More Thoughts on Web Analytics

Yesterday I wrote about the strategic choices facing Web analytics vendors as their core product matures. They have three basic choices:

- keep focused on Web analytics, improving their products and appealing to the most demanding users as a ‘best of breed” solution.

- expand into related Web functions, such as offer targeting, in-site search, content management, search engine marketing, and campaign analysis.

- expand into non-Web areas, in particular multi-channel customer analytics.

Specialized vendors in many other fields have faced similar choices in the past. They have generally found that competitive products from non-specialist vendors continually improve, reducing the number of companies willing to pay extra for an advanced "best of breed" solution.

Web analytics vendors will face the same dynamic. They may avoid immediate problems simply because so many companies have yet to purchase their first Web analysis system. This means sales can increase even if the vendor loses market share. There may also be a sizeable segment of customers who want only a bare-bones, stand-alone solution. But while serving this group could be a viable business, these customers are likely to be highly price sensitive and hence not terribly profitable.

This all suggests that some sort of expansion is inevitable for companies that wish to remain independent. A quick look at the leading Web analytics vendors (Coremetrics, Omniture, WebTrends, WebSideStory) shows that they are expanding into some or all of the Web-related areas listed above. It makes perfect sense: the customer behavior data that they extract for Web analysis is the foundation on which the other applications are built. (Content management is something of an exception, but is a logical extension because the other applications need to be aware of what content is available.)

Expansion into non-Web analytics is a less popular choice, although Coremetrics (in combination with IBM Websphere) and WebTrends are making some efforts in that direction. This is definitely a harder path to follow, since it means selling to customers outside the vendors’ existing user base. But, for exactly this reason, it also allows the vendors to expand the scope of their involvement with clients and potentially to place themselves at the center of enterprise customer management efforts. And, as yesterday’s post noted, the large volume and complexity of Web data has already forced the Web analysis vendors to build tools so powerful that extending them to other channels should be relatively easy (at least on a technical level).

Of course, from my own perspective as someone concerned with Customer Experience Management, I have a strong vested interest is seeing cross-channel customer analytics become more widely available. So I do hope the Web analytics vendors continue to pursue this option.