Some of you asked us to follow up on the tendencies in the web hosting industry. We hear you 🙂 Although we are a bit late delivering the news, the topics are still as hot as they were in August. The buzz words on this year’s event were hosting business acquisitions, products and services up-selling, affiliate programs, and of course - cloud computing and virtualization.
So let’s start with the acquisitions. Acquisitions in the hosting industry happen in a very specific way. The buyer who is typically running a web hosting business acquires another web hosting company and merges its operations (support, server platform, billing primarily). Then they usually keep the brand name and website of the acquired company and run the two businesses together, often in competition with each other. Having the two brands competing means that the owner maximizes the probability of winning the customer – if the customer does not choose the first brand, there is a chance he'll choose the second one.
The question is what this means for the customers. Most often they don't even understand that something has changed about their host. That is normally a good thing as there is little disruption of the service. The funny part is, however, what happens when you think you are running away from a lousy host and going to a better one, but you actually end up with the same support and same server platform. The good news is that hosts do not hide their acquisitions and sales, they often make official announcements in press releases and you have a good chance of knowing about all that if you do your due diligence.
From a business point of view, it's fair to say that consolidation is good for the web hosting industry. The market is so fragmented that hosts are more focused on beating competition with marketing tricks than providing better service to the customer. Few can actually do something meaningful with their product. To be honest, I would rather see the industry with fewer players who are serious about developing their business and thus stay reliable to their customers.
The next hot topic lately is “up-selling” – i.e. selling additional products to your hosting customers such as web design, ecommerce solutions, SEO, etc. First, it's a great way for web hosts to increase their revenue without spending more money on marketing. The more things you sell to the same group of people, the more you collect with the same effort.
Second, most of the shared hosting customers are not proficient in the art of creating and managing a web site. They need more than a simple hosting platform -they need a complete solution, in which the hosting environment is just the basis of the pyramid. So, it comes naturally and in response to that demand to offer a wider range of complementary products to ease things up for the customer.
I can't miss mentioning that we are also looking for expanding our product range. As always, we will keep you updated on anything new we launch. We will also be happy if you tell us what products you might find valuable. So, if you have any ideas or suggestions, please share them in the comments to this post.
The next hot topic among hosts is affiliate marketing. Right now, that’s the most popular way for web hosts to get their customers and also where they spend the greater part of their marketing budgets. Affiliate marketing works in a very simple way – hosts find specialized hosting-related directories (called “affiliates”) and pay them huge commissions for every sale the directories send to them (commissions are normally higher than the price of the one-year shared hosting product). The reason why this is so effective is mostly the credibility factor – people visit directories to find “objective” evaluation and opinions on what are the best offers out there. When they see you in the directory list of featured hosts, or top ten hosts, they believe you are trustworthy, go check you out and ..eventually buy.
The reason I mention affiliate marketing is because some of you might like the idea and make money out of it. It is more or less applicable in every industry. I should also mention that it has ups and downs, so it's important how well developed the affiliate marketing is in your game field. Right now, it is huge in the hosting industry. But, it is about to become too costly and web hosts are already starting to look for other ways to market their products.
Cloud computing and virtualization
Just like on WebhostingDay in Germany earlier this year, cloud computing and virtualization took up a good portion of the talks at HostingCon. It seems that more and more hosts (those, mostly focused on providing dedicated solutions, I have noticed) are launching clouds. I am not good with the technicalities, but I do appreciate the business advantages – clouds allow for better and cheaper storage solutions that result in cost savings and are thus important for every hosting provider.
Last but not least, we were very much impressed with the organization of such a huge event as HostingCon’09. We met both competitors and potential partners and we appreciate the quality of information exchanged. The venue location at Gaylord National Convention center was impressive, to say the least. There were many industry top executives present and the lecture sessions were carefully picked and proved useful and informative. We are also now testing some of the solutions offered at HostingCon such as a new webmail product and hopefully, we will deliver some new quality stuff soon.
Once again, you are welcome to share your thoughts about new products or services that you would like to see from SiteGround in the comments below. We might surprise you pleasantly sooner than expected 🙂