Google paid click growth sluggish in February; More worries emerge

ComScore has delivered its paid click report for February--also known as the most anticipated metric in the Web world these days--and the news isn't so hot for Google.

According to Citigroup analyst Mark Mahaney and Bank of America analyst Brian Pitz said Google's paid clicks were up 3.1 percent in February from a year ago. That growth rate follows a 0.3 percent decline in January. The rub: February had one extra day in 2008 compared to 2007. Mahaney said in a research note that if you factor out the extra day Google's paid click growth was flat.

Overall, comScore reported February searches on Google's U.S. sites were up 30 percent from a year ago indicating a deceleration of growth from January. May the chattering about Google's paid click growth begin.

Mahaney wrote:

Assuming the data is accurate, we could see two factors behind the Coverage Ratio decline: 1. Google's ongoing efforts to improve both lead quality for advertisers and the user experience for searches. 2. A macroeconomic dampening of commercial queries by searchers. We continue to view the decline in Click Thru Rates, however, as counter-intuitive. A decline in Coverage Ratio should generate a rise in Click Thru Rates.

Mahaney also added that if comScore's data holds for the first quarter and indicates global trends Google's first quarter targets are at risk. According to First Call, Google is expected to report earnings of $4.63 a share on revenue of $3.65 billion.

Pitz at Bank of America was willing to take Google for its word that paid clicks are due to quality gains. He said:

While Google's Feb paid click data does little to calm investor fears of a slowdown in Google's core business, we believe most of the deceleration is due to the continuing quality initiatives by the company itself, which should drive significant upside longer-term. Moreover, we caution investors against reading too much into comScore numbers as they have historically been a bit noisy (but directional nonetheless).

Pitz's latter point is critical. There's a significant risk of overanalysis when it comes to these Google figures. If quality--and therefore revenue--increased these statistics are mere blips. If comScore's stats indicate something more then Google's quarter is in trouble. In any case, we'll find out soon enough. Google reports its first quarter results in mid April.