Can Web Traffic Be Turned into Gold?

Here's why SAS Institute says its latest service can help E-tailers get the most money out of their Web sites.
Joseph RadiganJune 6, 2001

Did SAS Institute’s unveiling this week of its IntelliVisor SM for analyzing Web sites’ traffic data give the Web analytics field a level of sophistication it’s lacked?

Several analysts who cover the business intelligence software market told that until recently most of the programs for analyzing Web traffic have been limited in their ability to match online and offline sales data.

“The first generation of tools, like DoubleClick and Media Metrix, showed which pages were being looked at and which products were being bought,” says Jacqueline Coolidge, a director with Hurwitz Group, a consulting firm in Framingham, Mass. “But it’s really important to incorporate information from other channels.”

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Not everyone in the Web analytics sector is convinced that SAS has reinvented the wheel. For example, a spokesman for NetGenesis of Cambridge, Mass., says his firm began matching up online traffic and offline data a year ago. San Jose, Calif.-based NetIQ’s WebTrends unit markets a product called CommerceTrends that also matches online and offline data.

Another vendor in the space, NetPerceptions launched its first analytical tool that studied both online and offline traffic three years ago, says Steve VanTassel, the company’s senior vice president for products, But when the dot com economy was still surging in 1999, many E-tailers were so focused on spending tens of millions of dollars on advertising to gain new customers and building up order fulfillment processes that they could devote little time to actually analyzing their traffic.

It’s only in the last year that Web sales have reached a large enough volume to make it worth the while of the average bricks-and- clicks retailer to study the data.

One place where SAS says it has upped the ante is in integrating its sales analysis service with most major enterprise resource planning systems. The company says it is already integrated with PeopleSoft, J.D. Edwards, and SAP, and it expects to certify its products on Oracle before the end of the year. A company spokesman says IntelliVisor also can draw down files from a wide variety of sources, including archived sales data and the customer data warehouse.

Dan Vesset, an analyst with IDC, a Framingham, Mass.-based market research firm also says that SAS’ entrance into the Web analytics market could provide a boost to all the firms in the sector.

Most of the firms already in the field are relatively young Internet start-ups, Vesset notes. Privately held SAS, with roughly $1 billion in sales, has a size and a name recognition in business intelligence that some of the firms that specialize in Web analytics have lacked.

If nothing else, SAS, by coming out with a product that analyzes both online and offline data, confirms the shift toward “bricks-and- clicks” strategies adopted by most old-line retailers.

What’s more, Hurwitz’s Coolidge says SAS’s service also analyzes psychographics, or data that merges demographic data and buying patterns.

Certainly it doesn’t hurt to learn a ton of details about customer preferences, but the SAS system will cost a pretty penny to provide them. There’s a $30,000 up front fee and a continuing monthly charge of $20,000. Then again, SAS is pitching the product to retailers whose annual sales are typically going to run from $200 million to $1 billion, so an annual charge of $250,000 may be worth it.

What’s more, most of the major Web analytics packages carry hefty price tags themselves. Costs of $10,000 per month to $15,000 per month are hardly unusual.

Andrew Braunberg, senior analyst for Current Analysis, a Sterling, Va.-based market research firm, says given the nature and complexity of the business intelligence market, such a cost is not out of line.

“The level of sophistication and mathematics of it all means that you traditionally needed a Ph.D. statistician to analyze it,” Braunberg says. “But the lack of quantitative expertise has been one of the drags on the data mining market. I didn’t bat an eye when I saw the price.”

Even at $250,000 per year, if the service can help E-tailers add a percentage point or two of extra traffic, it will quickly pay for itself.

Hurwitz’s Coolidge says the service also lets a client set up a business scorecard and size up how it’s Web business is performing relative to its corporate strategy. “If you have a Web site that’s designed to get new customers, and only existing clients are visiting it, that’s a problem.” The tool is supposed to help E-tailers avoid that sort of trap.

Among the first two retailers to latch on to the service are Vermont Country Stores of Burlington and Blair Corp. of Warren, Penn.

Blair’s been using the IntelliVisor since it relaunched its Web site in January, says Jeffrey Parnell, the firm’s vice president and general manager for E-commerce. The service has helped the company market research team position goods on its home page to drive sales.

“It helps us generate actionable data that helps us make decisions in real time,” Parnell says. The retailer sifts through the daily reports, evaluates where products are positioned on its home page, and how well they’re selling.

Blair, which had $575 million in sales in 2000, is evaluating each product category, where individual goods are placed on the site, and matching their location to their sales data.

“We noticed and continue to notice that certain categories have much higher conversion rates from Web traffic to buying,” Parnell says. “The tool helps us present merchandise in a logical format that leads to more buying.”

Tom Grant SAS’ manager of ASP strategies says SAS takes daily data feeds from its E-tail clients, and, after they’ve been processed at a Web hosting site run by EDS, returns complete reports that analyze the traffic and the buying patterns. SAS opted to deliver the service via an application service model in order to better position it for the market’s mid-tier.

Grant says E-tailers can take various metrics, look at the factors that affect them and then build a scorecard to map out the most effective marketing tactics. The price is based upon the amount of data a client sends to SAS.

Blair sends its data after midnight each day, and the traffic analysis reports are in by the beginning of the business day, says Darren Schott, Blair’s director of E-commerce.

Parnell isn’t ready to disclose the boost Blair has received from the service, but he says it’s more than enough to justify the cost.

Current Analysis’ Braunberg notes that the complexity of sifting through reams of “clickstream” and offline data is itself a gargantuan task.

“You’ve got to put this data in a form where it can be analyzed,” Braunberg says. “That can be 80 percent of the work and is probably worth the price of admission.”