The Web analytics space is hot, customers are engaged, consultants busy, vendors optimistic. There's no question this is a healthy "industry."

But that the intense competition among the top vendors has somewhat killed product innovation. And the next generation Internet - what some call Web 2.0 - needs a totally different kind of Web analytics. Let me explain.

Most analytical products available today were designed in 2001-2002, after the dot-com bubble burst, when there was a strong need to measure marketing campaign ROI. I would even go further and say that the only thing that mattered at the time was measuring Google AdWords and Overture (for 90% of customers, at least), because search engine marketing was the only marketing program that really worked and could be justified in those recession years.

Since 2002, leading vendors have been adding powerful capabilities to analyze behavior on the site, nicely complementing the marketing analysis capabilities—and adding consulting brains to help customers understand the reports. And since 99% of customers typically use no more than 10% of the reports available to them, it is not too surprising to see vendors focusing on helping customers better use their product, as opposed to creating more features that would likely not get used. In other words, the Web analytics market is becoming a consulting business.

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