Web Analytics Market to Hit the Billion-Dollar Mark by 2014

All has been quiet on the Web analytics front in recent months, after a year or so as one of the industry's hottest topics. According to a new report from analyst firm Forrester Research, however, industry watchers can expect a resurgence that will take the Web analytics market close to the $1 billion mark by 2014.

"If we were to equate Web analytics to a human life stage, 2009 places us squarely in awkward adolescence," writes John Lovett, a Forrester analyst and author of the report, "U.S. Web Analytics Forecast, 2009 to 2014," due for release Wednesday. "After some explosive prepubescent growth, the Web analytics market is beginning to develop its own footing, yet significant change is imminent and maturity is still distant."

While Forrester's data indicates that 73 percent of businesses are using Web analytics tools or are evaluating them in a pilot program, revenue has been hard to come by: Providers of free tools take up 78 percent of the market share. Even when businesses are paying for analytics, 37 percent of them are only doing so in addition to a free offering.

Free analytics tools gained such tremendous early adoption by surprising the market with noteworthy capabilities with no associated cost. "[The] introduction of highly capable free tools to the marketplace [was] a disruptive event that altered the course of many incumbent vendors and levied price pressure across the entire market," Lovett writes. While this helped get customers past what Lovett calls the "investment chasm," the need for deeper insight and faster innovation will soon lead businesses to pay for more full-featured applications.

In fact, despite the widespread penetration of free Web analytics solutions, Forrester predicts that spending on the technology will enjoy a compound annual growth rate of 17.2 percent over the next several years, rising from $363 million in 2008 to $953 million in 2014.

Furthermore, the market will continue to favor software-as-a-service (SaaS) delivery; 88 percent of Web analytics deployments were hosted in 2008, a dominating share that Forrester nonetheless expects to reach 98 percent in 2014. Marketing budgets are shifting toward online interactive channels, and the growing need for effective tools is accelerated by the call for accountability in the marketing department. Forrester says that 21 percent of companies will increase spending on measurement technologies this year.

The so-called "investment chasm" Lovett refers to in the report is one of three such pitfalls, including a "staffing chasm" and an "action chasm." As data increasingly becomes a commodity, businesses need adjuncts to squeeze the value from it. These include the Web analytics tools themselves, as well as professional services, dashboards, and integration tools to make sense of the data in a broad business perspective. "The democratization of data is looming," Lovett writes. "Ultimately, Web analytics will become part of a broader array of integrated services supporting marketing professionals who focus on customer intelligence."

Lovett's complete Web Analytics forecast is available as part of Forrester's ForecastView offering, a syndicated subscription service that provides access to up to 40 forecasts across North America and Western Europe, as well as forecast data and market metrics not available through Forrester's research reports alone. The ForecastView offering comprises online, mobile, and emerging technology markets.

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