The Other World-Dominating Platform not named Facebook: Google Analytics

Recently i'm accused of being a Facebook Fanboy.  I resemble that remark.

Yet while I’m first to admit to being the 2nd-biggest Facebook pimp in the valley, my other secret geek fetish is a rarely-blogged subject: Metrics.  Schwwinggg!

See, I get a hard-on just saying that word.  Metrics… mmmm, sexy.  Jim Sterne, you make me hot baby.

Metrics is the New Black.  And Yahoo & Microsoft are wearing White waaaaaay past September.

So i’m here to tell you -- Google is absolutely killing everyone in this space.  Ain’t even a contest.  In fact, I don’t think most people even realize it is a “space”.  It’s like Bill Gates back in the 80’s deciding he’s going to dominate the worldwide market for PC software, and everyone else out there saying “what is this ‘personal computer’ you speak of?  I like my digital watch just fine”. Meanwhile, Google’s the only one at the party who’s got a damn towel.

Seriously: Google is an 800-lb gorilla here, and there’s barely a few other chimps out there competing.  GOOG is amassing the greatest suite of measurement technology around, and I swear NO ONE IS PAYING ANY FUCKING ATTENTION… except perhaps Jim and a few other metrics geeks.  I can’t believe Yahoo and Microsoft are ceding yet another critically-important market to Google, and yet hardly even realize how bad they’re getting pounded.

Here are the products i'm aware of under the Google Analytics Platform:

• Google Analytics: a pretty little urchin that maps your measurement (note: 2 acquisitions: Urchin & Measure Map)
• Google Website Optimizer: a tool for doing basic a/b testing & landing page optimization
• Adwords & AdSense analytics: conversion tracking & funnel goals in Adwords & Adsense
• Google WebMaster Tools: tools for ensuring web analytics tracking is available for your site.
• Feedburner: publishing & measurement tools for your blog or RSS (recently acquired by Google)
• others i'm overlooking here?  (whoops there's one i forgot)
• Google Checkout: provides info on conversion from search visitors to sales, helpful for CPA (thx for the reminder Bryan... forgot to include this in first draft)

Maybe I’m missing the hidden web analytics jewels in the Yahoo & Microsoft & eBay & Amazon empires, but I gotta think Omniture going public (and not tanking), along with Yahoo’s pickup of MyBlogLog last fall are probably the only significant recent developments among all companies not named after a very long string of zeros.  even there, people probably think of MBL as a social networking service for blogs & bloggers, rather than a low-end web analytics company snapped up by Y! (congrats again eric, todd, & rafer).

UPDATE: Shri reminds me in the comments that eBay has several analytics tools for Sellers.  and of course PayPal itself is an analytics tool, in similar ways that Google Checkout is noted above.  and probably there are other tools in these areas from Amazon & Yahoo as well, but i'd still say none of the other companies are focusing on significant opportunities in web metrics tools & services outside simply doing adjunct services that supplement reporting on their own core products.  the point i'm making is that Metrics is not a feature of some other product -- rather, it's a Product (capital 'P'') in its own right.

But I digress.

Let me explain why I think metrics & web analytics are so damn important, and at the same time why Google is willing to pay hundreds of millions to acquire measurement companies and technology, then suddenly turn around and give it all away for free.  I mean WTF, right?

Google’s Master Plan, Part I: Help Everyone Sell Shit Online… Only Better.

Ok, here’s Google's dirty little secret about analytics:

Google makes [more] money by helping everyone -- and i mean EVERYONE -- improve their Conversion Rate.  And eventually, they need everyone to get better at Conversion Optimization in order for Google to make a strategic move from CPC- to CPA-based pricing.

Huh?  Conversion Rate?  CPA-based pricing?  What the hell am I talking about?

Well, consider that Google makes most of its money selling clicks.  They sell clicks on AdWords links on Google.com, and they sell clicks on Adsense links on other people’s content sites.  And where do those links go?  Why, they go to other people’s websites.  Mostly, they go to e-commerce websites where people sell shit.  And the people paying for those clicks hope that eventually, those users who click on links will convert from site visitors to buyers.  If they convert well, the website owner makes more sales, and more money, and they buy more SEM advertising.  If they don’t convert well, the website owner makes less sales, and in fact could even be losing money on buying unprofitable traffic from their SEM campaigns.  Which means they spend less money with Google.  Thus: better conversion rates = more spending on SEM & Adwords campaigns.  And this is why Google buys metrics companies for millions and then gives away their products for free.

Now let’s take that one step further, and consider the ongoing evolution of the advertising industry. 

