Google Move Jolts Web Analytics Market

News Analysis: Small businesses with Web sites will like the free Web traffic analyzer, but top companies may be uncomfortable.

Google Inc.s free Web site traffic analysis feature introduced Sunday was quick to impact WebSideStory, the company that arguably leads the analytics market that Google has just entered.

In the hours after Google debuted its Google Analytics feature, San Diego-based WebSideStorys stock price fell as much as 12 percent, to below $16 a share.

While the share price recovered somewhat by days end, the message was clear: Google is shaking up another bunch of businesses.

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In this case, its firms that provide Web analytics tools, which are used by Internet-based publishers, retailers and advertisers to track a Web site visitors every click and scroll.

The features identify site bottlenecks and other snafus affecting customer service, gauge a Web travelers overall experience and, more importantly to advertisers, can be used to measure an ads success or failure.

To Google, the analytics tool is mostly meant to improve the attractiveness of its advertising system, known as adWords.

By giving away the tools, itll attract more marketing dollars, it believes. Advertising represents almost all of Googles $1.58 billion in revenue last quarter.

But therell be collateral damage, as is usually the case whenever a company of the size and significance of Google does anything.

In this case, analysts expect Google Analytics to have a significant negative impact on San Diego-based WebSideStory Inc., Omniture Inc. of New York, and other leading incumbent Web analytics firms.

The reason? The benefit of all their data crunching comes with a sometime heavy price, usually between $500 and $30,000, depending on the intricacy of the data thats collected.

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Another reason for incumbents to worry? Google Analytics will also inevitably be followed by responses from Yahoo, Microsoft Corp.s MSN, Time Warner Inc.-owned America Online, say analysts.

"Googles efforts illustrate the value of Web analytics, a market where WebSideStory is the leader," wrote Mark May, a senior analyst with Needham & Company.

"It doesnt bode well for some companies," added Clay Moran, of Stanford Financial.

But the blow to the incumbents may be softened a bit. Google Analytics may not find takers among major companies that spend significant amounts of money on advertising.

They arent necessarily going to trust the same company (Google) to publish their ads and then analyze the ads effectiveness.

"A large advertiser, spending a significant amount of their budget at Google, would be uncomfortable," said Bryan Wein, president of 360i, an Internet performance marketing firm.

Google is also attacking a part of the market that established analytics firms ignore, namely small businesses with Web sites that dont use the features, either due to ignorance or their cost.

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