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Last week, Google shares fell $22 (4.6%) on news that comScore data showed a 7.5% drop in monthly Google paid clicks. As one Wall Street analyst put it, “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.’’

My reaction to this data (and to the Google stock decline) was mixed. On the one hand, Google’s stock price has seemed really high to me for several months. Indeed, last month I calculated that Google’s market cap was equivalent to the combined value of Yahoo, eBay, Amazon, IAC (Ask, CitySearch, etc), Time Warner (with AOL), SalesForce, Priceline, and Expedia. From that perspective, a decline in Google value seems appropriate.

But on the other hand, I am not a big fan of comScore (or competitor Nielsen NetRatings) data. Indeed, read that analyst’s statement again: “though we hesitate to read too much into ComScore data in general . . .” – that’s pretty weak justification for downgrading a stock.

My personal experience has shown just how ridiculous comScore and Nielsen data is when it comes to online metrics. A few months back, Nielsen produced data that suggested that NexTag was spending around $860 million a year on online advertising. I might have believed this number without question, were it not for the fact that the same report showed my former employer – Adteractive – spending $420 million annually. As I wrote on my personal SEM blog: “I can say with a very high degree of confidence that Adteractive did not spend $420 million, $200 million, $100 million, or probably even $40 million dollars.” That’s right, the Nielsen data was off by a factor of 10X or greater. And I’ve had similar experiences with comScore to make me question their methodology as well. I won’t go into it here, but my original blog posting on this topic has all the lurid details.

So the fact that alleged stock experts and the overall market in general is using this data to cut billions of dollars of market valuation off Google (or any other Internet stock, for that matter) is concerning. It basically shows that the general public really doesn’t understand Internet advertising well enough to accurately determine an Internet company’s worth. This is a scary scenario for any Internet company currently enjoying the wave of investing exuberance. In particular, I’m talking about Google here. When your stock balloons to $750 a share and a $170 billion market cap, you’ve either got incredible underlying fundamentals, incredible hype, or both.

In Google’s case, I think the answer is “both.” Google is a cash machine and they’ve constantly impressed the market with their quarter after quarter record earnings. But Google is also the darling of analysts and the public, just like so many hyped-up companies in the past (Enron, WebVan, Krispy Kreme, etc). I’m not suggesting that Google is “all hat and no cows” like Enron or WebVan, but I do find it interesting that Google stock can fluctuate so significantly on data that a serious Internet investor would dismiss as meaningless.

Once again, I go back to the analyst who starts his comment by saying ‘the data is worthless’ and ends by saying ‘but we are downgrading nonetheless.’ Maybe that is code for ‘this stock has a lot of hype and any bad news – even fake bad news – could cause the hype to implode so we are downgrading.’

I’ve never owned Google shares, and my track record of stock picking isn’t stellar (yes, I did buy WebVan at $6 a share . . .). But I do spend most of my working hours thinking about online advertising, and it’s troubling to see Internet stock prices influenced by pointless statistics. After all, at the end of the day, the billions invested in stocks and venture capital in Internet technology is what keeps the heat on in my house. The fact that the public could one day be scared off from investing in the Internet – and possibly due to unfounded data – makes me want to stash a few more dollars under the bed for a rainy day.