The Google Analytics business model is unique for the web analytics industry - a deep dive reporting tool suitable for companies of all sizes (past article - Who uses Google Analytics?) given away free of charge. But is there a catch to this uniqueness? Well in my view there is none. Of course I am slightly bias in my opinion, but the idea behind providing Google Analytics for free makes perfect sense to me:

  • Provide accountability and transparency to existing Google advertisers
  • Provide confidence and prove the value of online advertising to potential new advertisers

Lets face it, happy customers are good for any business. For Google, may be as a result of using Google Analytics, customers will remain advertisers for a longer period, become less likely to lapse their accounts (take breaks from advertising), even raise their AdWords budgets to capture a greater share of the search market. For those users that are not advertisers, perhaps Google Analytics will give them the confidence to try it - that is Google Analytics helps Google acquire more advertisers. So to me, giving away Google Analytics for free is a valid business model as it can help generate revenue for the business.

Compared to this return, the cost of providing analytics is not so great. Following Moore’s Law, data collection (bandwidth), data storage (hard disk space) and data processing (CPUs) are inexpensive to provide and becoming more so.

Is this such a unique business model?
Giving away your technology up front in the hope of making your money back later in other ways is used in other industries. For example, the mobile phone industry has been giving away cell phones to customers with annual contracts for many a year now. Satellite TV companies offer free receivers, dishes and installation with their contracts and Internet Service Providers ship their routers for free to new customers. Of course these are not directly analogous to Google Analytics, as they all require a customer commitment to spend a minimum fee usually over a 12 month period. With Google Analytics however, there is no commitment. In fact anyone can use it without charge (and cancel at any time) even if you are not a Google Advertiser.

However being free can also be a hindrance. Some people dumb down the product, claiming that decent features must come at a cost. Others speculate that sharing your data with Google is a bad thing - “they will hike up your bids”. But that is fraud and no business can survive that, as Enron proved. Perhaps by sharing your data, Google could provide a better service such as more qualified leads, better click fraud protection etc. - but that is pure speculation at this stage.

So until Microsoft release their alternative (Gatineau, which is most likely going to be free), Google Analytics remains a unique tool in the web analytics market.

Is having a free tool good or bad for the industry? Does it stifle competition or create new opportunities? Share your thoughts by adding a comment.

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