Archive for October, 2009

Few would argue that the past few years in web analytics have been, well, intense. The emergence of Yahoo Web Analytics, multiple management shake-ups at WebTrends, Adobe’s acquisition of Omniture following Omniture’s acquisition of Visual Sciences, WebSideStory, Offermatica, Instadia, and TouchClarity, and the continued push into the Enterprise from Google Analytics. From where I sit we have seen more changes in the last 24 months than we had in the entire 12 years previous (my tenure in the sector) combined.

When I think about these changes, I find myself coming to the undeniable conclusion that our industry is undergoing a radical transformation. More companies than ever are paying attention to digital measurement, and despite my disbelief in Forrester’s numbers, an increasing number of these companies are forging a smart, focused digital measurement strategy. At the X Change, at Emetrics, and at Web Analytics Wednesday events around the world there is more and more evidence that this wonderful sector I call “home” is really starting to grow up.

And we’re just getting started.

If you pay close attention to the marketing you see from Omniture, WebTrends, Unica, Coremetrics, and the other “for fee” vendors you’ve surely noticed a dramatic change recently. Nobody is talking about web analytics anymore; the entire focus has become one of systems integration, multichannel data analysis, and cross-channel analytics.

All the sudden web analytics is starting to sound like, gasp, business and customer intelligence.

Eek.

Since it’s late and since this post will be over-shadowed by the hype around Google Analytics releasing more “stuff” on Tuesday I’ll cut right to the chase: I believe that we are (finally) on the cusp of a profound revolution in web analytics and that the availability of third-generation web analytics technologies will finally get digital measurement the seat at the table we’ve been fighting to get for years.

Statistics, people … statistics and modeling, predictive analytics based on web data, true forecasting, and true analytical competition for the online channel. Yahoo’s use of confidence intervals when presenting demographic data and the application of statistical models in Google’s new “Analytics Intelligence” feature are just the beginning. As an industry it’s time to stop fearing math and embrace analytical sciences that have been around for longer than many of us have been alive. It’s time to stop grousing about how bad the data is and actually do something about it.

Do I have your attention? Good.

Thanks to the generosity of the kind folks at SAS I have a nicely formatted white paper that is now available for download titled “The Coming Revolution in Web Analytics.” Just so you can see if you might be interested here is the Executive Summary from the document:

“Forrester Research estimates the market for web analytics will be roughly US $431 million in the U.S. in 2009, growing at a rate of 17% between now and 2014.  Gartner reports that the global market for analytics applications, performance management, and business intelligence solutions was US $8.7 billion in 2008—roughly 20 times the global investment in web analytics.  Among their three top corporate initiatives, most companies are focusing their efforts online, expanding their digital efforts Internet to increase the organization’s presence in the least expensive, fastest growing channel.

Today, a majority of companies are dramatically under-invested in analyzing data flowing from digital channels.  Even when business managers have committed money to measurement technology, they usually fail to apply commensurate resources and effort to make the technology work for their business.  Instead, most organizations focus too much on generating reports and too little on producing true insights and recommendations, opting for what is easy, not for what is valuable to the business.

Web Analytics Demystified believes this situation is exacerbated by the inherent limitations found in first- and second-generation digital measurement and optimization solutions.  Provided by a host of companies primarily focused on short-term gains in the digital realm, not long-term opportunities for the whole business and their customers.  Historically these companies worked to differentiate themselves from traditional business and customer intelligence, focusing on the needs of digital marketers.  Unfortunately, as the need for whole business analysis increases, many of these vendors are playing catch-up and forced to bolt-on data collection and processing technology as an afterthought.

The current state of digital analytics is untenable over time, and Web Analytics Demystified believes that companies that persist in treating online and offline as “separate and different” will begin to cede ground to competitors who are willing to invest in the creation and use of a strategic, whole-business data asset.  These organizations are using third-generation digital analytics tools to effectively blur the lines between online and offline data—tools that bridge the gap between historical direct marketing and market research techniques and Internet generated data, affording their users unprecedented visibility into insights and opportunities.

