Web Analytics Demystified SAS Revolution
Web Analytics Demystified SAS Revolution
Web Analytics Demystified SAS Revolution
Table of Contents
Executive Summary..........................................................................................1 The Coming Revolution in Digital Analytics....................................................2 The Privacy Implications of the Electronic Signature...................................3 Proof that Consumers Will Surrender this Data: Google...............................3 Competing on Analytics in the Online World.................................................4 Digital Analytics Today: A RearView Mirror...................................................5 An Eye Toward the Future: SecondGeneration Digital Analytics..................6 How these Technologies Fail Us Today.........................................................6 The Coming Revolution: ThirdGeneration DigitalAnalytics..........................8 Business Intelligence 2.0. .............................................................................9 ThirdGeneration Analytics in Action. ............................................................10 Applying Old Techniques to New Technology. .............................................11 The Inevitable Outcome: AnalyticsDriven Automation...............................12 Conclusions....................................................................................................13 About SAS.......................................................................................................14
This white paper was written by Eric T. Peterson, CEO and Principal Consultant at Web Analytics Demystified, and sponsored by SAS. Theauthor welcomes your feedback on this white paper. About the Author Eric T. Peterson, CEO and Principal Consultant at Web Analytics Demystified, has worked in Web analytics since the late 1990s in a variety of roles including practitioner, consultant and analyst for several marketleading companies. He is the author of three bestselling books on the subject, Web Analytics Demystified, Web Site Measurement Hacks and The Big Book of Key Performance Indicators, as well as one of the most popular Web analytics bloggers at www.Webanalyticsdemystified.com. Mr. Peterson has committed much of his life to the betterment of the Web analytics community, so much so that Jim Sterne, President and cofounder of the Web Analytics Association, says, Erics leadership in the industry in unparalleled, his devotion to the community is legendary and his years of experience translate immediately into strategic and tactical competitive advantage for everybody who works withhim. Web Analytics Demystified Web Analytics Demystified, founded in 2007 by internationally known author and former Jupiter Research analyst Eric T. Peterson, provides objective strategic guidance to companies striving to realize the full potential of their investment in Web analytics. By bridging the gap between measurement technology and business strategy, Web Analytics Demystified has provided guidance to hundreds of companies around the world, including many of the best-known retailers, financial services institutions and media properties on the Internet. For more information on Eric T. Peterson and Web Analytics Demystified, please visit www.Webanalyticsdemystified.com, e-mail [email protected], or call (503) 2822601.
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Executive Summary
Forrester Research estimates the market for Web analytics will be roughly US $431 million in the US in 2009, growing at a rate of 17 percent between now and 2014. Gartner reports that the global market for analytics applications, performance management and business intelligence solutions was US $8.7 billion in 2008 roughly 20 times the global investment in Web analytics. Among their three top corporate initiatives, most companies are focusing their efforts online, expanding their digital efforts Internet to increase the organizations presence in the least expensive, fastest growing channel. Today, a majority of companies are dramatically underinvested in analyzing data flowing from digital channels. Even when business managers have committed money to measurement technology, they usually fail to apply commensurate resources and effort to make the technology work for their business. Instead, most organizations focus too much on generating reports and too little on producing true insights and recommendations, opting for what is easy, not for what is valuable to the business. Web Analytics Demystified believes this situation is exacerbated by the inherent limitations found in first and secondgeneration digital measurement and optimization solutions. Provided by a host of companies primarily focused on shortterm gains in the digital realm, not longterm opportunities for the whole business and their customers. Historically these companies worked to differentiate themselves from traditional business and customer intelligence, focusing on the needs of digital marketers. Unfortunately, as the need for whole business analysis increases, many of these vendors are playing catchup and forced to bolton data collection and processing technology as an afterthought. The current state of digital analytics is untenable over time, and Web Analytics Demystified believes that companies that persist in treating online and offline as separate and different will begin to cede ground to competitors who are willing to invest in the creation and use of a strategic, wholebusiness data asset. These organizations are using third-generation digital analytics tools to effectively blur the lines between online and offline datatools that bridge the gap between historical direct marketing and market research techniques and Internet generated data, affording their users unprecedented visibility into insights and opportunities. This white paper describes the impending revolution in digital analytics, one that has the potential to change both the Web analytics and business intelligence fields forever. We make the case for a new approach toward customer intelligence that leverages all available data, not just that data that is most convenient given the available tools. We make this case not because we believe there is anything wrong with todays tools when used appropriately, but because we believe digital analytics should take a greater role in business decision making in the future.
On onehand, businesses using Google Analytics had a valuable offering that would augment their measurement efforts, and all they had to do to get it was agree to let Google use data about their visitors and customers to build better products. On the other hand, Google was getting explicit access to an unknown quantity of data about consumer behavior on the Internet, and all they had to do was provide some simple aggregated views of data they already had. Regardless of how many companies took Google up on their offer, Google wins. Google and companies sharing their view on the value of dataAmazon, Harrahs, CapitalOne, Nokia and Expedia all come to mindhave already amassed significant stores of information about consumer behavior that they are clearly using to their advantage. And while few doubt the greatness of these companies, their advantage is not that they have data, it is that they are actively using data. These companies have decided to be digital analytical competitors.
