comScore, Calacanis, Wilson, And TechCrunch – Oh My!

If you have been away for a day or so, you have missed the giant dust-up over recent comScore business decisions.

Given the number of readers and friends that seem to be confused as to what exactly has happened, we put together this post to make it all plain as day.

As it happened:

comScore wanted to improve the way that it tracks website traffic. People had long complained (correctly) that comScore was consistently under-reporting their traffic. comScore set about to make changes to fix this. It was not going to be cheap, and given that comScore is a public company (not a flush startup), that means that revenue would have to rise to cover the new costs.

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Public companies just can’t add on expenses like private startups with fat bankrolls.

Called Media Metrix 360 (an odd name), comScore’s new product is a hybrid method that combines direct counting and its traditional extrapolation techniques to give a much more accurate picture of true traffic to each website. Some 75% of the top internet properties are working with comScore in one way or the other.

That was some seven months ago, things have since turned nasty. All Things D and Valleywag published posts on the same day (Friday) in regards to pricing information for Media Metrix 360. It is not free, and they were afraid that its high cost would leave out smaller companies, putting them at a competitive disadvantage.

From All Things D:

“Hey Web publishers! Want to boost your traffic overnight? Talk to comScore, which is handing out millions of unique visitors… comScore’s old system tracked small panels of users and extrapolated their traffic patterns across the Web. But its new “hybrid” system uses panel data along with records generated by actual visits to the site… ComScore lets publishers who are already clients participate in the program for free. But it will charge everyone else $10,000 a year, which the company says helps cover the cost of new servers and other equipment it needs to process the new deluge of data.”

From Valleywag:

“Comscore will give the tracking pixel away for free to paying clients, sites that pay thousands of dollars a year to get its detailed traffic information. All other sites, however, will have to pay Comscore $10,000 or keep having their traffic counted the old way. That’s blackmail. Sites that can’t afford Comscore research (it’s extremely expensive) will have to fork over $10,000 merely to have their traffic counted on an apples-to-apples basis with that of their richer competitors. Because most sites think Comscore grossly under reports their traffic, this amounts to Comscore saying “If you want your higher traffic numbers, you need to pay us $10,000.”

Fighting words from Valleywag, and a rather even keeled response from All Things D. It mattered little, the news about the supposed costs spread like wildfire around the internet and blogosphere, igniting the passions of Mahalo boss Jason Calacanis. Turns out he has a long, long, history with comScore. Oh, and one hell of an axe to grind.

Jason took to his pen, and blasted an email to his 19,000 newsletter subscribers. His title summed up his emotions well: “Why We Should Boycott ComScore (and *perhaps* why traders should short their stock).” You can read the full post here. We would paste it into the post for reference, but Jason does not allow that. We will, however, quote it at some length. From the email, bolding to denote different sections in the message:

“Comscore is the technology industry’s biggest bully, and today I’m calling for an industry-wide boycott of their services. I’m asking journalist and bloggers to stop covering their stats, I’m asking advertisers to not use their services, and finally, I’m asking startup companies to not support their new and widely reported on “$10,000 to get your stats correct” extortion ring… For over a decade, I’ve railed against our industry’s leading metrics company ComScore with little result….

They screwed me at Weblogs, Inc. It wasn’t until I started Weblogs, Inc. that I really felt the sting of not participating in the Comscore protection racket. You see, advertisers love Comscore and they make advertising buys based on it…..

ComScore Tries to Buy Me Off. This summer the tough guys at Comscore approached me with a clandestine deal after I continued to publicly complain about their methods. The message was clear: if I stopped criticizing them and publicly supported their server data measurement program they would not charge me. The $10,000 it would cost a year for this service would be free for me if I threw my fellow entrepreneurs under the bus…. You bastards think that after a *decade* of me trying to stop your extortion you can by me off by simply waiving some fees?… I wrote back: “You guys are evil for charging companies–I would never support you. Quantcast and Google are going to crush you guys…. And I’m telling everyone I know to support Quantcast.”…

To My “Friends” at Comscore. You know I’m right. As such, I’m asking for complete and unconditional surrender. Make your tracking pixel program 100% free in the next 10 days or the boycott will continue.”

Also in Jason’s piece were a number of sucker-punches to Fred Wilson, who Mr. Calacanis claimed “turned a blind eye while letting his huge venture return in comScore color his objectivity.” He claims that Fred is abetting the “extortion” by comScore, making one of the most famed startup VCs alive in fact anti-startup when it suits him. Enter Fred Wilson.

Fred weighed in in the comments section of Jason’s post, stating:

“jason, since you’ve slandered me, i’ll respond here. you don’t know what you are talking about. comscore (SCOR) is a public company. you can go look at their financials. they aren’t exactly printing money. it’s hard to measure the internet and they spend well over $100mm per year doing just that. they aren’t “shaking down” anyone. their move to a hybrid model is a reaction to many of the criticisms that people have had of their panel model over the years. but it isn’t cheap to manage that data either. someone has to pay for this. or of course we could all just let google do it for free. we know how that will play out. eric schmidt has said “analytics are infinitely monetizable” well for google they are. if we want a third party keeping everyone honest, the market has to pay something for it. as i said, go look at comscore’s financials and you’ll see they aren’t exactly getting rich doing that. and the “huge venture return i made in comscore” is in your imagination. i have not ever made any money personally on my comscore investment. please don’t spew lies about me jason. with “friends” like you, who needs enemies?”

