Cost of Google Analytics
Fixed costs:
Google Analytics (GA) offers its standard features at no cost to sign-up (Gallaugher, 2014). After registering, a tracking code will be issued by GA. That code is to be entered into your website’s page, or any subsidiary pages you want GA to analyze (Gallaugher, 2014). While the standard version of GA can be implemented without any fixed cost, it does have limits. For example, the standard version samples data, which in essence, provides average statistics not full data. Additionally, the standard version has a limit of 10 million hits that it will process per month (Image 1). For a small business, that might be more than enough. However, for a large business, that may not be nearly enough. Moreover, the standard version only has self-support for the product, which may require the need to hire a professional consultant (see variable costs). This is where GA provides a premium version with enhanced features. The premium version has a fixed cost of $150,000 annually (Image 1). Among the advantages of paying for this version is the 24/7 direct technical support, hands-on implementation specialist, account management, one billion hits processed per month, and data results are accurate, not statistical samples of the data (Image 1). Whether a business decides to invest in the premium version depends on the volume of data expected and the depth to which the data needs to be analyzed. For a company the size of IVK, the premium version is a must.
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Source: http://forums.thedailywtf.com/forums/p/28822/338568.aspx
Another fixed cost that will need to be factored is the cost of a digital-analytics strategist, a person who analyzes and reports data with recommendations. In 2014, the average annual salary of a digital-analytics strategist was $65,000 (Bruell, 2014). A director level digital-analytics position averaged near $100,000 annually (Bruell, 2014). According to Indeed.com, a Google Analytics data analyst earns on average $76,000 (Libert, 2015). IVK will need to have at least one digital-analytics FTE (full-time equivalent) to manage the Google Analytics account. This FTE will also require a computer to work with Google Analytics. In comparison to a manufacturer, the fixed cost of implementing GA are advantageous because IVK will not have to develop land or pay rent to utilize Google Analytics (Knight, HBR). This pro could be leveraged for investors who typically experience higher beta risks with technology firms as explained by Joe Knight of the Harvard Business Review.
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Variable costs:
Variable costs are defined as the costs that increase as output increases (Baye, 2015). Google Analytics variable costs are defined as the cost that increase as the use of Google Analytics (equivalent to the output in this formula) increases. Google Analytics is free in terms of use and certification unless organizations choose to use Google Analytics Premium. Therefore, costs must be analyzed based not on charges for the input but the cost for adapting. In this case the input cost that will increase with use is the time spent by employees to learn, become certified, and implement Google Analytics. Organizations may face additional variable costs in the learning aspect of this if they choose to hire consultants to assist in this process. Lunametrics is an example of a consulting organization and Google Analytics reseller that assists companies in taking the data provided by Google Analytics and audits it to identify inefficiencies among the data (Moore, 2015). Companies like IVK will also experience variable cost when determining how many Google Analytics equipped employees are needed to successfully utilize the tool. As stated by Alex Moore, who is the Manager of Sales for Lunametric's Pittsburgh, PA division, organizations will generally have one analyst regardless of size and this analyst will have the main duty of reporting data findings (Moore, 2015). Organizations of comparable size for Fortune 1,000 companies will typically hire a second analyst for integration and creative purposes. Fortune 500 companies will hire an additional 3-5 analysts that are considered data scientist, formerly known as statisticians. Last, Fortune 100 companies will have up to 10 additional analyst secured to face the volume and need presented by all of the previous tasks. Given IVK's market capitalization and initiative of growth, if hiring in house analyst there would be 2 employees hired initially. Thus, variable cost equal the salaries of GA employees needed divided by the total users of GA. This variable will affect the savings of the income statement. It would be wise for IVK to look into utilizing the consultant option as much as possible. Salary is a larger cost than consulting; therefore IVK will need to analyze if they want the cost savings of consultants over the convenience of in house analysts. These savings or expenditures will increase or decrease cash flow and furthermore respectively affect the ROI in comparison to IVK's hurdle rate.
Upfront costs of implementing GA:
The upfront costs of implementing Google Analytics software itself are negligible because Google Analytics uses a service model of billing. Therefore, businesses do not have to pay an initial licensing or upfront costs to use the service whether or not they use the free version or Google Analytics Premium (Buhman, 2015). The $150,000 Google Analytics Premium fee is a fixed cost determined by dividing the cost over 12 months. A company will not be charged until the end of the first billing cycle.
However, the majority of the upfront costs associated with Google Analytics stem from training and consulting. Time for training and testing should be configured into costs. If IVK utilizes a consultant, companies have the option of using part of their consulting hours to have a consultant train teams on any of the certification options with Google Analytics IQ in person. Industry rates include $225.00 per person for beginners training, and up to $800.00 for advanced skills(see Jeffalytic url). In order to be competitive, a company should have at least 5 workers trained on the system (Buhman, 2015). Thus, the upfront training costs would be $4,000 for 5 employees for advanced GA training. Hence, IVK or any corporation could use a consultant to address training needs. These costs will be associated with the start-up costs and upfront cash needed to make the investment in GA.
