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Tuesday, September 28, 2004

WebSideStory: We Ain't No Delinquents

It's a tale of two companies.

A commenter on my previous post -- since he left himself anonymous, we'll call him Officer Krupke -- about this company suggested that I might "have something against" WebSideStory, even though I suggested the IPO "made perfect sense." No, there's no grudge, just puzzlement. I did think it was a bit strange that so many of the company's executive team arrived so recently, well after the company's "first phase." (I stand corrected in stating that the early product was a logfile analyzer. It was and is bug-based tracking.)

An Associated Press story about the company's IPO (it started trading today) confirms certain facts. For most of its history, leading up to the first time it tried to IPO in 2000, WebSideStory was profitable. But those profits (90% of them in 1998) were mostly from pornography advertising.

Nothing wrong with that. Online pornographers have sometimes led the pack in adoption of certain marketing technologies. But now the question is, can WebSideStory turn a long-term profit from its 500 or so enterprise-class clients, and what are its growth prospects? As the AP story points out, WebSideStory has mostly lost money catering to the enterprise, though this is beginning to turn around.

Make no mistake, the field of so-called on-demand analytics is crowded. The small business sector that WebSideStory left behind may turn out to be the more fertile and profitable ground for analytics software and services. Personally, from the standpoint of risk and leverage, I'd rather have 50,000 small-to-midsized customers than 500 supersized ones. Enterprise clients are pretty good at pitting one vendor against another, unless a single "category killer" emerges.

Time will tell.

Posted by Andrew Goodman




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