Five "Ecosystem" Challenges for Web Analytics Vendors

multiplesRecently I had the opportunity to be interviewed by a Research Analyst from a boutique investment bank who covers web analytics vendors that are publicly listed. An interesting question at the end of the conversation was: “what do you think are some of the future challenges / threats to these web analytics vendors”. Ahh fun stuff.

Before we go any further I have to admit that making predictions for the future is one of the more obvious career limiting moves.  Each person’s knowledge is finite and on the web, as well as in life, there are infinite possibilities for outcomes. Then there is always lots of “you don’t know what you don’t know”. Hence there is high possibility of failure, atleast on some counts. But the good thing is not knowing enough never stopped us from expressing our opinions. : )

Here were my top five challenges that the pure web analytics vendors are going to have to confront / overcome:

# 5 Privacy:

This is not really on the radar for a lot of the vendors, not as much as it should. There is a vocal chunk of people who are rightly or wrongly worried about their privacy and new and innovative ways to stay anonymous on the web. That has been around for a little while, what I think is scary is the “main-streaming” of these privacy worries and software / methodologies to “preserve” privacy.

Vendors / companies are still on third party cookies and yes they support first party but they are not going out aggressively to move to first party. Small step but it provides a measure of assurance to website visitors.

The impact of privacy worries is that vendors will “lose” the fragile things like cookies (both third and first) and javascript tags  that we use to collect data. Maybe not tomorrow but surely in the near future. When that happens what do we do? Are we putting serious thought to alternative, and safe, ways to collect data?

# 4 Demand for multiple solution options:

Currently everything is ASP (put a tag, send us the data, login to view your data, send us a monthly chq, count your blessings : )). There is a trend on the horizon where customers will demand more options beyond just ASP.

Two important threats in this bucket:

    1) My hypothesis is that one outcome of the privacy concern is that companies will decide to simply not send their data outside the company. This is an “easy” way to address a multitude of customer concerns in one shot.

    The mindset being “we collect our customers data, it is all first party, we are 100% responsible for it, it will never leave our shores, it is never going to be in a place where your clickstream from different sites sits”.

    It is important to point out that I personally don’t think that all of these are actual problems in compromising privacy, but I am sure you can imagine an article in the Washington Post with your company name and these concerns.

    2) Almost all vendors are ASP now and it is a “pay per drink” cost model. The more pages you have the more visitors you have the more you pay. There are a subset of businesses for whom this will be ok but there will be an increasing amount of businesses who will figure out that buying the technology and hosting it in house is rather cheap (and with just a quarter body watching over it in house).

    kairos smallAs more businesses realize this they might want to bring in-house and pay a one time fee for software and then the standard 15 – 20% per year for updates. This will mean you can cut your analytics costs by five or ten or twenty times (based on what you pay currently and how big you are).

These two items will put different top line and bottom line pressures on the vendors, something that is both a challenge and an opportunity.

# 3 “Web Analytics” is not enough:

I have been on record for a while now saying “traditional web analytics is dead”. The essence of that thought is that decision making based on clickstream analysis is good but it is only part of the data that is required to make truly insightful recommendations. This is something every company that implements web analytics discovers in three, six, nine months (or longer depending on many factors).

Yet except for one vendor all others are staying entrenched in the world of clickstream data collection and processing. Plenty of graphs are provided that go up and to the right over time. But do they scream action? Forget scream, how about a whimper?

instadia smallOne vendor that seems to get it is Instadia. They have integrated an ability to do surveys from the web analytics tool. You don’t need to add new javascript tags, surveys can be turned on and off and changed as you please, and, most importantly, the surveys collect the session data so you can later go back and tie your standard web analytics, clickstream, data with the customer voice. Impressive step in the right direction.

Current industry leaders will have to figure out how to do what Instadia has done, and figure out how to raise the bar because just relying on clickstream data won’t cut it.

