For many marketers, much of the early excitement about the Internet came from the prospect of being able to track everything they wanted to know about their customers. This was particularly important during the first Internet Bubble in the late 1990s, when visitors, more than revenue, were key to so many business plans.
This desire to track Internet visitors generated the field now known as "Web Analytics," which refers to storing and analyzing massive log files that track users.
The changes in the Web analytics industry over time are a mirror of how the overall Internet has evolved. And it's time for another spurt of growth.
The industry was founded in 1993 with the advent of WebTrends, an enterprise-based software tool that read through massive server logs at the speed of molasses, often consuming a large piece of IT resources. The need for real-time storing and processing of data fostered applications for cloud computing -- which, in the late 1990s, operated under the auspices of application service providers (ASPs).
The leading tools of the Web analytics industry -- WebSideStory, Visual Sciences, Coremetrics, Omniture -- several years ago became ASP or cloud solutions. Indeed, even Webtrends, the initial market leader with its roots in enterprise software, would survive only by adding a hosted option.
Having survived the early cookie wars, the Web analytics industry was one of the first to face the specter of “free.” In 2005, Google purchased the Urchin analytics package and launched Google Analytics, a free service whose availability prompts questions about the value of various recent industry mergers.
Today, the Web analytics industry is going through consolidation. The latest example: Adobe Systems Inc. (Nasdaq: ADBE) struck an agreement to acquire audience analytics company Omniture for $1.8 billion. In 2007, Omniture had gobbled up Visual Sciences, which itself had just merged with WebSideStory. IBM acquired SPSS this past summer for $1.2 billion.
Whether Adobe or IBM have wasted billions or will prove they can survive even when competing with free remains to be seen. Even in this troubled economy, Web analytics has been one of the few areas where high M&A prices continue unabated.
What does this activity in the Web analytics industry mean? Is it, as some believe, a sign of less innovation as the larger firms like Adobe and IBM focus on profits to appease shareholders?
It’s time for Web analytics to evolve again with the Internet, just as it’s done over time. Most companies continue to be mired in counting clicks and views. But it’s time for some new, fresh takes on the process, particularly as Internet users are finally coming to understand that privacy on the Internet is quite limited and guided more by user actions than by regulation.
It will be interesting to see how the Web analytics industry takes the next step in its evolution, reflecting ongoing trends on the Internet.
— David Silversmith is Vice President Information Technology at FirstBook.org, an organization that provides new books to children in need.