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Tuesday, March 29, 2005

Google Changes Rules of Analytics Game; Acquires Urchin

A day after WebTrends was bought from its publicly-traded parent, NetIQ, for $94 million by a private equity firm, Google has acquired web analytics provider Urchin. Urchin seems a good fit with Google, as it has always seemed to have "geek appeal" and good approval ratings from webmasters. I've been doing a bit of digging into this sector recently, and it seems that Urchin's wide footprint has come largely on the strength of partnerships with web hosting companies. Sounds a lot like the way WebTrends came to be something of an industry standard long ago!

A couple or three observations:

(1) I don't think this signals the end of Google's acquisition of third-party tools and aids in the analytics, shopping cart, bid management, or similar areas. However, I also believe the ecosystem of third-party services will grow healthy, as Google now seems committed to allowing these vendors to interface with its systems;

(2) This acquisition will obviously lead to some further integrated analytics tools "by Google," building on their current free conversion tracking product. From the marketing manager's standpoint this is healthy. We need to be able to look not only at logfile type data or at conversion data, but at integrated data. A simple view of conversion stats is important to us one day, but deeper behavioral analysis or forensic investigation of low-quality traffic is important on a different day. BUT -- it's not purely about better tracking. It's also about Google continuing the trend it started with the launch of its conversion tracker: having direct access to post-click behavioral information. With the ability to see into Urchin/Google reports, Google will know a lot more about the value of a click. It can also do more to combat click fraud without relying on hearsay and inexperienced site owners to attempt to piece together behavioral patterns. There is an upside and a downside to all of this. I continue to think the lack of privacy (the downside) still outweighs the upside, since additional efficiency (the upside) is something that experienced analysts can achieve anyway. But what I think isn't going to change the fact that Google absolutely needs to get its grimy mitts on post-click data, because Microsoft and Yahoo will also be going hard after it;

(3) This once again disrupts the economics of web analytics. I (and numerous colleagues) have been talking up the idea of late that the current "middle" of the analytics space makes no sense because it deprives the buyer of high-end functionality while still being quite expensive. I've been saying that within a year, the current pricing will shift radically so that a $50,000 upper-end analytics offering would become available for one-third of that price, and a middle-tier "Cadillac log analyzer" like ClickTracks' new Optimizer product ($1,195 and up) will have to offer many more features or be completely left behind by the marketplace. I believe we are on track for that radical shift to occur within a year, and it appears that Google has precipitated the shift starting now;

(4) The Achilles heel of data analysis companies from the bottom end through the middle right up to top-drawer companies like WebTrends and Omniture must surely be data capacity. The higher-end outfits can handle all the enterprise data you can throw at them without choking on it, which is why they can command $100k/yr. and up for their services. I was rhetorically asking colleagues like Matt van Wagner of Find Me Faster: if this is all about data, and one of the reasons for high prices is the high price of computing and storage, isn't Google the king when it comes to cutting prices on storage, and expediting computing times? After all, isn't that what Rich Skrenta wrote about on his blog when he referred to Google as a global brain whose raw computing power is its hidden advantage? It appears that this is coming to pass now as Google literally moves into the analytics field, in part with an eye on cutting prices down to size. For those of us who need these kinds of data at a reasonable price, it's a welcome development. I still think a number of niche third-party providers will flourish. But they will be judged on how well they understand customers' needs, and on the service they provide. The folks who just bought Webtrends have to be a bit nervous now. Google seems likely to commodify certain aspects of the analytics game.

Posted by Andrew Goodman




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