Web analytics, tools used to measure a Web site's performance and traffic have historically been the domain of larger retailers and e-commerce companies. That may change with yesterday's news that Google will offer its Web analytics tools for free.
While companies with "shopping cart" Web sites have embraced analytics, many organizations have trouble justifying the investment, said Bill Gassman, research director at Stamford, Conn.-based Gartner Inc. With the Mountain View, Calif.-based company offering Google Analytics for free, suddenly a door is opened for small and midsized businesses, giving established vendors some very powerful competition.
"I see a huge vacuum in the midmarket," Gassman said, referring to both "mid-volume and mid-complexity" Web analytics. "Over 70 vendors are trying to make noise in that midmarket area."
According to Google, the tool, formerly known as Urchin, includes functions for keyword and e-mail campaign analysis, tools for Web site design optimization, and new reporting dashboards. It's based on technology from Urchin Software Corp., which Google acquired earlier this year. The service, previously called Urchin On Demand, had been offered as a hosted Web service, at $199 per month.
Google's reasons for offering the tool for free are clear, Gassman said. This service will leverage Google's AdWords search advertising business and is intended to demonstrate the value and return on investment of Google advertising.
"For example, the Web analytics platform is an excellent place to see which key words should you be using and which words are leading to an eventual purchase," Gassman said.
But there are some catches.
"There's the privacy issue," Gassman said. "There's concern that if you're giving Google information about your site, and what's happening on your site, they could make determination about where you show up in their search ranking." Gassman said Google would need to address the privacy issue head-on to appease skeptical users.
Training is another hurdle that could affect Google's offering. Gassman said high-end vendors have found that customers are only using about 15% of the functionality available to them in Web analytics products. Vendors have had to invest heavily in training and consulting to help customers get real value from their products.
And, Gassman continued, all the Web analytics tools have proprietary tags required to communicate statistics back to services. Setting these tags up requires an investment of time and training, and makes migrating to a new service a lengthy project.
Despite these issues, Gassman is optimistic about the potential market impact of the new Google Analytics offering. By bringing down the cost of the initial service investment to zero, the returns don't need to be quite as high, he said. That could inspire more companies to start using Web analytics, which could grow the market in the long term. He also sees this offering as raising the visibility of Web analytics in general and said it is likely to challenge the other vendors in the midmarket space to continue to innovate.
Bob Chatham, a principal analyst with Cambridge, Mass.-based Forrester Research Inc., agrees that Google Analytics will spur innovation in the market. While the free tool will not have an immediate impact on the high-end of the market, he does see it as a significant development.
"This is not a competitive product at this point," Chatham said. "But [Google Analytics] will apply pressure to high-end vendors, who will need to add value to their products so customers can justify their purchases."