Data-Mining Company Helps Business Analyze Customers

USAMA FAYYAD helps businesses decipher just what customers do on the businesses’ Web sites.

Companies generate reams of customer information from their sites, but it is different from their sites, but it is difficult to analyze it quickly and cheaply enough to get any use from it. That is where Mr. Fayyad comes in. His start-up, digiMine Inc., crafts data-mining software packages for companies seeking to glean trends from their customer data.

Data mining uses algorithms to sift through those monstrous databases and reveal customer-usage patterns. Once marketers get their hands on this juicy info, they can learn a range of valuable lessons, including what works and what doesn’t work for customers on Web sites.

They can also forecast future customer moves.

For all its usefulness, data mining is costly and requires skilled technical talent. Large corporation either develop the systems in-house or contract it out. Because it can be time-consuming and expensive, data mining has often been out of reach of small and medium-size businesses.

Enter digiMine.

The Kirkland, Wash., company hosts a service that collects the information, store the data and analyzes it in reports for a monthly subscription fee. While the majority of digiMine’s customers use the service to analyze data generated from the Web, the start-up is increasingly combining through “offline” databases such as catalog information. Prices can range from $15,000 to $50,000 a month.

DigiMine installs software in a customer’s database, which regularly grabs the data, encrypts and compresses it and transfers it to a digiMine data center. The data is then “cleaned,” or stripped of useless information, and loaded into a secure data warehouse. DigiMine then uses a set of proprietary algorithms to analyze the data. Detailed reports are posted on the Web, where the company’s customers, using a password, can retrieve it. The data are gathered daily and reports are created using easy-to-read graphs and charts.

“Our customers don’t need a technical person in house to help them figure it all out,” says Mr. Fayyad, digiMine’s 38-year-old president and chief executive.

Mr. Fayyad says he borrows heavily from his experience as a former lead executive in Microsoft Corp.’s data-mining group. During pilot tests at the software giant, he noticed companies were extracting little useful information from outdated data warehouses.

In March 2000 he formed digiMine with two other former Microsoft executives, Bassel Ojjeh, 27, and Nick Besbeas, 39, aiming to create a simpler yet comprehensive data-mining system. The team quickly raised $5 million in initial funding from an early round of investors including Pete Higgins, another former Microsoft executive who runs a Seattle venture firm called Second Avenue Partners.

In September, digiMine scored a second round of $20 million led by the Mayfield Fund, Menlo Park, Calif. The company now has 120 employee and more than 30 customers, including retailer Nordstrom Inc. and imaging company Getty Images Inc., in Seattle, and Dialpad Communications Inc., a Santa Clara, Calif., Internet telephony company.

Still, data mining is a fast-growing and hotly contested market as businesses struggle to keep up with ever-expanding customer databases that include both Web site and offline information. Competitors include a slew of so-called Web analytic companies, including Accure Software Inc. Fremont, Calif., and WebTrends Corp., owned by NetIQ Corp., San Jose, Calif. Well-established companies including International Business Machines Corp., and NCR Corp. are pivotal players in the market as well.

Mr. Fayyad, a data-mining expert who once used scientific data analysis to identify volcanoes on Venus for the National Aeronautics and Space Administration, says data mining is an important tool for companies as they increasingly rely on the Internet to communicate with their customer. “The Web makes everything harder,” he says. “Now there are all these servers out there capturing events numerous times a day at such a huge rate.”

In the face of the current economic slowdown, he says, companies are eager to learn more about their customers in hopes of retaining them and getting a return on the investments they have sunk into their Web sites. DigiMine’s Mr. Besbeas says demand for the company’s services haven’t waned during the current tech bust. “We’re not seeing any real problems of our customers paying for the service,” he says.

Getty Images says digiMine helps it better understand customer behavior on its e-commerce site that supplies images to ad agencies and other media companies. Tony Tan, Getty’s director of customer analytics, says the digiMine tool has helped determine how many visitors are repeat users or new registrants, and how much time users spend on the site.

Binney & Smith Inc. the Easton, Pa., owner of the Crayola crayon brans, signed a deal at the end of June with digiMine. Binney & Smith’s Justin Knecht, manager of Internet technology for the brand, says he is hoping to dig up customer trends on the Crayola Web site, where a group of some 600,000 registered users, including educators, parents and children, visit regularly. Binney & Smith is a subsidiary of Hallmark Cards Inc. of Kansas City, Mo.

Mr. Knecht aims to use digiMine’s service to segment the site’s user base down to what he calls granular levels. For example, the software should be able to determine what activities a particular customer segment is using on the Crayola site. “With that information we can target content to that group,” Mr. Knecht says. “You could probably analyze this stuff on spreadsheets but drawing the connections would be difficult.”

By: Nicole Harris

Source: The Wall Street Journal


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