Hi Everyone,

First, I would like to make it perfectly clear that my intent is not to offend anyone. I've been following this board for quite some time, and have seen some of the unwarranted flame wars that have began from one simple post. :)

That being said, I'm very interested how people envision the future for economy hosts. Obviously, there will always be a market for users looking for an economical solution.

We are an IT consulting firm, whose intentions are to begin offering web hosting solutions to our current and future customers. We hired a professional firm to study the market from nearly every angle possible, and report their findings. I must say I was astonished when reading the report. The unfortunate prediction is that the bulk of economy hosts will soon travel to the dot-com gods in the sky. The main reason being that many of them are skating, buying their time in this very competitive market. That much wasn't a great surprise as I've noticed myself that what some hosts offer far exceeds their capacity and means. For example, it is impossible, regardless of volume to realisticly offer 350MB of disk space and 20GB of transfer for $9.95/month. Simple math would dictate that very few economy hosts could support that capacity, if called upon to do so. Now of course I realize that your average user will not even use 1/4 of what's allegedly allocated to them, but anyone who has taken Business 101 knows that to grow a long-term successful business, one of the top rules is "Don't write checks your body can't cash." In my opinion (and only my opinion) that crosses the line between marketing hype and unethical business practice. The analyst's findings based on growth trends (and whatever else they use. ;) suggest that within 2.5yrs as users continue to demand more, content becomes more dynamic, and traffic increases as a whole, the economy hosts will be forced under, not being able to deliver their promised capacity.

Based on the study, we've decided to align our market more closely with a competitor such as hosting.com in other words - business vs. economy hosting.

My question is, what do you think the future holds?

I appreciate any constructive opinion, and again, my intent is not to offend. I realize there are many excellent economy hosts out there.

I might just make a brief comment. The increase in traffic and dynamic content is unlikely to be what pulls an economy host down. Technology should keep up with demand for such things, or even lead it (depending on your philosophy of where technology fits into society, but lets avoid a war on that!). Prices for hosts would be fairly much constant as a result. Basically, the whole thing is relative.

I do agree that hosts overstretching the mark in their promised capacity are likely to fall, due at least in part to increased consumer awareness. In such a game of odds, they have to lose at some stage. I would not say that hosts in the economy hosting market are intrinsically doomed to failure, however.

In couple of years you will see hosts giving out 20gig bandwidth and 300megs space for pennies.

Originally posted by Palm
In couple of years you will see hosts giving out 20gig bandwidth and 300megs space for pennies.

Your kidding right? This comment is nto based on any fact or current trend. If anything, bandwidth prices are at their lowest now and will go back up once the economy gets better. So the hard costs for hosts will be going up in the future and not down.

i don't think so, with companies like cogent, bandwidth can be alot cheaper then it is right now, cogent just needs some time to be able to provide quality bandwidth

Your kidding right? This comment is nto based on any fact or current trend. If anything, bandwidth prices are at their lowest now and will go back up once the economy gets better. So the hard costs for hosts will be going up in the future and not down.

A few years ago bandwidth was pricey because of the pipes in place were too small. There was a lot of over subscription, etc... Now there are so many companies acting as tier 1 providers, there is much more peering, and the pipes are huge. OC 192's are barely used. There is plenty of bandwidth out there. Also, once one Ethernet guy makes it, then it will be even cheaper as the rest will have to follow suit. It makes so much more sense to sell bandwidth at 10, 100, 1000, etc.. Ethernet drops then pipes.

I agree, bandwidth will drop and space will always increase. Someday bandwidth maybe a wash like Internet access went to unlimited hours. Purely speculation of course. :stickout

Originally posted by JeremyL
In couple of years you will see hosts giving out 20gig bandwidth and 300megs space for pennies.


I don't know that I consider that a reality. :) I could be off base, but I think of bandwith as gasoline. As more and more bandwith intensive solutions are deployed, such as streaming content, gaming servers, etc.. the more bandwith that is required. Just as the more auto manufacturers produce gas-guzzling SUVs, the more oil supply is needed. It's simple supply and demand economics. I don't know what anyone else things, but I believe the Internet is in for a serious change in direction within the next few years. According to recent studies, in late '99, 75% of all net traffic was directed at 100 sites. 1st quarter of 2000, 75% of all traffic was targeted at 5 (I think) sites. Yahoo, MSN, AOL, E-bay, and Napster. As long as the MSN, AOL, and e-bay's of the net have their greedy little hands in the pot, you can expect more commercialization. I don't think anyone would argue that they unfortunately set the trend on the internet, and if they can't on their own, they buy whoever can. :) Banner ads will become larger and more intrusive, the whole ridiculous subscription concept will come into place, etc... It will be miserable. lol

The bar is gunna get lowered like Palm said (i think it was him) It would go for pennies. And larger firms will always win. (***** :bawling: ) I cant wait to see what happens!