As a merchant or advertiser, I’d love to buy risk-free advertising – that is, I’d like to make sure every dollar I spend on advertising results in a sale worth two dollars.  But for the most part, I have no such guarantees.  However, advertising is inexorably getting better – before 1995, I could only buy offline advertising (TV, newspapers, radio, magazines, billboards) which was pretty unmeasurable except via sampling & surveys.  Then in 1995 with Yahoo & AOL I was able to by online advertising (banner ads = CPM), which were mostly unmeasurable, except that I could sort of count impressions.  Then more recently in 2001 via Overture (nee Goto.com) and then later Google I could pay for clicks (= CPC), which was pretty measurable, except that I couldn’t track user behavior very well once they clicked thru to the site.  And potentially, click fraud from my competitors or CPC affiliates (= Adsense) could increase both my clicks and my cost without increasing the # of sales I receive.  Sucks, right?  Yet Google still makes money on that crap.  But they know they need to fix that and do a better job for their customers.

Google’s Master Plan, Part II: Guarantee Every Click You Buy Generates a Sale (= CPA)

Now finally in 2007, Google (and others) are introducing advertising based on cost-per-action (CPA) pricing, where advertisers only have to pay for actual results (ideally, sales).  In a perfect world, Google starts moving to CPA pricing for a significant portion of its customers, who feel great about it because now they’re only paying for advertising where they KNOW it’s going to create revenue.  But in order for Google to make such a move en masse & provide such guarantees, they need to know a helluva lot about your site conversion, and they also want to give you every possible opportunity to learn about and improve your site conversion, so they don’t waste money or clicks sending users to your site that don’t result in sales.  Thus, Google can offer CPA more effectively if they’re evaluating how the clicks they send to your site conversion to sales.  Which is another reason why metrics are so damn important.

Got all that?  Probably not, huh?  Ok, just remember this:

better metrics => better conversion => more money for Google => give away metrics free

That’s why they’re buying up all the metrics tools they can think of, and why they’re giving them to you for de nada.

Yahoo, Microsoft, eBay, & Amazon: We don't do Metrics?  HellOOOoo?

Strangely, this same logic should follow for several other companies offering either advertising or e-commerce or both: Yahoo, Microsoft, eBay, and Amazon to name just a few.  Yet none of those other companies (except Yahoo minimally) appear to be very active in acquiring metrics technology or companies, nor are they seemingly doing much to build out such technology internally & provide very much metrics info back to their customers. (update: heard thru grapevine MSFT may be putting a facelift on their purchase of DeepMetrix from a year ago and getting ready for a debut soon... but they're still late)

So again I say: What.  The.  Fuck.   ?!?!?

Are you guys all idiots?  Figure it out and get cracking.  Build, Buy, or Partner to get some goddamn metrics tools & technology for you & your customers.  Or Google is going to eat your lunch.  Again.  When will you ever learn?  Sigh…

Many Miles Metrics Before I Sleep.

However despite Google's growing dominance in metrics, there’s still a huge # of problems to be solved here.  Google has created a great set of tools & technology, but there’s just way too damn much complexity.  It’s nigh impossible to use default Google Analytics reports to make relevant decisions.  You need to customize the tools to your business -- and customize the conversion goals & funnel to your product features / user transition states -- and then you need to present & interpret metrics data in ways that enable good decisions.

Product Managers should use metrics to help guide decisions about products & features, do A/B testing, and make tradeoffs between building new features vs optimizing existing ones.  Marketers should use metrics to help guide decisions about what customer acquisition channels to use, which ones to pay for, and how to segment and focus on customers that exhibit behavior generating the highest value / ROI.  Founders/CEOs should use metrics to create dashboards they can use to simplify the # of variables they look at, and to support the company’s overall strategic and tactical direction.  Sounds great, but just one problem: all this shit is still WAY TOO HARD.

Metrics isn’t about an avalanche of reports & data you review every day, week, month, or quarter.  Metrics is about making information actionable, and forcing simplest possible data necessary to make just-good-enough decisions.

Haven’t figured everything out on this one yet, but I’ll be working on this topic in the near future (see Startup Metrics for Pirates: AARRR!).  Both with Google & Facebook products & services, and for a few startups where I’m advising or investing, metrics are critical to make good decisions.  But the process framework to use here is still a bit rough.  Hope to improve on this set of metrics ideas, & appreciate any thoughtful comments or feedback.

Comments

[increase website traffic]

google Web Analytics is just a great tool. you really see what you website is doing.

[Adsense Analytics Integrated]

Hi.. First of all... a nice post... contains valuable infomation for me.. I think adding adsense earnings reports to Analytics by Google was indeed a nice step. I have written a nice article about this, which can be found in my Name link. But while I was writing this I had one question in my mind, will they be providing us publishers with details for every ad displayed or for every page?? Please let me know this...

[Ted Rheingold]

Dave,

Have you heard the theory that GoogLytics downplays the number of inbound visitors from non-Google search engines?

This is all uneducated speculation and should not be considered the opinion of my and my company, but my other stat software shows a higher rate of inbound links from non-Goog search engines than GoogLytics does.

But keep your ears open on this one. It sure makes Google looking more attractive to advertise on if it seems like it's bringing in that much more organic referrals.