# 2 Reliance on “page centricity”:

No matter how you look at it at the moment every single vendor relies on a “page” to exist on a site in order for the analytics to function. The page can be defined by a unique url or url stem or a combination of parameters in the url or a url and a piece of data stuffed back into the application (think gmail, the url is always the same but when I hit reply I am sure Google Analytics is being passed a piece of data that is telling it I am now viewing the “reply page”).

The current solutions rely on a page to know what you are doing, how long you have been on the site, how deep did you get, what “group of content you have seen”, was your visit a success etc etc.

page centricityIt is aptly clear that the concept of a page is dead. It is already dead on many sites (like this one where one page has a lot of the site in it, how do you measure success?). Think blogs and flash sites and ones with RIA’s etc. This is important because it will mean rewriting software code and logic and a completely different way of approaching “web analytics”.

Still none of the vendors have stepped forward to change their fundamental data collection and key metric computation models to move into the new world. Even when metrics are suggested for the new world and data capture methods are suggested they still rely on stuffing data/values into the “page centric” places in the tools to solve problems. 

We will have to give up on what we have and start fresh to do “web analytics” in the world that will be upon us in a year or two.

# 1 The 10/90 rule:

Buzz 2Dlightyear smallSince I was talking to someone who rates stocks (and as you know the stock price today is simply the current value of all future earnings of a company) this was atleast a near term threat. The 10/90 rule states that if you invest $10 in web analytics software and professional services then invest $90 in intelligent brains to analyze that data in order to extract maximum value from your web analytics tool investment.

Today there is a lot of dissatisfaction in companies independent of what vendor they use. Yes some companies are extracting more value than others but for the most part people have a tough time getting actionable insights.

Increasingly companies are less worried about what software solution they use and more worried about finding the right people to extract value. Soon Omniture, WebTrends, CoreMetrics, HBX will all look the same and soon a bunch of people will be able to say “hey I can get 85% of what I want from the free Google Analytics or from the ‘cheap’ ClickTracks or StatCounter”.

In that world will the “big boys” still be able to sell as much? Or will the be pushed to fight for 5% of the companies that could today make a lot more revenue from the feature differences between each of them?

Will they have an effective strategy to monetize some of the $90 in the 10/90 rule? Will some show hubris and underestimate what the emerging free web analytics tools can do to their future revenue streams?

 

It is strange but at the end of the conversation (and this blog post is way more detailed than the conversation was, more time to think) I felt excited about being a participant in our little world of web analytics (or increasingly Web Insights). Excited because it is fun to have so many challenges in front of us, makes the journey that much more fun. Regardless of my personal role I look forward to the change that the next few years will surely bring.

What do you think? Do you agree/disagree with the above? Is there a major challenge that I missed? Do you have suggestions for our vendors on how to adapt / move forward? Please share your feedback via comments.

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Comments

  1. 1
    Jim Humphrys says:

    Avinash,
    On the issue of cutting "your analytics costs by five or ten or twenty times", most of my company's expenses are in people and training rather than the cost of the tool. GA is an excellent tool and many companies should use it, but I suspect there are also many companies that would find a different tool a better fit.

    I agree, web analytics is not enough. I find our WA tool becoming the platform for integrating emarketing inputs and outcomes. Whether it is email campaigns, direct mail campaigns, ad campaigns, ppc, or surveys, WA provides a mechanism to view results across all media, while providing segmentation data for analysis.

    Jim

  2. 2
    S.Hamel says:

    Thank you Avinash for another excellent article!

    5. Privacy: basically, 3rd party cookie is dead, 1st party is fine, but more work toward privacy is required. Can't agree more!

    4. Demand for multiple solution options: hosted vs in-house, the never ending debate. Here I would tend to disagree with Avinash. Bringing web analytics hosting in-house might seem an interesting venue for cost saving, but budgetary expenses being what they are, it's not obvious to compare a capital investment (hardware and software) and ongoing service-based yearly expenses. Furthermore, there is a strong push toward outsourcing whatever is perceived as a commodity and use it as a service, the Microsoft Live and Google Apps are two indications of a strong move toward this direction. In the case of web analytics, hosting and data crunching is the commodity, timely presentation of quality results is the real value. If web analytics vendors starts Applying Web 2.0 concepts, we might see interesting possibilities emerge (want your dashboard in Google Personalized Home? build your own interface using YUI (Yahoo! UI Library), mash up your data with other Web 2.0 services? Fine!