Originally posted by creid
The bar is gunna get lowered like Palm said (i think it was him) It would go for pennies. And larger firms will always win. (***** :bawling: ) I cant wait to see what happens!

I really don't see the $$$ per month getting much lower if the larger guys are the gauge. More than one of the larger players at the WHExpo said they can't make money charging anything less and some have even raised their prices.

You'll notice most of the really large players start at around $20mth (some maybe $15) and go up from there. You will never see a dellhost sell webhosting at $7mth (at least for a real plan) because they have enough management experience to know that they would never make any money that way.

If you take ***** as an example, they have a really, and I do mean really strict TOS that will prevent any site from ever using any real bandwidth.

I also don't see the hosting business going the way of ISP's with unlimited everywhere. This is just due to the fact tht the isp's have a way to gauge traffic by dialup or dsl speed. With websites it's alot different because the traffic can't be capped that way since if it is there would still be a bandwidth limit.

I completely agree, JeremyL, and larger players will be the guage. I don't see them going lower either, why? Because they don't need to. Why would they want to give up revenue to help the little guys? That makes no sense.

You hit the nail on the head with your statement about a dellhost. It should also be noted that 1.) Hosting isn't Dell's primary business function, so they don't have as much to lose to begin with. 2.) They have access to more resources (in terms of connectivity, etc.) than the middle and small guys could ever possibly dream of. This gives them an automatic advantage.

You won't see them ever offering hosting for $7/month like you said, not only because of the reason you stated, but also because it's not a market that I would think they'd want. I surely won't be targeting the users that want the entire world for $9.95. Many of them are impossible to deal with and please, and when they don't get the world, they start an online protest campaign. No thanks. :) I would much rather invest in targeting customers who know that less isn't always better.

Anyways, well said Jeremy

Playing the numbers game has worked for established hosts out there and will continue to work well, with the ability to offset any losses due to the customer base of those hosts. It is always going to be hard of course for small hosts starting out to sustain such low prices via this method which commonsense alone should suggest. The hosts that guage their bandwidth against base costs per unit are doing well despite this method restricting them from using big numbers to promote themselves and relying on better support and services offered overall.

A point to consider also why prices have driven downwards other than undercutting is the reality of the market being global, and not just a U.S. based venture. Many currencies are not equal to the U.S. dollar with some being very low such as here in Australia where we are at 0.53 cents to the U.S. dollar. This means that people seeking hosting in the U.S. due to the associated costs being more expensive within their own country for equivalent services will seek the best deal possible considering the rates of exchange.

Hosts that draw the balance between knowing their marketplace by offering packages aimed at the worldwide market while ensuring the bandwidth offered doesnt cut into the bottom line will ensure their survival in an ever increasing supply of services.

Good point, Nishtec... But the key is hosts knowing where to draw that balance. Many are just skating by with their fingers crossed.

Nevertheless, the "numbers game" is still a shady practice, and shady practices catch up with every business sooner or later. If it worked that well, and there was a forseeable future in it, then the big guys would do it too, rather than offer 50MB for $19.95/mo.. and unlike many others, they could afford to take the hit if it did backfire. It doesn't matter to me one way or another, I have no vested interest in economy hosting. I'm just wondering why I'm one of few people who see something wrong with it, and doomed to backfire. :)

Take a look at Excite@home - Currently trading under $1/share :)

Storage space on a server will never ever break the bank of a hosting company. Hard disk space is a inexpensive and one time up front cost. The exception might be someone giving out 'unlimited' or several gigs of storage for $15/mo. however I cant think of any of those right of hands.

-Brendan

I think a lot of people seem to forget web hosting is a scalable market. There are people who want buckets of space and transfer for next to nothing, as well as people who see their requirements as being less, but wish to pay a premium for a quality service (whether percieved or reality). While one customer will look towards one end of the market the latter will be looking elsewhere. There will always been these groups and different hosts will focus on different areas.

