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