Comscore, Inc. (SCOR) - Google’s Bark is Worse Than the 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 to 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.
FD: Author does not have a position in SCOR
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TechTrader Daily comments on the Comscore Swoon
this is the second time news from Google has crushed the early March 2008 starter bounce. IF this second bounce tip over is unjustifed then this is a appealing dip within a solid bounce. At some point the 3month old bounce ought to be free to swing on Commscore’s internal merit. And if all 3 players are going to have this service, perhaps one of the other 2 buys commscore. the market cap below $700 million would be easy for MSN to swallow.
June 28th, 2008 at 11:45 am