comScore: Google's Bark Is Worse Than Its Bite

Shares in comScore, Inc. (SCOR) dropped more than 20% on Tuesday after Google Inc. (GOOG) announced the launch of a new product called AdPlanner.  The product will be offered free to advertisers and seek to help these advertisers place ads more effectively on sites that are applicable to what they are pitching.  Google will use its vast amount of collected data from its search engine and specialty products to feed AdPlanner the pertinent information needed to benefit the advertisers.  comScore investors are fearful that Google’s free service will cut into the amount of paid subscriptions comScore itself can sell.

Despite the obvious fact that Google is is a ferocious competitor, it still appears the sell-off was a bit overdone.  At this point, Google has a strong footprint with small and medium size businesses which will likely be its target market for AdPlanner.  By contrast, comScore has a client base that is comprised primarily of large cap customers with more detailed and extensive advertising needs.  Since there is only a small amount of initial customer overlap, it is unlikely that Google will take market share from comScore at least on a short-term basis.

From a customer perspective, there are some reasons why advertisers may be wary of using Google’s service versus comScore.  The biggest issue is a potential conflict of interest in consulting with advertisers.  Since Google is one of the leading companies actually selling ad space, it seems that its measurement business could easily be skewed to make it look like advertisers would do best by placing their ads in slots where Google would receive advertising from this placement.  There is nothing illegal about this practice, and there are no accusations of this taking place, but for large companies that require more due diligence on partners they do business with, it could become an issue that would deter them from using Google’s service exclusively.

Prior to Tuesday’s decline, comScore had risen 20% above its closing price on the day Zachstocks profiled the company in April.  The stock is now trading back at about that level with the stock price showing signs of stabilization.  The multiple is not extremely cheap, and the environment for advertising is definitely challenging.  However comScore’s international presence and their focus on higher quality customers will likely allow them to ride out the weakness and emerge on the other side a much stronger company.  I would exercise caution and discipline with any trading strategy, but I do believe the fear in comScore’s stock price may be a bit overdone.

SCOR Notes

Disclosure: Author does not have a position in SCOR.

Comments

[Wez]

Lol, dream on. Google, who owns all the traffic, is offering for free, what others have to charge for as their business model...and it's a revenue neutral exercise? Wake up and smell the Microsoft. This has been done before, with similar excuses for why "it isn't a big deal". How many competitors did Softy crush with this model? SCOR and Nielson are cooked.

[DanielJacome]

SCOR is not cooked, Wez. you should have looked closer at what Ad Planner (from GOOG) is and is not capable of doing...

SCOR reported a monster Q2 with record revenue today -- the macro environment is not hurting their business as many had thought and better yet, they are still sucking more and more revenue from existing customers....