting worked up over the inadvertent FUD created by comScore, which caused Google's shares to close down 4.6 percent to $464.19 on the NASDAQ today. However, they are treating it as a legitimate data point.
Ben Schacter from UBS said: "Though we hesitate to read too much into ComScore data in general and one month's release in particular, we are incrementally more cautious on our revenue growth estimates for Google sites."
Schacter cut his 2008 sales forecast for Google by 1.1 percent to $15.7 billion, so he's clearly thinking of comScore.
What is the reason for the ad click decline? No one knows for sure, but everyone has theories. Schacter said it could be that advertisers who drive the Google bus aren't bidding as much for ad keywords, which serve the ads. If that's happening to Google, it's bound to be happening everywhere in online advertising.
Is it probably a sign of the slowing U.S. economy on the whole? I think so, and so does CitiGroup's Mark Mahaney, but it's hard to pinpoint exactly how that is. People spent less money on digital advertising during the 2000-2001 recession, making it easy to see how the ad market fizzled.
I keep reading in these financial reports that a slowdown in the U.S. economy leads to fewer ad clicks. But I wonder what exactly is the link between fewer clicks and the economy? It doesn't cost the users to click. We users don't pay to search the sites where Google places its links.
Advertently and inadvertently, we click on the links, and Google gets paid. It's possible that, as Schacter said, there are fewer ad keywords being bid on. But I don't think that would make a big enough impact on the number of clicks Google is getting. At least, not after one month.
Perhaps Google's search and AdSense improvements are negatively impacting the click-through rates? Mahaney seems to think so. Quite simply, it's also possible that fewer people are going online to shop, which means fewer clicks.
Is there not enough inventory then? I doubt it. If you listen to Microsoft Platform honcho Kevin Johnson, the online ad market will blossom to $80 billion in the next few years. Though I'm sure he's conveniently ignoring the recession we're easing into. If anything, there could be too much inventory, but not enough muscle to serve it.
I don't really know why there were fewer clicks for Google, and right now the analysts don't definitively know either.
Maybe it is recession harbinger. Maybe it is an anomaly. But if not, we could be in for an interesting ride as Google seeks to juggle its ad juggernaut in the face of a recession while trying to broaden its Internet offerings and possibly contend with Microhoo in 2008.