Report: It’s A Good Time To Be A Web Analyst, Not Quite So A Google Analytics Competitor

Econsultancy just released its annual Web Analytics Buyers Guide, and in conjunction with its Online Measurement and Strategy Report forms an in-depth analysis of the marketplace over here in the UK. On the whole it makes for very interesting (and heart-warming) reading.

That is, unless you are a paid-for web analytics provider residing at the SMB end of the market. In fact, even those at the top end are facing challenging times with the possibility of further consolidation following Adobe’s recent purchase of Omniture, which has emerged as a 42% market share holder (estimations were used where it was impossible to get official figures). The outlook for the industry on the whole is very good however.

The market

The positive picture found by Econsultancy seems reflective of the current ascendancy of web analytics in the UK. By Econsultancy’s estimation the UK web analytics market is up 9% in 2009, from £78m in 2008 to £85m in 2009. Although this was down slightly on the 12% growth recorded in 2008, it still represents a good growth rate in a year where recession has hit many related markets. Interestingly, the user experience and usability market, increasingly a close cousin of web analytics, grew only by 5%.

The reason for this growth? Well, the recession may have been both a help and a hindrance:

“While the economic climate has compelled companies to take measurement and understanding of return on investment from digital activities even more seriously, there has been an inevitable slowdown as some companies have either delayed investment or cut budgets for technology and analysts.”

There is a general sense here that marketers and business owners are only starting to realize the potential impact their website data can have on their bottom line. We also believe that marketers have had more time on their hands to finally get to grips with their website data in 2009, a side effect of a return to the tried-and-tested in their marketing efforts.

Good news for web analysts

Even better news for web analysts is the finding that companies increasingly focused their investments on internal web analysts rather than the technology itself. The share of expenditure on staff to analyse website data grew from 36% to 42% while the share of expenditure on web analytics technology fell from 45% to 38%. 1% share in spend also went from the technology platform to professional consulting services.

Econsultancy sees this as a positive shift for the industry and that decision makers are taking note of what thought leaders are saying:

“…web analytics experts stress that the interpretation of the data and use of information to drive business decisions is of key importance, rather than the data itself.”

However, the same report found that 46% of companies still don’t have a dedicated web analyst. Meaning there is still huge potential for growth in this area. As Avinash Kaushik puts it: “you need a person with a planet-sized brain” to avoid becoming “data rich and information poor.” There is a feeling in the market that finding the right staff is difficult:

“It is arguable that companies are not investing in staff, simply because there is a shortage of people with the right skills in the industry. Web analytics requires a unique combination of skills that includes an understanding of statistics, business acumen and deep knowledge of digital and interactive marketing.”

Google vs. everyone else

80% of companies surveyed for the Econsultancy 2009 Online Measurement and Strategy Report use Google Analytics. We’ve yet to see full launch of Yahoo Analytics in the UK and it remains difficult to even obtain an account (my YSM! rep told me recently that they are kept completely in the dark regarding all of this). However when it does launch it can only pile more pressure on the paid-for solutions. To my mind, two questions remain about the future of the free web analytics solutions:

1. Can Google Analytics bridge the gap to the upper echelons of the paid-for solutions? (and do they want to?)
2. Can paid-for solutions targeting SMB markets remain profitable in the face of this free competition?

The first question can be further divided by asking whether this “gap” exists at all or if it is just a perception that there is a gap. From the Econsultancy vendor matrix, it seems that there is near convergence at a grass-roots level purely in terms of the features offered by each company. On paper there are few features not provided by Google Analytics which the others can boast, particularly after a busy 2009 on Google’s part. In practice however there may still be a gap in flexibility in some areas.

Google’s privacy terms and conditions could also be a thorn in their side; 17 out of 19 of the other solutions provide some form of personal information or form data capture.

Google’s inability to provide personal information about users is possibly most relevant at a small business level where every lead counts, and due to the smaller volumes concerned can actually be chased up. It is also relevant for larger organizations wishing to tailor direct marketing for user groups based on personal data.

I was involved in a case recently where Google Analytics was removed from the tender list of a multinational publishing group after it became clear it could not be used for ABCe audits (independent verification of media performance), another symptom of their cagey safety stance. In the end, this may provide an answer for question 2—in exploiting these and similar potential weaknesses Google’s direct competitors could find their own defendable niches; otherwise, the future for lower-tier analytics tool providers looks bleak.

A shift in focus?

Econsultancy asked 20 web analytics providers to plot their current positions (where we are now) and in the future (where we are going) to get a sense of where each product fits in the marketplace and what their plans for evolution are. The chart below shows them all plotted in the “where we are now” position. Already the upper right space is looking cluttered. Tellingly, 12 of the “where we are going” labels moved into or further into the upper right quadrant, a sign that these companies see differentiation and revenue growth through higher levels of customization and the providing of a service to complement their product’s revenues. Even more tellingly Google and Coremetrics continue to hold their cards to their chests and didn’t release this information.

At the top end, paid-for solutions are bolstering their offerings with new features galore to keep increasingly sophisticated users happy. This often means going beyond what is traditionally considered web analytics with features like usability studies, PPC management modules and merchandising bolt-ons. This is also a response to the threat of commoditization. For example, 14 solutions out of the 20 showcased provide email marketing campaign management modules. Likewise 14 support pay-per-click campaign management (in addition to analysis). The lines are blurring, and as Andrew Hood, Managing Director of Lynchpin Analytics points out, soon a study of this kind increasingly becomes more a question of “what exactly is the defined market for web analytics” than “how fast is it growing?”

It’s clear from Econsultancy’s report that industry leaders see this as a dynamic period for web analytics with focus shifting towards the tracking of multiple marketing channels and then using test data to make measurable improvements to websites. As Brewster Barclay, Managing Director of Clickstream Technologies puts it, we are “moving from web analytics to customer analytics.” Meanwhile, Dennis Mortenson of Yahoo suggests automation and predictive modelling are the future:

“We’ll be seeing a lot more predictive analytics. After that, automation will sneak into the tools as well. That’s where we’re headed—there’ll be a whole different level of intelligence applied to it.”

Whichever direction web analytics takes, it seems clear that it is only going to become a greater part of everyday life for digital marketers around the world.