By Michael Totty
Staff Reporter of THE WALL STREET JOURNAL
Marketers have long quoted John Wanamaker, the Philadelphia retailer
who famously said, "Half my advertising is wasted. I just don't
With the Web, online marketers say, they finally know which half.
That hasn't always been the case. Until recently, online businesses
could figure out how many visitors came to their Web site from a
particular banner ad or e-mail pitch. But they couldn't easily tell
which of those visitors were spending money, or how much they were
But now a new set of tools, by tracking every click a visitor makes
through a site, can not only tally the number of visitors drawn
by a particular ad but also tell which campaigns are bringing in
the most sales and the most profits.
These tools "marry data about who's buying what with traffic
data -- who's going where," says Matthew Berk, a senior analyst
with Jupiter Research in New York. "When you combine those
things, it can be really powerful."
Just Looking, Thank You
The ability to measure ad performance is only one feature of "Web
analytics" software, which e-tailers increasingly are using
to better understand how customers interact with their sites. Forrester
Research Inc., a Cambridge, Mass., technology consulting firm, counts
at least 27 vendors selling Web analytics tools, including NetIQ
Corp., San Jose, Calif.; SPSS Inc., Chicago; WebSideStory Inc.,
San Diego; Omniture Inc., Orem, Utah; and Coremetrics Inc., Burlingame,
The tools make it easy to spot ads that bring in a lot of browsers
who don't spend a lot of money. For instance, Dartek.com, an online
discount computer store, last year launched a series of banner and
The campaigns were expensive, accounting for about a third of Dartek's
fourth-quarter advertising budget, and they brought a lot of visitors
to the site ( www.dartek.com <http://www.dartek.com/> ) --
at the peak, the pop-up campaign brought in nearly 1,900 visitors
in one day.
But these visitors weren't buying enough to cover the cost of the
ads. "Fortunately, we were able to see that [the banner campaign]
was not for us," says JoAnn McNeely, Dartek's marketing projects
manager in Naperville, Ill. Ms. McNeely uses analytics services
from WebSideStory to track the 30 or so advertising campaigns she's
Paying by the Word
Mr. Berk, the Jupiter analyst, says retailers' growing reliance
on search-engine advertising is helping drive their use of analytics
tools. Advertisers often buy scores or hundreds of search-engine
terms, and pay whenever someone clicks on the ad. Costs can add
up, so sites want to know which ones are delivering.
Restoration Hardware Inc., the Corte Madera, Calif., home-furnishings
retailer, used an analytics tool from Coremetrics to find out which
ad terms would pay off and which wouldn't. It tested about 120 keywords
on Microsoft Corp.'s MSN search portal and found that many of the
most popular -- and expensive -- terms were attracting visitors
but not producing sales.
For instance, Restoration discovered that the term "mirrors"
accounted for 5% of its total "click" charges in March,
but not many of those shoppers actually bought anything. More specific
terms -- "bathroom mirrors," "wall mirrors"
and "decorative mirrors" -- cost less because there was
less demand from other advertisers for them, but they produced three
times the conversion rate, or the percentage of visitors who ended
up buying something.
"We now can quickly and easily identify the individual terms
that are driving sales, or driving costs, taking the guesswork out
of search marketing," says Feather Hickox, Restoration's Web
manager. "For a company our size, it's critical."
Coremetrics, like WebSideStory and many other Web analytics firms,
is an "application service provider," selling its analytics
tool as a subscription-based service that its customers access using
a Web browser. Costs for the services vary: Coremetrics' charges
start at $6,000 a month for its total analytics package, and $4,000
a month for the marketing module alone, depending on the volume
of site traffic or total number of marketing campaigns that are
being tracked. WebSideStory's service starts at $15,000 a year.
Inevitably, all this data collection raises concerns about privacy.
Many analytics companies use "cookies" to identify each
visitor to their customers' sites; the cookies let trackers tell
when a customer returns to a site, so they can give credit to a
particular marketing campaign even if the shopper doesn't purchase
until the second or third visit. The analytics companies say they
don't keep any personal information, such as names or credit-card
numbers, that can be used to identifyindividual shoppers.
Still Some Mysteries
Despite their success at unraveling the mysteries of online marketing,
more data can't always explain everything.
CompUSA Inc., a Dallas-based computer retailer, began using Coremetrics
last fall to test the effectiveness of different e-mail marketing
messages. Its marketers sent to a group of prospective customers
nearly identical messages with different subject lines. Some subject
lines touted specific prices and products, while others offered
more-generic low-price messages or highlighted new technologies,
such as Intel Corp.'s new Centrino wireless chip.
But they found that no single message consistently brought in more
sales. The message with the price information did well during the
post-holiday period in January and early February, while the Centrino
message outperformed the others around the time Intel launched the
new chip in March.
The test is continuing, but CompUSA's marketers are still trying
to make sense of the results. "We haven't found the key,"
says Al Hurlebaus, CompUSA's director of e-commerce. "Sometimes
I have to remind my team members, and remind myself, that we've
been in this business for years and we're very successful. It's
not necessary that we forget everything we've learned and use the
tool to make decisions for us."
Mr. Totty is a news editor for The Wall Street Journal Reports in