This white paper describes the impending revolution in digital analytics, one that has the potential to change both the web analytics and business intelligence fields forever.  We make the case for a new approach towards customer intelligence that leverages all available data, not just that data which is most convenient given the available tools.  We make this case not because we believe there is anything wrong with today’s tools when used appropriately, but because we believe digital analytics should take a greater role in business decision making in the future.”

Since I pride myself on the quality of my readership I sincerely hope that each of you will download this document and  take the time to read it. More importantly I’d love you to share it with your co-workers, friends, and followers on Twitter. I believe we are at a critical juncture in our practice’s history where the skills that have served us all along are not going to serve us for much longer, but I am always willing to admit that I’m wrong and more than anything I love a spirited debate.

Are you ready for the revolution?

Now that Omniture’s Q3 earnings are public that I sort of felt like I needed to apologize to the company or at least recognize that they did a good job last quarter leading into their sale to Adobe Systems. Despite what I had heard from multiple sources their earnings announcement was right in line with guidance. Congratulations to the entire Omniture and Adobe team!

It still leaves me scratching my head about the deal since the synergies are less obvious to me than they clearly are to Adobe and Omniture’s management and shareholders, but hey, with the sheer number of changes occurring in the industry right now who knows what might actually work. Hell, based on what I’m hearing about the Google Analytics announcement next Tuesday, it’s going to look like a great time to be focusing on something other than competing with Google Analytics …

I’m going to get to spend time with many of their largest customers next week so I suspect I’ll hear a great deal more about how this sale is being met by HBX customers, Visual Sciences customers, and those folks who have a tremendous amount invested in the SiteCatalyst line of products. If you’re an Omniture customer going to Emetrics next week and have an opinion you’d like to share please reach out to me directly and we’ll arrange some time to chat.

Again, congratulations to Josh James and all of the OMTR shareholders on what is increasingly looking like a great deal for all involved.

Recently Google published the results of a Forrester Research study they had commissioned (PDF) to help the broader market understand the use and adoption of free web analytics solution.  Google should be applauded for commissioning Forrester to conduct this work, especially given the quality of the research and the level of insights provided.  Without a doubt, free solutions like Google Analytics and Yahoo Web Analytics are having an impact on our industry and driving change in ways few of us ever imagined.

I really did enjoy the Forrester report, primarily because the author (John Lovett) managed to surface totally new data.  When he first told me that over half of Enterprise businesses were using free solutions I have to admit I didn’t believe him.  In a way I still don’t, but perhaps that’s only because I work with a slightly different sample than he presents.  Regardless, John’s report paints a picture of an increasingly challenging market for companies selling web analytics and a new sophistication among end users.

Speaking of sophistication, there are a few points in the report that I question, and since I have pretty good luck getting feedback from readers on big picture stories I figured I’d bring them up here in the blog.  Before I do I want to emphasize that I am not questioning Forrester or John’s work—I am merely trying to explore some data that I find contrary to my own experience in this public forum.  To this end I pose a handful of questions that I would love to discuss either openly in comments or via email.

The first point I question is the observation in Figure 3 that 70% of companies report having a “well-defined analytics strategy.”  Two years ago my own research found that fewer than 10% of companies worldwide had a well-defined strategy for web analytics.  Last year Econsultancy reported that only 18% of the companies in their sample had a strategy for analytics.  To jump from these low numbers to the majority of Enterprises just doesn’t square with my general experience in the industry.

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Remember, the implication of this data point is that 70% of all companies having more than 1,000 employees have a “well-defined analytics strategy.”  According to a 2004 report from the U.S. Census Bureau there were just over 12,000 companies in the U.S. with more than 1,000 employees.  Without assuming any growth between 2004 and 2009, Forrester’s 70% figure would result in over 8,500 companies in the U.S. that have a “well-defined” strategy for web analytics. Does that sound right to you?

