Web Analytics as a Business: A Brief History

by on October 15, 2010

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The concept of web analytics, the collection and interpretation of website visitor activity, emerged around 1993. At the time it was a tool for webmasters who needed to understand activity on the site to balance throughput and ensure the site stayed up. Soon after some marketer realized that this information could be used to better target visitors, and web analytics ownership shifted from the IT department to the marketing department.

Two Different Business Models

Initially, two unique approaches to web analytics evolved, leading to the emergence of two types of analytics service providers: analytics software retailers like WebTrends and NetGenesis and Application Service Providers (ASP) including Urchin Software Corporation, Unica, Coremetrics and WebSideStory that provided browser tag based solutions. The “in-house” method made use of installed software on a server configured to analyze data collected in weblogs. The ASP approach involved the use of external hosted services to monitor incoming and outgoing web traffic and other data.

Affiliate Trading and Early Industry Expansion

Affiliate trading sparked a wave of new predictive analytics firms. The idea of site affiliate trading emerged shortly after 1993, mainly on hobby sites. Any given site would host a bar on their page with small banners that linked to their affiliates. These affiliates would typically have something in common with the other sites. Later on, these affiliate programs branched out to include advanced coding that allowed the website to automatically prioritize links based upon the number of visitors they received from their affiliates, giving their affiliates the incentive to place links on their website to trade traffic. Near these banner bars was usually a link to an external analytics service, where affiliates and site visitors could see how many unique visits the site received per day. Growing numbers of sites using this type of affiliate program led to a boom in external website analytics companies, and subscription-based analytics rose gradually afterwards. Subscription services had previously only served corporations and larger business, but expanded to serve small businesses and fan-sites as they became more plentiful with the emergence of ecommerce.

Dot Com Bubble Burst and Consolidation

The dot-com bubble of 1995 began to slow down in 2000 due to rising interest rates. Companies that had previously forged the new frontier of online business began to make less and less off of their new investments. Until that time, companies that simply added a “.com” to the end of their name or a “e-“ prefix to their company name saw their stock increase in value exponentially. Industry consolidation followed as software giants absorbed smaller companies.

Following the dot com bubble burst, the analytics industry started a period of consolidation that continued through 2009. In 2005 Google acquired Urchin and renamed it Google Analytics. In 2007 WebSideStory (NASDAQ: WSSI) re-branded as Visual Sciences. Visual Sciences was purchased by Omniture (NASDAQ: OMTR) in 2008 for a settlement of $394.2 million. Rapid industry consolidation continued to occur when Adobe (NASDAQ: ADBE) acquired Omniture in 2009, re-branding Omniture’s analytics solution as “Adobe Online Marketing Suite”. In early October 2010 IBM acquired Unica, another pioneer in this space.

Looking Ahead in Web Analytics

Monopolization of a fresh market like web market analysis raises the concern of slower innovation. In a short span of time the hegemonic software corporations Google, Adobe and IBM absorbed most of the smaller, nimbler companies that created the analytics space in the first place. On the other hand, the big companies have the resources, both human and cash, to invest into expensive software projects and the size of the market provides incentives for growth and innovation.

The other issue impacting this space is the new concept of web ethics, which brings to question the nature of modern analysis software. All we know for sure is that as the debate about privacy on the web, the use of tags, cookies and data storage heats up, the analytics space is going to be impacted. It will be interesting to see where it goes next.

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