Research carried out for our 2006 Web Analytics Buyer’s Guide has highlighted the major impact that the Google Analytics launch has had in terms of driving the marketplace forward and shaping the sector.  

Last year, when asked whether they were worried about the search engine’s planned free service, other analytics vendors tentatively said they were positive about this development as it would help drive the industry forward.

But there was also an understandable element of concern about how things would unfold and what the implications would be for vendors in terms of product and service differentiation. 

It was therefore interesting a few months on from the Google Analytics launch to see what suppliers had to say now that the service is out there and available for use – and whether their cautious optimism was well founded.

In short, do other web analytics companies agree with Brian Clifton, of Google Analytics, who told E-consultancy in a newsletter interview recently that the release of the search engine’s free product has created “a rising tide to float all boats“?

The answer, certainly for those analytics providers who supply more than a basic level of functionality, seems to be a resounding “yes”.

For example, Paul Blunden, CEO of Foviance, said: “There has been a marked increase in the understanding of the role analytics play, and the biggest driver for this has been Google analytics. By providing a basic, easy-to-use package, clients have been able to begin their exploration of what they can find out about their users. The larger, more ambitious clients then realise that they need a more powerful solution tailored to their requirements.”

The widespread use of analytics by SMEs is being seen as a massive boon not just for the web analytics industry but also for e-commerce generally.

Companies who are measuring what they are doing online and refining their approach accordingly are more likely to understand the value of analytics investment, driving better business performance in the process.

And of course, some of these smaller companies will be the major companies of the future.

Matthew Tod, of Logan Tod & Co, an e-business consultancy, added: “Google Analytics has been a real shot in the arm for the industry … more companies have started to review their existing arrangements and it has kick-started interest in smaller organisations.”

The arrival of Google at the Web Analytics party has speeded up a process whereby vendors have had to think carefully about their proposition to ensure that they are not trying to sell something that is already available for free or very cheaply.

There are obvious parallels with the email marketing platforms market (among others) where the commoditisation of email broadcast means that the value for many suppliers is in selling “strategic” services rather than a commoditised product.

John Harrison, CEO at Maxsi, developers of eVisit Analyst, pointed out that the market has begun to shake down into three main areas: free products of the type offered by Google, US big ticket products with functionality, support and consultancy aimed at blue chips and, finally, niche suppliers with a clear focus in one area or sector.

What does all this mean for market growth?

In terms of valuation, this year is another strong year for the UK web analytics market which we estimate will have grown 22% to an estimated value of £56 million by the end of this year (from £46 million in 2005).