How Yahoo! buying IndexTools changes Web Analytics

Published by Eric T. Peterson on April 9, 2008 All posts from Eric T. Peterson

Yahoo! just announced that it has acquired IndexTools. When I first heard about this deal I thought “Oh, that’s nice for Dennis and Dennis is a pretty nice guy so that’s nice … and the title of Director, Data Insights at Yahoo! is a pretty nice title.” But then I really stopped to consider what Yahoo! pushing IndexTools out to the world means to web analytics (Disclosure: I have been working on a white paper for IndexTools; unfortunately that work is on hold for the time being.)

While we have seen a lot of deals in the last two years, this one is potentially the permanent game changer.

Depending on the deployment model that Yahoo! uses to bring IndexTools to the masses, this acquisition may spell the beginning of the end for some folks who are pretty invested in the status quo. I was unfortunately forced to write this post well in advance of the announcement because of my travel schedule so I am sure I have missed some details but consider the following:

  • Many people consider IndexTools to be every bit as good as far more expensive solutions, offering strong support for visitor segmentation, customization, marketing workflow management, advanced merchandising, and reporting that is far superior to that currently offered by other free and low-cost solutions. In fact, IndexTools is often referred to as “Omniture at a fraction of the cost” and having used both applications I’m hard pressed to disagree — everything you need to do “Enterprise” (sic) analytics is in IndexTools, without exception, and Dennis has shown an uncanny ability to roll new features into the product that directly address emerging market needs at the point they’re needed, not years ahead of time and certainly not years too late. For an excellent review of IndexTools see Eric Enge’s piece at Stone Temple Consulting.
  • Prior to the acquisition, IndexTools was poised to release their own ad hoc segmentation and analysis engine, dubbed Rubix, that directly competes with the likes of Omniture Discover and similar high-end offerings. I have seen Rubix and my first reaction was “Oh man am I glad I left Visual Sciences when I did.” Dennis and his team have taken advantage of the work that Visual, Omniture, and others have done and essentially packaged it up in a much more user friendly and approachable way. The result is something that I believe a far greater number of analysts will be able to take advantage of, regardless of the price point, and something that other free and low-cost vendors simply have no response to today. Lars Johanssen of SATAMA and my very good friends Rene and Aurelie from LBi/OX2 have similar summaries of Rubix worth reading.
  • Yahoo! will almost certainly be able to take advantage of the good work that Google has done establishing their Google Analytics Authorized Consultant (GAAC) network, giving Yahoo! an immediate deployment network (oh man do I hope they call it the “YAAC” Network!) Having run IndexTools on my own site for some time I very much expect that many GAAC partners will actually prefer IndexTools for most of their deployments given the dramatically improved capabilities of the application. Here is a list of companies I expect to call Dennis and the team at Yahoo! to inquire about how they can be YAAC partner.
  • One of the things that people really like about Microsoft Gatineau is the inclusion of a small amount of demographic data available for segmentation. I like what Ian and his team have been doing, but I suspect that A) Yahoo! has access to very much the same data (only a whole lot more of it) and B) the existing segmentation capabilities in IndexTools, not to mention Rubix, will make that data a whole lot more useful to marketers. Imagine if you deployed IndexTools having real-time access to age, gender, income, and behavioral demographic data to apply to all the reports in your system, collected via Yahoo’s huge network, obfuscated, and presented properly showing sample sizes and statistical correlations. That would be cool, huh?

