Many of you will have read Rene’s very interesting post on this blog, in which he posits a world where there are only two web analytics tools to choose from: Google Analytics and Omniture. I’ve already commented on the post, and my remarks have been deemed to be of sufficiently high quality to merit an invitation from Eric to post a follow-up post here. I’m honored to do so.

The idea behind Rene’s post was that you don’t have to extrapolate the current rash of consolidation in the industry very far to see a future where there are only two solutions to choose from: Omniture at the high-end, and Google Analytics at the low. He goes on to speculate about the pros and cons of such a situation.

The post and its central idea got me thinking, and I realized that, despite the fact that Rene was only painting that view of the future as a means of initiating a kind of Platonic dialog about our industry, he actually hadn’t gone far enough. My prediction for the future of Web Analytics is as follows:

In three years, there will be no Web Analytics vendors at all.

Pretty bold claim, huh? Well, allow me to finesse that statement a little, and explain what I mean by “Web Analytics vendor”. My definition here is a company that makes the majority of its revenues from Web Analytics software and/or services. Today there is still a reasonable number of companies that fit that mold: Omniture, Webtrends, Core Metrics, Nedstat, IndexTools, and a bunch of smaller guys like CrazyEgg and Mint.

Note that I don’t include Google or Microsoft in this list, since neither of our companies will ever make more than a tiny amount from Web Analytics; for us, Web Analytics is a means to an end, a crucial component in a wider story which involves the selling of online advertising and the provision of software and services to make it easy for advertisers to buy this advertising.

This brings me to the real point of my prediction: In five years, Web Analytics will have been absorbed into other, allied disciplines (or will have absorbed them), so there will be no ‘pure’ web analytics vendors any more. Or, to put it another way:

There will be no Web Analytics vendors, but Web Analytics will be everywhere.

Hence the title of this post. The Web Analytics industry as we know it has reached (improbably) the autumn of its years. In just a few years it’ll be hard to find any company who really pays the bills from direct, old-style Web Analytics projects. But far from dying out, it’ll be easier than ever before to find Web Analytics software - it’ll be everywhere: in your ad server, in your CMS, in your marketing automation/CRM system, in your ad network. Companies will choose the Web Analytics that integrates best with their other systems (really, is a part of their other systems) rather than picking discrete, standalone applications on the basis of functionality.

This is already happening through the acquisitions that are taking place in the industry, and through the strengthening of Web Analytics capabilities in related disciplines. Marketing automation/management companies like Unica and Lyris (formerly JL Halsey) now offer web analytics as part of their offerings. Then there are the analytics capabilities of ad-serving tools like DFA, Atlas Media Console, and 24/7 Real Media, or ad networks like Tacoda and Advertising.com.

Content Management vendors such as Interwoven and Vignette also offer integrated analytics, and, in the case of Interwoven, MVT (through its acquisition of Optimost). Whilst CRM companies like Salesforce.com and Netsuite are adding more and more Web Analytics-like features. And, of course, the big portal/ad services companies: Google, Microsoft, and Yahoo!, each of which has Web Analytics embedded into the overall offering set (Yahoo’s capability is harder to spot, but is there - they acquired Keylime Software for this purpose several years ago). Even consultancies like Accenture are starting to get in on the act, acquiring Web Analytics-related assets like Maxamine and Memetrics.

At the other end of the market, Omniture is continuing to add capabilities which are moving it further and further from its core business of Web Analytics. Omniture will continue to absorb other businesses in related areas until the day comes when web analytics is only a minor part of what the company offers. We’ve already seen them do this with behavioral targeting (TouchClarity) and MVT (Offermatica). I predict that we will see Omniture acquire an ad server in the not too distant future. Why would they not, after all? Their value proposition to sites is that they can run and optimize their online marketing through Omniture’s services; having an in-house ad server would be a tremendous help in providing an all-up view of multi-channel marketing effectiveness (at the moment, Omniture has to reach complicated data-sharing deals with the likes of DFA to get hold of this data, or add cumbersome Omniture tags to ad calls).

As for the other Enterprise vendors - now really just WebTrends and CoreMetrics - they will have to go one way or the other; either acquire new capability to bolster their range of offerings, or be acquired. There’s a possible third way consisting of building very close relationships with some key third parties, to create a virtual version of what Omniture has done through acquisition, but it will be a tough road to travel by comparison.

What all of these developments have in common is that Web Analytics will increasingly become an enabling service which allows a company to provide a wider range of offerings - be it CRM/marketing automation, media planning/buying or content/site management. The “main” business (including consulting) will subsidize the investment in the Web Analytics software.

Which leads me on to my second bold prediction:

In five years, all Web Analytics software will be free.

“What?” you thunder. “Free?” Yes, free. I’ve posted before about what a miserable job it is making a living from Web Analytics. There are a bunch of reasons for this is that Web Analytics on its own is not really an annuity business - sure, most Enterprise vendors charge by the month these days, but there’s no established pattern of repeat business that you can build a truly reliable revenue stream on (this is the point, by the way, where the Enterprise vendors reading this splutter and immediately scroll down to post a rebuttal in the comments). The second main reason is that Web Analytics, for all its current glitz and glamour, is still really a minority sport. It’s a bit like Curling at the Winter Olympics - fun to watch for a bit, but most people get bored pretty quickly.