Fred posted a second comment as well, to the effect that people like “Jason and his friend Mike Arrington… like to sling mud… i am not going to get into a pissing match with them online. but i am “kinda sad” that you are getting the wrong impression.”

Aside from Fred’s atrocious capitalization, his points seem have a certain ring of truth to them. Oh, did you see there where he brought Mike Arrington into the debate? Michael had to then get involved in the whole bit, weighing in here on TechCrunch.

comScore also took the time to publish a comment on Jason’s post, their refuting nearly his every point. The full comment from their CMO:

Jason:

You really need to get your facts straight.

1) First of all, we measure Unique People rather than Unique Cookies which web analytics systems erroneously can unique visitors. I would challenge you to find any kind of server side measurement system that measures people, not machines or cookies. To show you how absurd server side numbers are, AOL Inc. had about 259 MM Unique cookies which gives it over 125% reach compared to a true reach of 54%. The inflation is driven by cookie deletion, multiple browsers, multiple machines for the same users, multiple devices etc… Large companies do not complain about their numbers because they know their server side numbers are flawed as obviously evident by the AOL metrics, not because ‘comScore fixes your number”. This dynamic is less obvious with smaller sites—they don’t realize how inflated their numbers are until their reach starts exceeding 100%.

2) Our Hybrid measurement is not mere pixel tracking as you assert. Our panel, which allows us to distinguish people from cookies, is a central part of the system used to correct for the inflation of cookie based server-side measurement.

3) You are confused about our pricing, so let me explain it to you:

• We charge a one-time setup fee of $5,000 that enables us to audit the beacon implementation and make sure we are measuring everyone consistently. This means auditing beacons on every page to identify pages with multiple beacons that result in over-counting, and pages with no beacon that result in undercounting. We have found about 15% of sites have placed multiple beacons on a page, and over 30% of sites that have missed a number of pages on their site. This auditing function is crucial to protect the system from being gamed. Imagine what happens, if unchecked, sites start cross beaconing each other to inflate their audience. The ‘free’ services do not incur this cost because not much is expected of them. We have seen many sites where the Quantcast beacons ‘fire’ up to 7 times from a single page!
• The initial $5,000 setup fee pays for that audit and gives you access to our reports on comScore Direct $5K for 6 month period.
• The $10K annual price is for ongoing access to our comScore Direct reporting system. However, you don’t have to subscribe to continue being measured using the hybrid methodology. As long as you maintain your beacons we will measure you with our hybrid methodology FREE of charge.

4) You may be upset because you don’t get a free subscription to the reports. We make no apologies for charging for access to our reporting system. That is the only revenue source we have to cover our costs. In doing so, we make a ‘mafia like’ pre-tax margin of less than 9% . Google and Quantcast offer metrics for ‘free’ because they have an advertising supported model. They use the data they collect from users or publishers to sell targeted advertising. We chose not to have a business model based on selling advertising, because we do not want to compete with our clients who make a living selling advertising, and who need a neutral third party to provide audience data that is free from conflicts of interest.

5) As for the free trial offer we made you, you need to get your facts straight. When we rolled out this new hybrid system, we needed some sites to beacon with us early to test it out and get user feedback .This is a common practice you might have heard of—it’s called ‘free beta.’ You chose not to participate, which is fine. But there was no attempt to ‘buy your silence’ and we challenge you to prove otherwise.

We provide a valuable service and we are proud of it. We offer the most accurate 3rd audience measurement tools available which are paid for in real dollars by more than 1,200 companies who, unlike you, freely choose them despite available ‘free’ services.

It’s unfortunate that you were picked on as a child. It must have been difficult to you. But you’re an adult now. If you want to debate, please do so with facts, not just blind fury.

Nearly at the same time, comScore released a new blog post helping to elucidate the situation. We’ll get back to Arrington in a second.

comScore put up this blog post called “Update on the Evolution of comScore Media Metrix 360” to help bring everyone up to the same speed. From the post, those $10,000 figures were wrong:

“While it’s clear that there is widespread consensus that building Media Metrix 360 is the right approach, a small minority have questioned our decision to charge non-clients $5,000 to set up their site’s reporting using the Media Metrix 360 methodology. We believe this is a very reasonable price to charge for six months of reporting back to the client. If at the end of that period, the client does not want to continue subscribing (no-one has yet done so), we will still continue to implement the 360 methodology free of charge as long as the web site continues to maintain our beacons / tags.”

In other words, if you pay us $5,000 for all our costs, we’ll keep tracking. If you want our detailed reporting, that will cost $5,000 more every six months. That hardly sounds as evil as we all first thought, right?

Arrington, a business partner with Calacanis (the TechCrunch50), agreed with comScore (and therefore with Wilson):

“My take – Abraham is right. Comscore is by far the best analytics service available. Alexa, Compete and Hitwise are seriously flawed (I may dive into this more in a future post). Quantcast has its own issues and is subject to abuse, which we’ve seen directly. Comscore uses panels and statistical analysis to generate traffic estimates. The new product measure traffic directly off of website servers and should provide nearly perfect data. And the fact is that the company probably does need to charge to do this properly, as Abraham argues. If a competitor can provide the same service for less (or free), God Bless Them and I’ll support them all the way. Until then, the market will bear what it can bear… So in this case I respectfully disagree with Jason on the merits of his argument. And I ask Fred Wilson to try to keep me out of his various fights.”

So, there it is. You decide what you think of it. To me, comScore is hardly trying to extort anyone here, but Valleywag and Jason Calacanis are saying the opposite. We report, you decide, right?