With Google’s stock down 40 percent since the beginning of the year you have to wonder whether some investors have misunderstood how Google makes money all along. Google’s stock too a big whack a few weeks ago when ComScore released stats showing that number of clicks the search-ad giant was getting were down. What the market missed was that clicks are only one proxy for how well Google is doing what counts–making money off of advertisers. It maximizes the ad space on search results pages when advertisers pay more per click and when consumers click through more ads. Advertisers, though, pay more for clicks that are more likely to lead to sales (conversions its called). So Google is constanty weighing lots of clicks against lots of money per click and is adjusting its algorithms and business practices accordingly. We’ll soon see how effective they’ve been recently when Google announces its first quarterly earnings. My guess is that the drop off in clicks won’t result in any earnings loss–and that’s more or less what Comscore and Google have been reminding people. But this confusion, and manic depressive approach to valuing Google, suggests that investors and analysts need to get smarter about valuing the online ad biz.