Google Analytics Sends Bad News to Web Tracking Business

By John Pallatto  |  Posted 2005-11-15

Google Analytics Sends Bad News to Web Tracking Business

If you are a computer industry executive, nothing can spoil your day as much as learning that a new competitor has jumped into your market by offering for free the same service that your company is charging thousands of dollars for.

But that is exactly what happened this week when Google introduced its analytics service that tracks the myriad activity of Web services as users explore a site and click on ads. Google Analytics will just be a new service added to its AdWords advertising system, which generates nearly all of Googles revenue.

The announcement blindsided such companies as WebSideStory Inc., Omniture Inc. WebTends Inc. and Coremetrics Inc., which can charge thousands of dollars for their analysis tools that tell Web marketers how well visitors like their site design, products, promotions and advertisements.

While Web site traffic analytics is the bread and butter of these companies, for Google, with its billions in advertising revenue, analytics is nothing more than a little add-on service that it can give away like the plastic toys kids find in cereal boxes.

The news was enough to temporarily send WebSideStorys stock price down by 12 percent as investors speculated whether the Google announcement spelled the end of Web analytics as a money-making business.

This led to further speculation that if Google is offering a Web site tracking service, then the likes of Yahoo, MSN and AOL will have to jump in too.

For the independent site tracking services, the new Google Analytics service is as much a threat as Microsofts decision to offer its Internet Explorer Browser for free to overwhelm the user base of Netscape Navigator.

Click here to read why Google thinks that its Web analytics service will be a hit with advertisers.

Google signaled its move into Web site analytics last March when it bought out Urchin Software Corp. of San Diego, which marketed analytics tools for tracking Web site marketing performance and on-site user experiences.

At that time Google officials said that it would offer the Urchin analytics tools to Web site operating and marketers. There was considerable speculation at that time that Google would offer Web analytics services for free, though the company did not confirm that. Now the other shoe has dropped.

The Google service would be of greatest value to the many small businesses and small commerce Web sites that use Google as their marketing platform. Most of these sites generate too little revenue to afford paying even a few hundred dollars for Web analytics services. Getting access to Google services might help them increase their volume and become a bit more of a Web marketing powerhouse.

Next Page: Listening for the crack of doom.

Listening for the Crack

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What remains to be seen is whether Google Analytics will cut into the service that the revenue generating analytics companies provide to the big Web commerce site that spends hundreds of thousands and even millions of dollars on Web site design and marketing programs.

These sites are willing to spend thousands to dollars to check on how online shoppers are reacting to their latest site redesign to see if some additional tweaks are in order. Their independent Web presence is strong enough that they dont need to use Google as their primary marketing platform.

To read more about Googles acquisition of Urchin Software, click here.

But the very fact that Google is offering the service will certainly prompt the bigger companies to ask why they are paying thousands of dollars for Web tracking services when Google is giving them away.

WebSideStory, Coremetrics and the like may soon find themselves under pressure to slash their fees if they cant demonstrate that they offer premium tracking services that are far superior to what Google offers.

Click here to read more about the growth of the Web analytics market.

Furthermore, Google Analytics may prove to be a significant enticement for some midsize and even some of the large shopping and commerce sites to make Google a big part of their Web advertising programs.

While Google Analytics may not prove to be the crack of doom that the some in the Web Tracking business fear, its a risk that these companies face from being in a vulnerable niche market. These companies sprung up when the Web was going through its early explosive growth phase.

There was a large demand for Web tracking services because traditional marketing companies didnt understand yet how the Web worked. That time has passed. People learned that the Web was no different from any other marketing medium and the dotcom meltdown was the proof of that.

So no one should whine that giant Google is unfairly attacking these poor independent Web tracking companies that are just trying to make a buck.

The evolution of the Web ensures that these companies will either fail or disappear one by one into larger companies such as Google as the Web commerce companies discover they can get the same services for little or no cash.

If they dont get these services as part of a service agreement with Google or some other Web search megasite, no doubt the tools will become cheap enough that they can buy them outright and do the Web tracking for themselves.

John Pallatto is a veteran journalist in the field of enterprise software and Internet technology. He can be reached at

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