Another additional training option is Analytics Academy. Analytics Academy, is a free training program offered by Google that trains students on digital analytics fundamentals and platform principles. This should take between 8-10 hours for initial training and 90 minutes for the test (Strilko, 2015). Additionally, Google doesn't charge a fee to take the Google Analytics IQ certification test. Logistically, employees who seek the certification should study over a period of time and then sit for a test date. Therefore, the only official time that should be scheduled is the 90 minute exam and the possible cost should be reflected in implementation costs if a company uses this method.
Recurring costs for maintaining and supporting the system:
If IVK were to implement GA, the recurring costs on maintaining and supporting the application are described as the following:
Using the GA premium version, IVK will have a recurring cost of $150,000 per year. Depending on the amount of traffic that IVK would be facing, it is important to avoid any delay in processing the real-time reports. One possible recurring cost would be the cost of time to monitor the performance of the site in order to avoid data processing latency, or any encounter technical trouble shooting issues related to bugs or defects with GA that would impact the accuracy of data reporting. Another recurring cost for IVK is to contract with a web analyst (third party vendor) who knows GA inside out. He/she should be responsible to pull all the real-time reports, as well as manage, monitor and maintain GA. This may require less in-house resources to oversee the entire analytics program. As what we had previously stated, an annual fee to pay for this GA web specialist could be $76,000 on average (see fixed costs). This would be the recurring cost for maintaining and supporting GA until the contract ends. Lastly, another intangible recurring cost could be related to the marketing manager to analyze and leverage the real-time reports based on the data on a weekly or monthly basis. By reviewing the real-time reports, the marketing manager would have to reset the target goals on a monthly or regular basis. Otherwise, the real-time reports will eventually become irreverent and useless. The real-time reports provide a good tool for the marketing department to understand what marketing they respond to and how they use IVK’s website. Therefore, it is important to focus on the power of analyzing the right data with critical metrics that impact the business, adopting analytics technologies and expertise, adapting the new format of decision-making process and activating high performance skills by making necessary adjustments and for better process improvements over time (McCarthy, 2014).
The Soft Costs of Google Analytics
All the costs listed above must be addressed as soft costs as defined by Joe Knight in his article Understanding ROI. Google Analytics is a perfect example of an investment that will need to be evaluated not on direct ties to revenue but the intangible benefits it provides. These benefits will be utilized by marketing managers to identify weaknesses and in turn will take corrective actions to resolve and increase revenue. GA does not produce a physical good. A manufacturer whose products yield a certain amount of revenue can invest in machinery and calculate ROI based on the future revenue producing potential. Therefore, ROI cannot be calculated for GA. Instead of using ROI as a metric, Moore suggests analyzing the way GA can provide a window of data into online operations and viewing compatibility with marketing platforms to strengthen investment decisions. While Knight analyzes soft costs as money spent in preventative measures to avoid incidents such as lawsuits, IVK should view Google Analytics for its soft benefits and how the data found in GA will benefit its loan sales. For example, IVK could find data from GA that shows where a potential customer found IVK's website, or when a customer decided to leave the page that could have provided information on loan services. IVK can then use this data to correct the website and gain more customers. Such facts are crucial when evaluating investment decisions.
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References:
Baye, M. (2014). The production process and costs. In Managerial Economics & Business Strategy (8th ed., p. 184). Boston: Irwin/McGraw-Hill.
Bruell, A. (2014). Agencies paying top dollar for data analytics. Advertising Age, 85(22), 24-25. Retrieved from http://search.proquest.com/docview/1618208502?accountid=458
Buhman, E. (2015, October 16) , Google Analytics Cost Analysis [Telephone Interview].
Gallaugher, J. (2014). Information systems: A manger's guide to harnessing technology (2.0). Washington, DC: Flat World Knowledge.
Knight, J. (n.d.). HBR tools return on investment (ROI). Harvard Business Review.
Libert, K. (2015, July 20). The inbound marketing economy [Web log post]. Retrieved from https://moz.com/blog/the-inbound-marketing-economy
McCarthy, B. (2014, Oct. 3). Prepare your organization to capitalize on predictive analytics. Harvard Business Review. Retrieved from http://krm.usinternet.com/materials/21982_hbr_20141003_predictive_analytics_%28mccarthy%29_v07.pdf
Moore, A. (2015, October 16). Google Analytics Cost Analysis [Telephone interview].
Strilko, J. (January 19, 2015) How to Pass Your Google Analytics Certification Launch Digital Marketing. Retrieved from http://www.launchdigitalmarketing.com/beginners-guides/how-to-pass-google-analytics-certification/
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