    3. Web Analytics is not enough: If there is an opportunity for web analytics vendors to extend their offering, I think it will be by offering new complimentary services. We have already seen most of the web analytics vendors offering at least some degree of SEO and PPC tools. I think we need to look for other services such as polls, surveys, competitive/market analysis, etc. Ease of merging with internal business data will also become crucial, when we say "web analytics is not enough", I would push for seamless and easier "analytics" in general. The platform for web analytics could become a data repository for the analysis and visualization of any type of data, not just web related.

    2. Reliance on page centricity: this item is getting a lot of attention. Rich Flash interfaces and even more, Web 2.0 types of applications require a different unit of measure. The WAA definition of a "page view" is of interest ("an analyst-definable unit of content requested by a visitor"), but to me, what seem even more interesting is the concept of a "Meaningful Interactive Event".

    1. The 10/90 rule: Again, I agree with Avinash. The tool is part of the equation, but it's not and end in itself. At the end of the day, you still need a human being able to understand, analyze and do recommandation on actionable data. In some cases, the lower-entry level solutions are what makes the most sense, but I think there is plenty of room for the "bigger" players, and I hope it's more than 5%!

    Great post Avinash, it's always a pleasure to read you!

    S.Hamel – http://shamel.blogspot.com

  3. 3

    Jim: Let me split the two excellent points you make:

    On the issue of cutting “your analytics costs by five or ten or twenty times”, most of my company’s expenses are in people and training rather than the cost of the tool.

    I agree with this completely. The trend that I have noticed is that for larger websites the cost of tool in the ASP model is also becoming non-trivial. My reference to five or ten times was simply on the ASP cost for the tool itself.

    GA is an excellent tool and many companies should use it, but I suspect there are also many companies that would find a different tool a better fit.

    I could not agree more with this statement. Each company will find its own sweet spot and there are tools that are better suited for certain vertical industries (CoreMetrics comes to mind).

    My hypothesis is (and please let me know what you think of it) that there is a threshold beyond with you'll be able to extract value from a top line tool. Until you reach that threshold you could benefit just as much from a free/cheap tool like my biased favourite ClickTracks. The benefit is you'll more more money to invest in people and training etc.

    Stéphane:

    Here I would tend to disagree with Avinash. Bringing web analytics hosting in-house might seem an interesting venue for cost saving, but budgetary expenses being what they are, it’s not obvious to compare a capital investment (hardware and software) and ongoing service-based yearly expenses.

    You make a great point, especially in highlighting the trend moving away from in-house to all hosted, like in Live or Google Apps.

    My thought is that the pressure to bring in-house will come

    1) primarily from Privacy considerations (data security and providing a illusion of extra data security)

    2) secondarily from not wanting to have another Data Silo (outside the company when the real value will come from integrating web analytics with rest of the company, it is non-trivial challenge today to get data from outside and bring it in and DW it etc)

    3) cost of having it in-house, there is general over estimation of how much incremental cost there will be for a decent size company (say Fortune 5000) to have a extra four cpu server with a redundant back-up to collect data

    Thanks to both of you for making some excellent points, I appreciate the comments very much.

  4. 4

    Hi Avinash:

    Great post as always. On the issue of whether the big boys will be able to monetize the 90%, IMHO the existing vendors will have a hard time moving a different business model that reflects their customer's needs – e.g. services. Many of the big boys are either public or planning to go public… The valuation associated with a product company is (sometimes significantly!) higher than that associated with a services company and therefore this creates an "innovator dilemma" – a great concept introduced by Clayton Christensen…. and opportunities for new entrants!

    All the best,
    Antony Awaida

  5. 5
    Lionel says:

    Great post! Your site is the most interesting blog about Web Analytics. I also think that the current offers do not cover 100% the underlying need and we can expect new solutions to come (eg. VisitorsVille, ClickMap, etc).

