Five "Ecosystem" Challenges for Web Analytics Vendors

Recently 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).

As 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?

One 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.

It 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:

Since 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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