Much more reliably annuity businesses to be in are media planning and buying, or media representation, or selling your first-party ad inventory, or doing the kind of big-iron, multi-year projects that the likes of Accenture excel at. Those kinds of projects can be worth an order of magnitude more than you’d get from a pure-play Web Analytics implementation. But good analytics is essential to the success of these kinds of projects; so any company worth its salt getting into (or wishing to stay in) these businesses needs to offer quality analytics. The Web Analytics will be a “value add”. And do companies tend to charge for the thing they’re bigging up as the great extra thing that you get by working with them? No, they don’t. So Web Analytics will be offered as a free, tightly integrated and - and let’s be in no doubt about this - completely essential component of any online marketing-related offering.

So, at the end of all this, am I predicting doom and gloom for the Web Analytics industry? Hell, no. Things are just starting to get really interesting.

Ian Thomas
Director, Customer Intelligence
Microsoft Advertiser & Publisher Solutions
http://www.liesdamnedlies.com

Since the acquisition of Visual Sciences/HBX by Omniture, there have been tremendous discussions about the future of the Industry. Everybody seems more or less to agree that a concentration is taking place which is somehow normal as Web Analytics is a maturing industry.

Now let’s imagine for a second that this concentration continues and we end up with two solutions. What if all we had at our disposal was Google Analytics as a “basic” free tool and Omniture, the “enterprise” platform, serving the high-end of the market?

How would this landscape affect consultants and practitioners? Would it be a good thing? Or would it be the end of analytics as we know it today? I wanted to open the discussion regarding this topic and know what other people have to say.

Before I go any further, I want to disclaim that as founder and CEO of OX2 that has now joined the LBi Group, we are vendor independent and we thus have partnerships with many Web Analytics vendors including Omniture (through their certification program) and Google Analytics (being members of the GAAC program). This is my personal opinion and doesn’t necessarily reflect the official position of LBi.

That been said, let’s start the discussion! Take a moment and imagine the future I just pointed out. If we had just those two vendors how would that affect us?

On the one hand, I can think of positive effects:

• Training would be easier for consultants such as ourselves as we would have fewer tools to support and understand. Nowadays we have to understand how to get the same metric from Omniture (SiteCatalyst / HBX), Google, WebTrends, Unica, IndexTools, … which, to be quite honest, is often a pain with many vendors – not all - as their underlying documentation can be opaque and support doesn’t always seem to understand what we are actually talking about;
• Practitioners could more easily switch jobs as all companies would be using either one or the other tool;
• Other products such as content management systems, emailing systems, other internet related systems would more easily be integrated with the two existing WA platforms. And compatibility costs would be lower. But not only online software, this would be also the case for other tools such as BI or CRM tools, allowing a better understanding of the online activities;
• Having only two WA platforms would also allow benchmarking easier as we all know that putting 2 tools next to one another inevitably gives you grey hairs. This might push for standardisation, which in term would also mean that switching between tools might be easier. But here, I might be dreaming: each vendor has his own tags. Moving from one solution to another, when you’re working tag based will always be a nightmare.

But as everything in life there’s no yin without a yang. Let’s see some negative effects of this situation:

• As for many industries, a duopoly generally leads to a lack of innovation. Certainly if there is collusion at hand and as GA’s pricing model is different from Omniture’s one, they might have a shared interest in locking the market between their solutions. After all, competition is good. Just take a look at how vendors have been competing these past years to release more powerful tools and better functionalities to address the complexity of Web Analytics;
• If Omniture would be the only enterprise solution, prices would remain high while I strongly believe that WA tools will more and more becoming a commodity, putting downward pressure on prices. Don’t forget that a tool is just that: a tool and that you need people and processes in order to use them correctly, which are the most important factors in a WA project. We have customers doing great things with Google Analytics and I’ve seen very poor uses of expensive WA tools. Look also at Office suites, currently you could say that you have two main options: Microsoft and Star Office; Microsoft still sells their software at a very high price and they make margins of over 70%! If there was a real competition I bet that prices would be lower;
• Having just Omniture and Google Analytics wouldn’t/couldn’t suit every need. Not all websites are alike and we see it already today that a single tool doesn’t fit all. Take for example Coremetrics that focuses on retailers and seems to be doing a great job regarding this vertical. Look also at Unica that allows big corporations to integrate easily WA to Campaign management.

My opinion regarding this question is that it wouldn’t be good for the industry if we ended up with just 2 products (I’ve taken Omniture and Google Analytics as they are the two most important tools nowadays, but it could apply to any other). As I mentioned tools are just part of the equation, an essential but not an important part.

Getting back to Omniture and Google Analytics, the first still has some competition at the enterprise level, which doesn’t seem to be the case for Google Analytics. Let’s be honest, even if we are big fans of Ian Thomas, Gatineau hasn’t, for the moment, been able to be a big threat to GA …

For more on my perspective you can read some of my thoughts about the future of the Industry following the Omniture acquisition of Visual Sciences here:

http://webanalytics.ox2.eu/2007/10/27/omniture-pacman-what-future-for-visual-sciences/
http://webanalytics.ox2.eu/2007/10/31/how-the-web-analytics-industry-will-evolve-with-omniture-as-the-green-giant/

So what do you think? Do you have other things to add to the pros and cons? How would you see yourself in this scenario? Do you want to see a two vendor market, kind of like Windows versus Apple, or do you like the diversity of options we have before us today?

I am looking forward to having a spirited and honest conversation about the future of the analytics market and thank Joseph and Eric for giving us all a venue to chat.

René Dechamps Otamendi, CEO, OX2 (part of the LBi group)