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Why pay when free Web analytics tools like Google Analytics can do the job?

Google Analytics, Google's free Web analytics tool, has sufficient functionality to meet many companies' needs, according to a new report from Gartner.

Richard Sexton doesn't feel the need to pay for Web analytics technology, and why should he? Sexton, president of retailer Carolina Rustica, gets all the Web analytics he needs at no charge from Google Analytics.

The Concord, N.C.-based company does most of its business – around 85% -- selling high-end furniture and lighting online, Sexton said. Among other benefits, Google Analytics helped Sexton identify "Tommy Bahama furniture" as his customers' most popular search term.

"We used that [insight] to change our site dynamics so it is better at capturing people that are searching for Tommy Bahama furniture," Sexton said. Speaking of Google Analytics overall, he added, "It provides us a level of detail we need to have actionable items that make sense without overwhelming us."

That's a conclusion more and more companies are coming to, according to Bill Gassman, an analyst with Stamford, Conn.-based Gartner Inc. Currently, he said, more than 1 million companies use Google Analytics to track customer activity on their websites, making it far and away the most widely used Web analytics tool.

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 Free to all, Google Analytics' price tag certainly has something to do with its adoption rate. But its functionality has improved greatly in the last year or so, Gassman said, making it sufficient to meet the Web analytics needs of many companies.

"It's lightweight usage, but indeed, after the last two upgrades, it's quite a good tool," he said.

Web analytics technologies help companies with online operations, particularly online retailers, understand user activity by analyzing data collected every time a user logs on. It can tell them who is accessing their website, when, from where, and what they're doing once there. Companies can then tailor their websites to better serve their customers and, hopefully, drive up sales.

The technology can, for example, identify customers that fill up their virtual shopping carts with items but abandon the purchase before checking out, helping companies identify ways to turn those potential sales into actual ones. Gassman said that for companies that deploy Web analytics technology, "10% improvement [in online sales] is just baseline."

Several commercial Web analytics vendors are currently in the market. Of them, the largest in terms of revenue is Orem, Utah-based Omniture, which boasts around 5,100 customers and made more than $300 million in revenue in 2008, according to its latest annual report. Smaller Web analytics vendors include Coremetrics and Webtrends. Larger vendors, including IBM and Oracle, also offer some form of Web analytics technology.

Prices for commercial products vary widely, running the gamut from $15,000 for small, basic deployments to more than $1 million for complex installments, Gassman said.

Google Analytics lacks much of its commercial counterparts' "high-end" functionality, he said. It does not, for example, collect individual visitor level-data, which "complicates the exchange of visitor information with personalization features in campaign and Web content management systems," Gassman wrote in a recent report.

Nor does it support custom look-up tables, which can convert product codes into narrative descriptions, he wrote.

Many companies don't require such high-end features, however, and Google has recently added a number of more basic capabilities that bring Google Analytics closer to parity with commercial Web analytics products, Gassman said. Further, he predicts that Google Analytics will come close to catching up in terms of functionality by 2011.

Among the features added to Google Analytics are improved segmentation capabilities, which let companies group customers by common behavior or demographic attributes for more detailed analysis; drag-and-drop functionality, making it easier to customize reports; and a programming interface that allows users to embed Google Analytics reports inside third-party business intelligence (BI) applications.

Google developed its Web analytics capabilities from technology it acquired when it bought Urchin in April 2005. Google Analytics was unveiled later that year, mainly to allow Google AdWords customers to better understand which search terms were driving the most traffic to their websites.

Google recently got some company in the free Web analytics market when Yahoo unveiled its own service. Yahoo Web Analytics, like Google Analytics, is free but limited to large Yahoo search customers and consultants, Gassman said.

In his report, he said that Google Analytics is probably for sufficient for companies which are not looking to perform analysis on complex e-commerce operations or integrate analyzed data with campaign and content management systems. Companies such as Best Buy, Home Depot, Macy's and Cisco would not do nearly as well on the Web without the sophistication provided by the commercial tools, he said.

But for those companies with less sophisticated Web analytics needs or with failed Web analytics deployments, it can't hurt to try out Google Analytics.

"With a few hours of exploration, most website stakeholders will learn new information about site traffic," Gassman wrote. "A realization that better tools are needed may come quickly or not at all, but there is no faster way to get started on the path of learning."

Companies should also weigh how much saving or profit Web analytics can provide in order to determine whether a commercial product is needed. "If the results of using analysis tools cannot drive improvements that reap at least $100,000 in additional Web channel value, it is difficult to make a business case for using commercial tools," he wrote.

Finally, Google Analytics is probably a good fit for small and medium-sized businesses that don't have the resources – financial or staff – to take advantage of all the additional features commercial Web analytics tools provide, according to Gassman. Such is the case at Carolina Rustica.

In fact, the company's e-commerce vendor, DMinSite, has a partnership with commercial Web analytics vendor Omniture. But Sexton said Google Analytics offers all the functionality his small company of just 10 employees needs.

"We have so much information already," he said, "and the information is no good if it's not actionable."

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