Chapter 1
What is Google Analytics, and Why Does Google Give it Away for Free?

Google Analytics collects information about how users find and interact with websites and mobile applications and makes that information available to marketers, content creators, and business owners. In this chapter, we will explore the fundamental benefits of using Google Analytics, and we will discuss Google’s motivation for making the product available for free.

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The current state of Google Analytics

Google Analytics is outrageously popular. As I’m writing this at the close of 2022, W3Techs is reporting that Google Analytics is installed on “86% of all websites whose traffic analysis tool we know,” and the platform has been the Beyoncé of digital marketing ever since it was acquired in 2005.

This broad adoption has allowed Google Analytics to set the standard for how marketers and web developers measure success. For example, if Google Analytics had not introduced us all to the concept of a session, likely, we would still be measuring traffic volume in hits or server logs.

To understand how Google Analytics got here, let’s take a quick look at where it came from.

Where did Google Analytics come from?

To answer this question, we’ve got to go back to the late 1990s. While sophisticated people in limousines were sharing mustard at stop lights, the team at Urchin Software was working on a product that could compete with the big enterprise “web statistics” products like Webtrends and Net Insight (source).

image source

By all measures, Urchin was a small player and late entrant to the digital analytics market, but it was fast and easy to use. Google acquired Urchin in April 2005 and officially relaunched it in November of that year as “Google Analytics” (source). According to a statement given at the time, Urchin was acquired because:

“Google said it expected the service to help Web sites increase their advertising returns.”
Source: New York Times, March 29, 2005.

To everyone’s surprise, Google decided to offer the product for free! This decision was met with fierce criticism from competitors, but it also resulted in an enormous adoption rate, with 100,000 accounts created in the first week (source).

In the following years, Google would rapidly expand the functionality of Google Analytics, rolling out event tracking, custom reporting, and real-time reporting. Between 2008 and 2012, the product expanded incrementally, but the first major overhaul came with the launch of Universal Analytics in 2013 (which many now refer to as version 3) and then Google Analytics 4 in 2020.

GA Timeline
I like to show the Firebase logo for GA4 to indicate that it is built on Firebase Analytics, but technically the logo hasn’t changed since 2013.

By all measures, Google Analytics 4 is the most comprehensive product overhaul to date. It was designed to improve application tracking and address increasing privacy concerns (read more about how GA4 differs from prior product versions here).

Many free products fail, so Google Analytics’ strong success is a testament to the tremendous value it creates for users. Next, I will explore this topic a bit deeper to understand how marketers and developers use Google Analytics to generate value.

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The purpose and uses of Google Analytics

I’ve been helping companies get value from Google Analytics for about 11 years, and I find it helpful to explain that Google Analytics can be used to support two goals:

  1. To optimize how people find your website to help you acquire new and better visitors (to some extent, you can do this for mobile applications as well).
  2. To optimize the experience of users attempting to use your website or application.

Let’s explore each of these.

Optimize how people find you

Users find websites in various ways or “channels,” including paid search, organic search, social media, and email. Advertisers have access to multiple third-party data sources that can indicate how well ads are performing (such as the reporting in Google Ads or Facebook), but these ad platforms are unaware of each other. As a result, when users interact with multiple ad platforms before converting, a single conversion will be counted in multiple locations. When this happens, the sum of your conversions across ad platforms will be higher than the actual conversions observed in your CRM or POS system.

Google Analytics creates a single source of truth across your channels because it can view all channel activity holistically. It can apply logic to determine which channels deserve credit for driving conversions. Additionally, GA creates a first-party data source because you decide what data is captured, and you have full access to do what you want with that data.

Wait, there’s more! The statement above is true of all Analytics tools, but what makes Google Analytics unique is the powerful integrations with Google’s advertising and cloud products.

  • Advertising integrations (Google Ads and the Google Marketing Platform) allow cost, conversion, and audience data to be shared between tools. This makes it possible to optimize against CPA and ROAS.
  • The cloud integration (BigQuery) gives you access to raw analytics data, which enables you to join web/app activity with other data sources, visualize in your BI tool, and conduct advanced analysis (propensity, LTV, media mix, etc.).

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Optimizing your users’ experience

The second way that Google Analytics adds value is by providing you with information about how customers interact with your website or application. This data allows you to answer questions like:

Are users engaged (time spent, pages viewed, etc.)?
Are users doing the things I want them to do (events, conversions, etc.)?
Are users having a negative experience (errors, page speed, etc.)?

Those who want to go deeper in this area can deploy Google Optimize alongside Google Analytics, a complimentary tool that makes it easy to deploy A/B tests or run personalization campaigns.

Why does Google give Google Analytics away for free?

So we’ve established that Google Analytics is extremely valuable to marketers, content creators, and business owners. So why do they give it away for free? After all, numerous paid Analytics products on the market constantly compete with Google Analytics.

First, a paid version of Google Analytics, Google Analytics 360, exists! We will discuss the cost and benefits of upgrading to GA360 in chapter 13, but it is important to know that many features that require expensive computational resources are only available to paying customers (such as roll-up properties, sub-properties, and unsampled reporting).

But putting GA 360 to the side, the vast majority of Google Analytics users are not paying a dime. Google’s perspective has been consistent since the beginning: Customers who use Google Analytics will spend more on Google Ads.

A famous Boston Consulting Group study in 2019 confirmed this perspective. The study found that companies with mature Analytics and attribution capabilities have a substantial advantage over competitors.

So, in summary, Google could monetize Google Analytics in one of two ways:

  1. Give GA away for free with the hopes that it will give advertisers the data that they need to feel confident about their advertising ROI across Google products, causing them to spend more ultimately. Or;
  2. Eliminate the free version and charge a fee.

Google makes its money from advertising, and it’s difficult to overstate that revenue stream’s importance to the company. By comparison, the potential revenue that could be generated by the second option is quite small. As a result, those who use the free version of Google Analytics benefit from the advertising economy. At the end of the day, the cost of operating GA is being covered by those brands that spend money on Google’s advertising products.

How Search Discovery can help

Search Discovery is a Premier Google Service & Sales Partner, a distinction held by only the top 3% of Google agency partners. This means that Google selected Search Discovery to ensure that companies using their products receive the best support, training, and value-added services available to maximize their investment and drive business outcomes. Further, Google selected Search Discovery to join the sales partner program across analytics, marketing, AND cloud products—a rare feat!

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In addition, as a data transformation company, we can assess your advertising’s effectiveness in using data to reach your target audience while maximizing your budget. Whether it’s applying customer LTV calculations to bidding strategies or GA4 upgrades, implementations, and integrations, our team of experts is here to help you succeed.

Our digital marketing and analytics experts stand ready to help you optimize your conversions, leveraging the full capabilities of GA4. Contact us today to get started!

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