Last week, Yahoo! purchased enterprise-level web analytics service provider IndexTools. Yesterday, Dennis Mortensen, COO of Index Tools, announced on his blog that Yahoo! would be setting the service free. The decision to offer a free analytics suite follows similar moves by Google and Microsoft. Google released Analytics (which we use here on ReadWriteWeb) in November 2005, drawing on software it acquired from Urchin and Adaptive Path, and Microsoft's adCenter Analytics is based on Deep Matrix, which it acquired in 2006.

IndexTools, which currently cost between $49.95 and $249.00, is now free for any current customer willing to sign a new Yahoo! service agreement. So far 3,000 customers have done so, according to Mortensen. Right now, the free version is only for current IndexTools clients, but we can probably expect Yahoo! to release a free version to the general public at the time of the next IndexTools update.

This is an important development for the analytics industry, but also for Yahoo! If Yahoo! can successfully attract web publishers to their free service -- and it is hard to see why they wouldn't be able to -- it means the ability to gather loads of aggregate data for their behavioral ad targeting initiatives.

It will be interesting to see what effect this analytics arms race has on Google and Microsoft's offerings, and what might happen if the Microsoft-Yahoo! deal goes through.