Thanks to the generous sponsorship of SAS, in the balance of this white paper Web Analytics Demystified will summarize the status quo for digital analytics today and outline a vision for the future of analytic competition. Our vision is based on interviews with true digital analytics competitors, our own work and the work of analytical giants like Davenport, Ayres and others.
Analytics
Decision Optimization Whats the best that can happen What will happen next? What if these trends continue? Why is this happening? What actions are needed? Where exactly is the problem? How many, how often, where? What happened?
Competitive Advantage
Predictive Analytics Forecasting Statistical models Alerts Query/drill down Ad hoc reports Standard reports
Degree of Intelligence
Reporting
Figure 1: Reporting and Analytics Tools and Capabilities, taken from Competing on Analytics (Davenport and Harris, 2007.)
According to Davenport and Harris, analytical competitors like CapitalOne, Harrahs Casinos, Google, Netflix, Amazon.com and others are leveraging this complete set of tools in their quest to create and sustain a competitive advantage in their respective markets. The authors note that all of these capabilities are requiredeven those providing a lowdegree of intelligence and little competitive advantage. They devote most of their work to describing how analytical competitors are leveraging statistical models, forecasting, predictive analytics and decision optimization against their strategic data assets to drive innovation and maintain their competitive advantage. Unfortunately, the digital analytics toolset today looks more like Figure 2:
Analytics
Decision Optimization Whats the best that can happen What will happen next? What if these trends continue? Why is this happening? What actions are needed? Where exactly is the problem? How many, how often, where? What happened?
Competitive Advantage
Predictive Analytics Forecasting Statistical models Alerts Query/drill down Ad hoc reports Standard reports
Degree of Intelligence
Reporting
Figure 2: Authors adaptation of Davenport and Harriss work highlighting the lack of true analytical capabilities found in Web and digital analytics offerings today.
Of all the highcompetitive advantage/highdegree of intelligence tools required for analytical competition, statistical models are typically present only in secondgeneration testing and optimization applications. While Web Analytics Demystified does not debate the inherent value associated with reporting tools, we firmly believe that simple reporting tools are incapable of delivering the type of deep insights and support for businesschanging recommendations required today. As organizational focus continues to shift into the digital realm, businesses must recognize that a revolution is upon us and begin to plan now for the creation and use of a thirdgeneration digital analytics strategy.
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The number of companies taking advantage of thirdgeneration tools in this way is still very small. But the very fact that the majority of companies interviewed for this white paper requested to remain anonymous to protect their competitive advantage speaks volumes to the opportunity and potential. Fortunately for those organizations ready to consider becoming digital analytical competitors, the work involved is often little more than application of wellunderstood techniques to new sources of data.
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Conclusions
Despite a decade of investment, the vast majority of companies that have made an investment in firstgeneration digital analytics technology still dramatically underutilize that investment for online decisionmaking and customer relationship optimization. That observation, combined with the bestguess estimate that fewer than 20 percent of online businesses have adopted secondgeneration ad hoc reporting and multivariate testing tools, suggests that the ideas presented in this document may be well ahead of their time. Perhaps. At Web Analytics Demystified, we strongly believe that the best analytical competitors are those possessing a welldefined strategy, not just describing how they compete today but how they will compete in the future. Given widespread belief that digital channels will only increase in importance over time, we believe it behooves forwardthinking companies to start considering the data and systems they will need to run their businesses well into the future. Especially as the data businesses have at their disposal becomes more granular, and as the knowledge of our likes, dislikes and preferences as individuals becomes more easily obtained, the need for a new analytical model becomes paramount. The only thing worse than not having data, is having data and not being able to useit. The counter argument for the shift described in this white paper is that businesses will place less importance on the careful analysis of business data and that company owners will rely more heavily on gutfeel decisionmaking. We believe that the notion that smart businessmen and women will turn their back on the seemingly infinite pool of data about their customers, products, brands and companies is highly unlikely. Rather, there is a strong desire to take a more analytical approach toward business, not less, especially in economically uncertain times. None of the ideas we have presented are easy to execute or particularly inexpensive. The software, people and the time and energy required to transform the businesses use of data all come at a cost, both in opportunity and in hard dollars. But as Davenport, Harris and Ayres have all shown: new analytical competitors are emerging and, more importantly, their analytical efforts are paying off. The new digital analytical competitors of the world have harnessed online and offline data to optimize interaction models and drive value back into the business by improving the entire customer experience.
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About SAS
SAS is the leader in business analytics software and services, and the largest independent vendor in the business intelligence market. Through innovative solutions delivered within an integrated framework, SAS helps customers at more than 45,000 sites improve performance and deliver value by making better decisions faster. Since 1976 SAS has been giving customers around the world The Power to Know .
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