Google Analytics: Rising Tide, or Tsunami?

While some Web analytics vendors may be wary of Google’s decision to release a free Web analytics product to AdWords users, most are putting on a brave face.

“Google is the rising tide that raises all the Web analytics ships. The announcement to offer free analytics is a great validation of our market,” said Michael Stebbins, VP of marketing at ClickTracks. “We’re thrilled they are opening the market’s eyes to what Web analytics can do today. At the same time, we need to put it in perspective: when Google offered Blogger it did not put other blogging platforms out of business.”

Other industry watchers were less than accepting of the “rising tide” theory. Jim Sterne, principal at Target Marketing and president of the Web Analytics Association, sees a much more dire result, at least for a large portion of the Web analytics market.

“The Google Analytics announcement is a tsunami that will wipe out the lower-end tools and lift all higher-end tools after a short flood of delayed sales cycles,” Sterne told ClickZ News.

Sterne thinks that lower-end Web analytics tools cannot compete with a free offering from a premium brand. High-end providers will benefit overall from increased awareness and an expanded market, as long as they offer the right services to differentiate themselves.

“After an initial slowdown of sales during the flooding, prospective customers will dry out and realize that they really do need a high-end solution, along with a real professional services department, a serious service level agreement and sub-week support response time,” he said.

Service and support are what companies like WebTrends are betting on, according to Greg Drew, WebTrends CEO and president. “Our customers know that enterprise organizations require more than just a set of reports to measure a campaign or understand site traffic,” he said. “Marketing analytics are mission-critical and enterprise customers need a consultative organization that helps them turn insight into action to improve their business results.”

While a free product will likely appeal to a certain segment of businesses, there is another segment that might be more comfortable paying for a product, Matt Naeger, VP at search marketing firm Impaqt, told ClickZ News.

“I would be hard to convince people that have already purchased a solution to give that up and switch over to something free,” Naeger said. “I think there will be hesitancy about not having control over the system.”

Another issue that may turn off some larger advertisers is the “church and state” separation between a media seller and the company tracking a media buy’s effectiveness.

While these issues may leave room for competition in the marketplace, it is not an ideal position for those vendors to be in, said JupiterResearch analyst Eric Peterson.

“Nobody in a sub-billion-dollar market in their right mind wants to compete with Google. Especially not when faced with having to sell against a free solution supported by Google’s substantial messaging and engineering facilities,” Peterson said.

With a focus on the lower end of the market, providers like ClickTracks sit squarely in the target that Google expects to address with its free product. According to Peterson, that market is large, made up of 83 percent of businesses in the U.S. with over $1 million in annual revenues and a reasonable amount of traffic coming to their sites.

Google Analytics is an upgraded version of Urchin, which was highly regarded even before Google acquired it in May. In a 2004 report on Web analytics, Peterson wrote, “Urchin leaves all other offerings far behind from an overall cost and price-per-feature perspective.”

Most Web analytics users, providers, and industry watchers agree that the end result will be good for advertisers. “There’s an expanding category of people who’ll use analytics to drive ROI. It’s not about killing a competitor, it’s about expanding a category,” said Bryan Wiener, president of 360i.