Did Web Analytics Just Become One of IBM's Core Values?
The clickthroughs of Web analytics are certainly clicking these days — in more ways than one.
According to research collected for the recent Gartner Magic Quadrant for E-Commerce, Gartner Vice President Gene Alvarez identified Web analytics as the number-one integration for e-commerce platforms. Meanwhile, Forrester Research recently released a report on Web analytics authored by analyst Joseph Stanhope; interviewed for an article in the July 2010 issue of CRM magazine, Stanhope predicted rising interest in the market. The upcoming magazine article, on the rush by analytics vendors to provide social media capabilities, cites four major analytics players that released social media software within weeks of one another. One of those companies, Coremetrics, a California-based provider of marketing optimization solutions, was purchased this week by industry behemoth IBM. Terms of the deal were not disclosed.
In a press release from Coremetrics, the company says that the acquisition would "expand IBM's business analytics capabilities by enabling organizations to use a cloud-based delivery model to gain real-time insight into consumer interactions internally and through social media networks to develop faster, more targeted marketing campaigns."
In a teleconference with analysts and media, Craig Hayman, general manager of IBM WebSphere, explained why Web analytics companies have become so important to businesses. Organizations intent on generating deeper levels of brand loyalty, he said, first need to analyze the information available online if they hope to optimize marketing processes and get deeper insight into clients' needs.
However, because most of that online information is stored within what Hayman calls a "complex set of digital outlets," such as brand Web sites, social media, mobile applications, and email, companies need Web analytics vendors to navigate these intricate systems.
Or, as Alvarez succinctly explains: "If your [Web site is] live, you better have Web analytics if you plan on staying live."
The acquisition extends IBM's range of offerings available through its Business Analytics and Optimization Consulting organization, which include IBM's team of 5,000 consultants and its network of analytics solution centers. Big Blue is certainly no stranger to acquisitions: Since 2002, IBM has spent more than $20 billion on more than 100 purchases, and only last month the company outlined plans to spend $20 billion more in the next five years. (The purchase of Sterling Commerce for $1.4 billion, announced soon after, represents a sizeable start.)
"The consolidation was inevitable and IBM's timing was right," says Gartner Research Director Bill Gassman. "Oracle, SAP, and Microsoft must now compete with IBM for e-commerce platform sales, without a strong online analytics offering in their portfolio[s]."
The addition of Coremetrics, Stanhope explains, will enable IBM to expand upon its WebSphere integration-platform capabilities to make marketing more actionable. "Coremetrics has done a lot of work in marketing attribution, advertising, and recommendations," he says. "The acquisition allows [IBM] to do more than just collect information and perform Web measurement."
Despite the appearance that WebSphere may be leading the announcement of this acquisition, Beth Ann Vaughn, IBM's integration executive, says that Coremetrics will be integrated throughout all of IBM's offerings. Speaking of integration, the two companies say that Coremetrics' staff of approximately 230 will be merged with IBM's approximately 400,000 employees in a way that doesn't disrupt Coremetrics' business.
"What they do well, we want them to keep doing," Vaughn says. "And finding ways that IBM, in a very targeted way, can assist them is the balancing act that I have. I think it will be very smooth."
The deal is expected to close in the third quarter of 2010, subject to regulatory approvals and the satisfaction of other customary closing conditions.
"As a business, we've grown very nicely," said Joe Davis, chief executive officer of Coremetrics, during the teleconference. "We saw [more than] 50 percent growth last year. But we recognize that we don't have the reach of a company like IBM. [With IBM's reach we will be able to] take the technology we've built, the customer relationships we have, and leverage everything inside of IBM to grow this business even faster."
Gassman agrees that Coremetrics was too small to "out-market" its industry rival, Omniture — itself acquired last year, by Adobe — and that the ability to utilize IBM's sales-and-marketing muscle to promote the value of Web analytics will expand Coremetrics' sales far beyond what it might have achieved as a standalone company.
And yet, Gassman adds, there's no immediate need for Omniture and other Web analytics companies to worry. IBM's presence in analytics, he argues, may actually serve to benefit all industry players by "driving more top-down initiatives in optimization, rather than the more common, and less impactful bottom-up approach."
Coremetrics also fits in with IBM's $1.2 billion acquisition of predictive analytics pioneer SPSS in July 2009. "SPSS was in the Web analytics business 10 years ago when they bought NetGenesis, but failed to capitalize on it," Gassman says. "They focus on predictive analytics for mostly offline marketing purposes, which the Web analytics industry has yet to appreciate."
Other players in the field may be more immediate targets for competition, Gassman adds. "SAS Institute and Teradata each focus on predictive analytics for cross-channel activity, for high-end customers. Online and offline is a hot topic, [and] IBM will likely go after this space quickly. I don't expect much before the end of the year, but this is one example of why the IBM/Coremetrics combination could be a lot more powerful than the Adobe/Omniture combination."
Still, with Omniture and now Coremetrics off the market, only a handful of standalone Web analytics players remain, including Webtrends. In an email interview, that company's CEO, Alex Yoder, calls the IBM/Coremetrics announcement "very exciting news for our industry." Coming so soon on the heels of the Omniture/Adobe deal, Yoder adds, this latest consolidation "represents overwhelming testimony to the value of online marketing technology as a core piece of an enterprise strategy…[and to] the growing importance of data-driven decision-making.… The market itself is strong and growing. This acquisition has been anticipated for some time and it will be interesting to see how this ultimately impacts enterprises looking to understand data across the multiple digital channels that comprise today's marketing landscape."
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