Consider that the combined customer count for Omniture, WebTrends, Coremetrics, and Unica combined in the U.S. doesn’t even add up to 8,500 companies.  Even if you use the more conservative 13% who “strongly agree” with Forrester’s statement you end up with over 1,500 U.S. companies.  I may suffer from sample bias, but personally I can barely think of 150 companies that I would identify as having any strategy for web analytics, much less a “well-defined” one.

Most companies I talk to have the beginnings of an over-arching strategy—they’ve realized the need for people and are beginning to reduce their general reliance on click-stream data alone.  But given that I think about this topic from time to time, I think a “well-defined” strategy for web analytics takes into account multiple integrated technologies, appropriate staffing, and well thought-out business and knowledge processes for putting their technology and staff to work.  What does the phrase “well-defined strategy” imply to you?

Similarly, if 60% of companies truly believed that “investments in Web analytics people are more valuable than investments in Web analytics technology” there would be THOUSANDS of practitioners employed in the U.S. alone.  But again, every conference, every meeting, every conference call, and every other data point suggests that the need for people in web analytics is still an emerging need.  Hell, Emetrics in San Jose earlier this year barely drew 200 actual practitioners by my count.  How many web analytics practitioners do you think there are in the United States?

Same problem with the rest of the responses to Figure 3 on web analytics as a “technology we cannot do without” (75%) and the significance of the role web analytics plays in driving decisions (71%).  Perhaps I’m talking to entirely the wrong people, perhaps I’m interpreting these data wrong, and perhaps I’ve gone flat-out crazy, but these responses just don’t match my personal understanding and experience in the web analytics industry.

This issue of data that simply does not make sense, while not universally manifest in the report, manifests elsewhere as well. For example, Figure 8 reports on the percentage of application used segmented by fee and free tools:

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When I look at these responses and see that 63 percent of respondents using fee-based tools and 50 percent of respondents using free tools claim to be effectively using more than half the available functionality, again I find myself scratching my head. As this data appears to speak to the general sophistication of use of analytics I went back and looked at Dennis Mortensen’s quantitative study of how IndexTools was being used around the world.

Dennis reports that fewer than 10% of his customers were using even the most basic “advanced” features in web analytics (report customization) and that fewer that 4% of his customers (on average) are making any “advanced” use of the IndexTools application. While this dataset is somewhat biased towards European companies who I believe, on average, to be somewhat behind their U.S. counterparts it does provide an objective view in how web analytics are used that seems to directly contradict the self-reported responses in Forrester’s figure 8.

Clearly there is a gap between the responses John collected and the current state of the web analytics market.  Since John is a very smart guy I know part of his rebuttal will include the observation that he surveyed people directly responsible for web analytics (see Forrester’s methodology) and that people in general have a tendency towards positivism. Trust me, my son is the most handsome little boy ever born and my daughter’s beauty is only matched by that of Aphrodite … same for your kids, right?

Given the difficulty associated with gathering truly objective data regarding the use of web analytics, this type of self-reported data is usually what we have to go on.  While Omniture, WebTrends, Coremetrics, and Unica all have the fundamental capability to report data similar to that provided by Mr. Mortensen, it may not be in their best interests to expose underwhelming adoption and unsophisticated use (if that is what the analysis uncovered.)  Ultimately we’re forced to accept these self-reported responses and  then reconcile them against our own views, which is why I’m asking my readers what they think about the data Forrester is reporting!