  6. 6
    Daniel R says:

    Avinash,

    Great list. On "#2 Reliance on 'page centricity'", can you point to me what are the proposed alternatives and guidelines?

    If it is a case-by-case situation, I would imagine it would very difficult assess what is to track (not that its always easy now). And of course, a new consulting opportunity.

    Thanks!

    – Daniel

  7. 7

    Great post, Avinash! Seems our banking friends are really looking to make cash again, probably nostalgic of their good old boom days, a couple of years back!

    Apparently, Robin Steif also got a call from an investment banker quite recently.
    Funny thing is that everybody's talking about the vendors and surely, Omniture did their IPO but why is no one talking about Mergers & Acquisitions and ZAAZ being acquired by Wunderman? I posted a (terribly) long post related to that on my own blog.

    Getting back to your wonderful post that sums things up quite efficiently, I've decided to reply from Copenhagen, where Instadia indeed seems to get it ;-) The OX2 Web Analytics Business Unit is testing out the above mentioned survey features as we speak and looking forward to datamining planned for tomorrow.

    Not only do they get the quantitative aspect of web analytics that you regularly mention but they also adapted the pricing as it's not page views based but domains based. Interesting Danes ;-)

    Related to outsourcing or insourcing, for us, it's all about integration: between the CMS, the AdServer, the emailing tool, the survey tool and then the datawarehouse, the BI and stuff like that.
    So ASP is nice. Free ASP is even better with Google Analytics but I share your concern related to privacy but also security issues, cf. your previous post.

    But then again, we all now that the road to Enlightment in web analytics is long. So ASP remains a good short term solution. Related to long roads, page centricity for me is not really an issue. If you're using tagging and do it correctly, you can replace the notion of page views by the notion of page elements.

    I hear them often those questions related to Web 2.0 but can't help myself thinking that Web 1.0 measurement is not really part of the process for the majority of companies who have a web site so let's try to be logical and make our classes with simple stats, in order to get the right questions first of all and then the right answers.

    So many clients want it all but you know as well as I do that they don't want to face the 10/90 rule as the responsability for Web Analytics is pushed too often into a corner or passed onto the new guy/gal.

    Our European web analytics dedicated business unit has nonetheless recently seen a shift in focus: leaving the realm of licenses and maintenances to move over towards true consultancy. It can still be very technical but can also be used for interpretation of reports, allowing us to hold a more holistic view on the technical context but also the companies' underlying communication strategy. As much as I hate the term consultant, we're actually being categorised as such, lately.

    This is the time where the fun starts ;-) and I must admit that it's also thanks to you that this sector is moving on, slowly but surely.

    Regards from the Brussels team, this time in Copenhagen. Next week, Paris ;-) I love Europe!
    Aurélie

  8. 8

    Daniel: Sadly I don't have something brilliant to say. At the moment I think it is very much on a case by case basis (and yes a huge consulting opportunity).

    What do I think it can be? Going out on a limb: I think the whole idea of clickstream is going to die, there will be no more clickstream. We are migrating to "business activity" on the web and there will be "business events" that occur and outcomes as a result of these events. In a world where pages don't exist I think we will measure

    1) the effectiveness of the sub-experiences as a whole and

    2) deeply stress outcomes (qualitative or quantitative) and judge value of sub-experiences much harder on what the outcomes are (vs. today where it is so easy to get a count of page views that we report that rather than deeper outcomes impacting analysis)

    It will be something better than what we have today or what we are proposing today: just newer ways of "stuffing events" into where page name or url should be.

    What do you think?

    Thanks so much for the comment, it put some heat on the brain cells! : )

  9. 9
    Robert Tsai says:

    Very well said, Avinash.

    My view is that #3 and #4 are the biggest challenges near term, trying to figure out how to tie all the data from multiple data sources (and best of breed vendors) as well as trying to glean actionable insight from what otherwise looks like terrabytes of statistics.

    Looks like the "page view is dead" meme is back in vogue again.

    Rob

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