The net effect, again depending on the specific go to market strategy Yahoo! uses, is potentially a profound shift in the nature of the web analytics market today. Consider the following options Yahoo! has:

  • Yahoo! can simply slap a big “Y!” on the IndexTools products and continue to sell them, perhaps through IndexTools and Yahoo’s existing partner network. The advantage of this option would be minimal interruption to IndexTools customers and it gives Y! a chance to migrate data collection and reporting technology from Europe to locations around the world. This would also give Y! time to look slowly at adoption and use of the product and think about their long-term strategy towards web analytics.
  • Yahoo! can brand IndexTools and give away the E-Business edition while continuing to sell the Enterprise version, Rubix, etc. The advantage of this option would be driving adoption and taking some of the attention away from Google Analytics in a sane and measured way. This would also give Y! better data regarding the amount of effort really required to support a real web analytics application (because let me tell you, for most of us, it ain’t easy!)
  • Yahoo! can slap the logo on and say “Come and get it, people!” giving away the whole hog to all comers. The advantage of this option would very likely be a high adoption rate (for IndexTools target audience, which is definitely different than the G.A. audience and more directly competitive with the likes of Omniture.) The disadvantage of this option is it has the potential to break IndexTools current architecture and could cause service interruptions which is something nobody wants, regardless of how much they pay for the service.

If it were up to me, I would select the second option, driving adoption and interest in the application while protecting IndexTools most valuable (Enterprise) customers at the same time. The second option would give Y! the greatest amount of information about the road ahead — to be sure there will be challenges — but would also give the company some much needed love.

Knowing some of the players involved, however, my money is on the first option. Nice and conservative, and basically exactly what Google did when they acquired Urchin. Despite what I’m sure is a strong desire on the part of Dennis and Yahoo! to have a tremendous impact on the marketplace around them, they say that “slow and steady wins the race” and that is probably more true today than ever before.

If Yahoo! chooses the third option immediately, or as Google did, waits six months and then goes to a totally free model, suddenly there are far fewer reasons to pay for web analytics at all. Even if they charge a nominal fee for more advanced functionality like Rubix, or force us to buy ads on Yahoo! a la Gatineau version 1.0 (which Microsoft has since put an end to, for good reason), I suspect there will be a profound disparity between what Yahoo! will charge and the CPM rates that most companies are paying today.

Wait, before you say “Yahoo! will never give IndexTools away for free … it would be too expensive” keep in mind that you said that about Google and Urchin.  My money is on free IndexTools before Christmas 2008.

While it is very easy for the top-tier of vendors to dismiss Google Analytics as “pretty, but basically inadequate” and “little more than an entry-level tool” the same claims cannot be used against IndexTools; consider again that many reviewers have said that IndexTools provides 80 percent of the functionality in Omniture at 20 percent of the price. If Yahoo! begins to provide 80 percent of the functionality in Omniture for NONE of the price, well, you get the gist …

If Yahoo! provides a low/no cost option for IndexTools, suddenly companies wanting to invest in web analytics will be far more likely to take advantage of the 10/20/70 rule for web analytics success I described over a year ago, focusing their efforts on people and process and worrying less about the technology used. Companies will be able to get their feet wet with Google Analytics and then, as the need arises, upgrade to IndexTools when they’ve mastered the basic processes and have hired the right people to move beyond basic reports and start to generate more complex analysis.

Obviously this acquisition is not without risks — Yahoo! could take too long to integrate IndexTools into their arsenal, the Microsoft/Yahoo! drama could play out in an unexpected way, and Google could respond by bringing Google Analytics dramatically up-market to be more competitive with Yahoo’s new position. Mitigating these risks are the fact that the team at Yahoo! is exceptionally bright (Bob Page, Michael Wexler, many others), any MSFT/YHOO drama will inevitably take years to play out, and if Google Analytics comes up market, well, then we have two truly great free or low-cost tools to choose from!

We have long talked about web analytics technology becoming a commodity, forcing a paradigm shift from the vendor-focused world that we live in today to the end-user focused world we truly need. Instead of asking “What tools should we use?” the conversation is now poised to become “How do we best use the data to drive our businesses strongly forward?” In a market where some vendors are still incredulously insisting that “web analytics is easy” I think this shift is long overdue and will be more than welcome by the majority of us practicing today.

Again, congratulations to Dennis, the team at IndexTools, and the acquisition team at Yahoo! I am very much looking forward to seeing how this announcement is received by the marketplace and how this change in the landscape benefits consultants and practitioners alike.

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