Regarding these self-reported attitudinal responses on how web analytics is used strategically, perhaps the truth is found in the companies who “strongly agree” with John’s statements.  If we apply this lens, as opposed to the more optimistic view, we get the following:

• 17% of companies recognize that web analytics is a technology they cannot live without;
• Web analytics plays a significant role in driving decisions at 12% of companies;
• 13% of companies have a well-defined web analytics strategy;
• 9% of companies recognize that investments in people are more valuable than investments in technology

These numbers start to make a lot more sense to me.  Likely the truth, as with so much in our industry, lies somewhere in between, but I would love to hear what you think about these adjusted numbers.  Do the lower numbers make more sense to you, or do you agree with John’s more optimistic assessment?

Unfortunately if the lower numbers are correct the implication is that despite the incredibly hard work that companies, consultants, and industry thought-leaders around the world have done for years we still have an incredibly long way to go before web analytics is recognized as the valuable business practice that you all know it can be!

Regardless I want to state that I do not disagree at all with the fundamental thesis in this report, that “free” is creating a whole new level of interest in web analytics and that, given proper consideration, free is an excellent alternative to paid solutions.  Lacking clear strategy and resources, too many companies have wasted too much money on paid solutions for free to not be compelling.  Thanks to the dedication of the Google and Yahoo teams, the world now has access to great applications that are in some regards more compelling than fee-based alternatives.

While I may not have said this a few years ago, today I honestly do believe that “free” is a viable and appropriate alternative to fee-based solutions. While not appropriate in every situation, it is irresponsible to suggest that any company not willing to fully engage in web analytics should pay for ongoing services and support. Given advances from Google and the availability of Yahoo Web Analytics, any motivated company large or small now has access to a wealth of data that can be translated into information, insights, and recommendations.

Conversely I agree with John (and Jim, and almost ever thought leader I respect) who states that you need to “prioritize your business needs and culture for analytics first and then evaluate the tools.”  This goes back to the fundamental value proposition at Web Analytics Demystified: It’s not the tools you use but how you use them. If you’re not invested in developing and executing a clearly defined strategy for digital measurement, you may as well be grepping your log files.

I would love your feedback on this post, either directly in comments or via email. Thanks again to the folks at Google for making this awesome research freely available and to John Lovett for shedding light on this incredibly important aspect of our sector.  Remember: we are analysts—our jobs are to ask hard questions and then ask even harder ones!

Those of you who live in Europe are likely already aware that my good friend Aurelie Pols has joined me as a partner in Web Analytics Demystified. Over the next two weeks she and I will be making a series of presentations and announcements at events across Northern Europe. We will be at:

• The Online Performance Management seminars, hosted by Creuna, in Copenhagen on Thursday, October 8th and in Oslo, Norway on Friday, October 9th. More information about our hosts and registration is available from Creuna.
• While we’re in Copenhagen we will be having a Web Analytics Wednesday on Wednesday, October 7th. I will be giving a short presentation on testing and if you’re in Copenhagen please join us at this FREE EVENT sponsored by IIH Nordic and Webtrekk
• Over the weekend Aurelie and I will be hanging out in Stockholm, Sweden. If you’re in Stockholm and want to meet-up please either shoot me an email or Twitter me and we’ll make plans!
• On Monday, October 12th and Tuesday, October 13th Aurelie and I will be joining the excellent Emetrics crew at Emetrics Stockholm. I will be giving the keynote on Tuesday morning and Aurelie and I will both be participating on a series of panels and shorter presentations. Those of you keeping score will note that I have attended EVERY SINGLE Emetrics ever held in the United States but this is my FIRST EVER event in Europe. Yahoo!
• On Wednesday, October 14th, I will be hanging out in Amsterdam with the Nedstat crew but have a fair amount of downtime during the day. I’m staying near Vondelpark and if you’d like to meet and get a cup of coffee (seriously, I mean coffee, I’m too old for the other stuff) Twitter me and we’ll make plans!

Since I usually do three European cities in three or four days this trip is a lazy walkabout for me (four cities, seven days) but Aurelie and I have planning to do and, of course, we’ll spend a little time enjoying the local culture.

If you live in any of these cities, or if you plan to come to Emetrics, please join us and come say hello!