The days when companies were content to have a great-looking, functional and heavily trafficked Web site are long gone. Today, a Web site must deliver measurable results. That reality has created a strong market for Web analytics software programs that analyze visitor behavior, enabling a company to optimize a site's structure and content to improve customer loyalty, increase sales and decrease support costs.
Customers, of course, continually want deeper information and they want it fast, making Web-based applications a natural fit. In fact, the migration of enterprises from licensed Web analytics software to ASP (Application Service Provider) solutions over the last 18 months is rapidly becoming a stampede.
"The question ASPs must now ask themselves is this: Is Web analytics an application that will always be more in demand as a service than as a licensed product or will licensed vendors claw back some of the market share that has been lost over the last year or so?"
The numbers paint a compelling picture of the trend: In 2001, Web analytics ASP revenues were up 54 percent while software suppliers' revenue declined by 30 percent, according to Boston-based research house Aberdeen Group. Two years ago licensed software vendors' market share was about twice that of ASPs; today the two groups are virtually neck and neck. A key reason for the stampede is that while Web analytics ASPs were once limited in the type of information they could provide, thus limiting their appeal, ASPs are now able to offer far more customization in varying degrees of sophistication, while still preserving the ASP cost advantage.
Customization and Scalability Are Key
An example of an ASP that offers a high level of customization is Bracknell, U.K.-based ASP WhiteCross. "We sit down with business managers and encourage executives to brainstorm to find out what the most difficult questions that need answering are," John Thompson, WhiteCross' Chicago-based marketing director, told ASPnews.
"We help customers understand the questions they can ask, and then help answer them. As customers are paying by subscription we have a continuing relationship with them, so they can keep coming back to us to get new questions answered. Most of our customers start with a plain vanilla solution which then gets increasingly customized." Despite this flexibility, Thompson said a WhiteCross service still costs about one third of an equivalent licensed product.
Scalability is another key feature that ASPs are able to offer their customers. The sheer amount of computing resources that ASPs provide also enables them to offer some services that would be impossible to conjure up in-house, Michael Christian, senior vice president of San Diego, Calif.-based WebSideStory, told ASPnews. "We are able to analyze 1.5 billion page views per month and offer real-time reporting. This is something that you simply cannot get from licensed software. To generate a report for a big e-commerce site using licensed software, a customer would typically have to run the system overnight, or it could take as much as a week," Christian said.
Web Analytics From Both Sides
Other Web analytics companies such as NetIQ have a foot in both camps: NetIQ offers its WebTrends software either using the licensed or ASP models. Jeff Seacrist, group product manager for WebTrends products, denies that there needs to be functional difference between an ASP solution and an in-house one.
"Six months ago, some solutions would have had to have been ASP ones. Only ASPs could provide some sorts of info, like e-commerce info - how much was spent, what had been bought. In the old software world, that information simply didn't exist, so the ASP market was the only place to get e-commerce info," Seacrist told ASPnews.
"Now there is no functionality that forces a company to use an ASP solution, and although our hosted side is growing faster, we have more customers on the licensed side," Seacrist said.
The Data Collection Divide Is Done
Changes in technology have made differences in results between the two techniques largely irrelevant, according to Guy Creese, research director of Internet analytics at Aberdeen Group.
The question ASPs must now ask themselves is this: Is Web analytics an application that will always be more in demand as a service than as a licensed product or will licensed vendors claw back some of the market share that has been lost over the last year or so?
The bottomline is that while the ASP delivery model offers some innate advantages over licensed software, both in-house and hosted solutions will deliver the results customers want. "ASPs will certainly overtake the software folks, but I think the ASP market share will stabilize at about 60 percent," Creese said.
"Scalability is a key advantage for ASPs, but the good news for the licensed sector is that there are a number of new technologies on the horizon that could produce stunning changes," Creese said. "A query that takes four hours may be possible in ten minutes. If this becomes mainstream then software players will definitely be back in the game."