[Searchquant]

Great post, Dave, but Google Analytics is by no means the best game in town. Omniture, ClickTracks, WebTrends and at least a dozen other independent SEMs & analytics firms have contributed far, far more to the optimization of websites and associated ppc campaigns than Google Analytics ever did.

If you look at the top 1000 AdWords advertisers, *very few* are using Google Analytics becuase they rightly fear that giving Google conversion data will [drumroll] help Google get more data with which to optimize *their* revenue and not the advertiser's.

A couple other points:

1) Google's trials in selling traffic on a CPA basis have so far been limited solely to the crappy traffic in their distribution network. Google gets ~20% of its revenues from contextual advertising, but any analytically-focused advertiser or SEM will tell you that a good AdWords campaign only gets ~5% of its transactions from Content. So Google's getting 4X more revenue from Content than they should. Don't expect Google to get aggressive in CPA-based buying anytime soon, because it'd cost them about, oh, $50B in market cap if it were ever fully rolled out. Google's paying lip service to CPA more than anything else.

2) That Google is as aggressive with analytics as they are means a)they've largely run out of the type of organic growth that let them beat estimates by wide margins; and b)they feel their traffic is undervalued relative to its intrinsic value. IMO, if Google maintains or boosts its share price, it'll be because they turn further monetization screws at the expense of advertisers, and not because everyone uses G Analytics and suddenly boosts ROI.

[Kevin Peyton]

thanks dave - a great 101 for web site statistics.

[Aaronontheweb (AjaxNinja)]

Great article Dave. I liked the brief history of where targeted ads came from (I remember when DoubleClick and ValueClick were the only names in the game) and your thoughts on where Google is going with this metrics business.

I was playing around a bit with MyBlogLog today and it seems more like a gimmick than a valuable tool. I'm considering adding the recent readers widget to the sidebar of AjaxNinja but I thought it might make the site look less professional. What do you make of it?

[shor]

Found your blog via Avinash and I'm loving the style, content and everything else about it.

Google (and yourself) understand that those who can 1) glean nuggets of insight out of mountains of data and 2) turn these nuggets into simple, actionable items will be the superstars of the web 2.0, 2.5, 3.0-to-infinity industry.

The other big boys are already aboard the analytics gravy train but are moving much slower (as usual).

[John Clinebell]

Hey, great post. It's absurd that Google's competition is letting them basically dig a grave and throw them in it when it comes to search marketing. Actually, they are helping dig the grave by not investing in what's obviously going to improve ROI the most; effective metrics analysis tools.

Now granted, Google Analytics isn't the simplest or most accurate thing to use, but it is pretty damned easy to pick up if you know Adwords well. The learning curve is practically non-existent if you know all the terminology already.

It's my opinion that those who aren't familiar with the intricacies of search marketing don't really have much business interpreting metrics anyways. Leave that to the professionals! And as much as Google wants Joe "I passed high school with a D-" Smith to be able to run a highly profitable campaign on his own, they realize that the top ROI can only be achieved with professional consultants who know what ads, targeted keywords, and landing pages work.. in other words, I'm not sweating my job security.

[Zack]

Great article, Dave!

[Hjortholm]

Yep, google surely got a solid land grab on the stat frontline , they also grabbed gapminder and it's trendanalyzer software in march 2007 - http://tinyurl.com/ytalds

[Malapropist]

"I can shoot with my left hand, I can shoot with my right hand, I'm amphibious."

http://en.wikipedia.org/wiki/Malapropism#From_radio.2C_film.2C_and_television

[Yishan]

Dave, it's "I resent that remark," not "I resemble that remark."

[Jeff Wang]

Nice post. Wow, didn't realize that how much power Google has in metrics ..

[todd sawicki]

Great post Dave. Glad to see our grokking at the web analytics summit went somewhere! As we've chatted - we're kindred spirits on this topic but I've got more thoughts on the topic from is google the advertising OS to lock-in (http://www.sawickipedia.com/blog/2007/08/03/mcclure-google-metrics-advertising-os-and-lock-in/). Good stuff to chat about next week when you are up in Seattle.

[BeachBum]

Wow, this looks like a doctoral thesis. Great work putting all this info together. I agree that Google is out to own the internet and the others (Yahoo & MSN) are just waiting for Google to fall apart.

BeachBum

[Scott Rafer]

Pssst, Dave. Mashery for web services analytics?

[Bryan Eisenberg]

Don't forget Google Checkout which helps Google close the loop between the searches and conversions to sale.

[Shripriya]

Dave, it is actually not accurate that eBay doesn't have metrics. If you are a seller, there are a whole bunch of tools (Selling Manager, SM Pro etc. etc.) that offer analytics. In fact, I think there is a new tool solely focused on analytics. And they are damned good - what you listed, at what price, the cost, the margin, when it sold (day, time) etc. I think Store sellers get a lot of it free with the subscription.