Sorry I made a mistake. Smarterstats is now working with the "NetworkService" Identity. SmarterTrack is not.
I tried changing the Identity to "LocalSystem" and this works for both SmarterStats and SmarterTrack. Are there security concerns in configuring it this way? I tried researching this but am confused.
http://msdn.microsoft.com/en-us/library/windows/desktop/ms684190(v=vs.85).aspx