"My gut is that Google will do some version of giving Urchin away to marketers -- it may be just to AdWords customers, it may be to the entire world like Picasa, and they may go even further than that and give away hosted analytics to the world a la Blogger, absorbing bandwidth and disk I/O costs. Whatever Google does, the rest of the web analytics companies have to accept that Google has entered the web analytics market; and that will create pressure someplace. Certainly Urchin in Google is much, much stronger than Urchin alone; and Urchin alone was not a bad little company. "

The most intriguing of these is certainly the idea that Google will fundamentally transform not only the web analytics industry but also the rules of being an online business by making analytics freely available.

"I have no idea what Google’s going to do; they’re going to do what’s best for Google, what's best for AdWords customers and what's best for Urchin’s customers. ... It is not completely unimaginable that Google would do this: they would say to their AdWords customers, or anybody in the world, 'We’ll give you tag-based analytics for free; and we’ll let you collect up to a million pageviews per month, and really improve the quality of your online marketing if you are underinvested in web analytics.'

"Our estimate is that web analytics is only 15% penetrated today. That creates tremendous upside; but most businesses aren't going to pay tens of thousands, or hundreds of thousands, of dollars for analytics. They may not even pay $500 for nominal analytics; but free is a great price, it is an absolutely great price. If Google were to do this, and I think this is the least likely of the scenarios, it would create tremendous pressure on the other players (such as ClickTracks, SaneSolutions and WebTrends). Some part of the market would say, 'I could get this for free from Google; and you’re telling me $12,000.' The difference between free and $12,000 is a big difference."

So where Google goes, can Microsoft and Yahoo be far behind?

"I don't know. That's a really good question. With the flurry of activity in web analytics space ... after yesterday, honestly I wouldn't be surprised. I was pretty surprised, even as an industry analyst, I was pretty surprised by both of those events happening on a single day. So if someone called me tomorrow, and said Microsoft bought company X, I would probably just shrug and say, 'Of course they did.' "

While Google's entry into this space will be tough on some of the existing companies, Peterson said that, overall, "This is great for web analytics as an industry."

"It shines a bright light on the fact that marketers need to use web analytics to improve the quality of their pay-per-click marketing, their algorithmic search results, the quality of the web site, and their checkout processes. Analytics is fundamental to running an online business. Anytime Google does anything, the whole world sits up and takes notice; and now the whole world is going to sit up and take notice of web analytics.

"The question of how it impacts the whole market, and how do software sales go in the market, is something we won't know until the end of 2005."

In all the heat about Google, don't forget about the WebTrends deal. That's actually a "fairly significant announcement," Peterson said.

"In the Jupiter Research constellation from October 2004, they were very strong from a market suitability standpoint; but needed to do more to show the business value. We believe that one of the things that was holding WebTrends back from demonstrating that value was corporate control from NetIQ, particularly in expanding the size of the services organization and doing more to help analytics customers. In talking to Greg Drew (WebTrends' GM under NetIQ, and president and CEO of the new company), I believe they now have the opportunity to make the decisions that are best for WebTrends customers and their organization; and that is something their competitors will have to take a long, close look at.

"In a space where every deal is so closely contested, autonony will allow them to be more aggressive, and to make different decisions. They’re a fairly aggressive bunch; and I think this autonomy will allow them to take advantage of that."