Facebook drives 6MM people to Friendster!

That headline is kinda, sorta true. If you buy shoddy analysis from misinterpreted data.

Like a recent piece from Henry Blodget, mass inflator of the Web 1.0 bubble. He is at it again with a piece on Facebook being a Google Killer. He points to RBC Capital Markets analyst Ross Sandler’s “analysis” of Facebook’s incredible growth and comScore data on entries and exits.

This is the kind of incessant hyping that inflated the housing bubble we’re all suffering through now — assuming that extreme rates of growth will continue.

The 1427% growth cited for Facebook starts from an insignificant base. With Google’s 468MM uniques in 2006, the only way for Google to have grown 1427% would be to reach every man, woman and child on earth. And it certainly couldn’t sustain that growth into the future, even if a lot of couples got really busy really fast.

Blodget also points to comScore’s entry/exit data to bolster his case. Here, he falsely equates correlation with causation. comScore’s entry/exit report doesn’t necessarily mean that site A drove traffic to site B. It just means that after someone went to site A, they went to site B.

If you go from Facebook to Google, it counts as an exit from Facebook and an entry to Google. It doesn’t matter whether you clicked on a link in Facebook to go to Google or not. You just happend to do those two things. Given that a lot of people use both Google and Facebook, any big site will show up on both entry/exit reports for any site.

Blodget says:

Fully 19% of Google sessions now come from Facebook, up from 9% a year ago.  At the very least, this will likely give Facebook the leverage to negotiate a sweet referral deal at some point.

Nope. Those people are going to Google anyway, without any prodding from Facebook. Google would be stupid to pay for that traffic.

comScore’s entry/exit report is one of the most useless reports they generate and really difficult to interpret. The only real curiosity in the Facebook data is this: 6MM people go to Friendster after they go to Facebook?

Yet another issue with RBC’s graph is that it doesn’t take into account duplicated reach. The combination of Google and Facebook is not 99% of worldwide uniques, because there is a high degree of overlap between the two sites. RBC analysts evidently don’t know how to use the unduplicated reach feature of comScore’s reporting tools.

That’s three huge flaws in one report. Sadly, that’s not uncommon. Analysts and journalists frequently ignore methodology while chasing killer headlines.

Thanks to @carolalene for the pointer on the comic.

Advertisements

About Rakesh Agrawal

Rakesh Agrawal is CEO of redesign | mobile. Previously, he launched local and mobile products for Microsoft and AOL. His personal blog is at http://blog.agrawals.org and tweets at @rakeshlobster.
This entry was posted in facebook, google, search, social networking, statistics. Bookmark the permalink.

One Response to Facebook drives 6MM people to Friendster!

  1. Pingback: Does correlation imply causation? - Quora

Comments are closed.