What a business needs to do is find out what everything is going to cost, work out how much you need to become sustainable, building in failsafe levels for emergencies, then charge accordingly, with a level of profit that suits your business requirements. Staying in business isn't rocket science. It just takes a good hard look at yourself.

Greg Moore

I live in The Netherlands, and we have/had some real cheap hosts to.

One, called Freehosting, offered free webhosting, and free domainnames. Ofcourse, you only getted 5 MB and the domainname wasn't yours (like Namezero domains). But in a few months, they were the biggest hoster in Holland.

But they were smart, if you wanted more e-mail adresses, you had to pay a lot more. But, they weren't smart enough.

They went broke, almost then. Another company buyed them, and now they are called LaDot Hosting. And people have to pay for hosting now. Ofcourse, many people want get lost of that Freehosting garbage (slow, often offline, no support).

You can imagine if most people want to go away at the largest dutch hoster, it's good for the other hosters.

But we're dutch, and we always want to have it cheap. So people are going to other cheap hosters, also with no support etc. Other hosting companies (like mine), also get some ex-freehosting customers, but not as much as the other cheap guys.

I often hear, when I'm making a offer for somebody: "So much? That other company is much more cheaper!". But I can't handle very cheap prices, beacuse we give support, have fast servers and we want to make profit.

So my point is that cheap hosters are destroying the market, and go broke, but antoher cheap company will come....

The problem right now is that Web Hosting today is not serving the Small Business customer very well. Web Hosters do not follow a traditional off line business model. With that said many smaller hosters will fail.

I see prices going up in the next 2 years to almost double what it is today, but there will be 5x the value in the accounts.

Originally posted by bbrader
Storage space on a server will never ever break the bank of a hosting company. Hard disk space is a inexpensive and one time up front cost. The exception might be someone giving out 'unlimited' or several gigs of storage for $15/mo. however I cant think of any of those right of hands.


That's true in many cases, but servers can only accomodate so much storage space, and besides, you wouldn't want a terabyte worth of data on one server anyways, would you? Not in this business anyway :) When someone has to start adding additional quality servers while not maintaining a reasonable user/server ratio, that's when it could easily 'break the bank.' :) I agree with you though about unlimited and several GB of storage--those people are hopeless. ;)

Originally posted by RobbertC
So my point is that cheap hosters are destroying the market, and go broke, but antoher cheap company will come....

You're right, it's a continuous cycle. Eventually, if predictions are correct, users will become more aware, and realize jumping host to host looking for the best deal, isn't all it's cracked up to be. It's very true that "if it seems too good to be true, it probably is." There's always a catch. Take a certain cobalt RaQ dedicated provider (;)) as an example: $99/mo. for dedicated service, and 300GB of bandwith--But their support, from what I hear, is horrible. I inquired into their service, and was concerned about the fact they had no uptime guarantee, and they stated "hardware failures are normally resolved within 24hrs." They openly admit they don't and won't have an uptime guarantee, and they stand by the 24hr policy, so if a NIC fails, which is a 10 minute job, they can take 24 or more hours to replace it. Uhm, I don't think so. Sure, there will be many many users who have that AIDS mentality ("It won't happen to me")and they don't care about a loose policy, and poor support, but wouldn't you think that most people would be willing to pay a higher price for quality, guaranteed support? Apparently not. :rolleyes:

Remarkable wrote:

>The problem right now is that Web Hosting today is not serving
>the Small Business customer very well. Web Hosters do not
>follow a traditional off line business model. With that said many
>smaller hosters will fail.

Would you care to elaborate on how you think web hosting is not serving the small business customer very well? I'll give you my two cents... let me know if I'm close to what you were thinking.

I get the impression that web hosters have a hard time attracting traditional offline small businesses, because traditional small businesses often do not understand the concept of web hosting. Web hosting is just not something the general public "gets". When I tell people I host web sites for small businesses, I tend to get a blank stare, or "so what does that mean?". Someone who designs websites, though, gets instant recognition. Anytime your target market doesn't comprehend what you do, you have trouble.

From my limited perspective, I think web hosters correct for this by marketing themselves to web designers. The web designers refer their clients to the web hoster, and probably get a commission from the web hoster. This, however, leaves the web hoster's business relying on the web designer's business.

The web hosting business is often done by putting up a web site and getting that site listed in as many online directories as possible, and then waiting for the business to come. You don't have any of the "high-touch" sales calls, office visits, etc. that a typical business might utilize in selling their product or service. The argument could probably be made that the revenue per customer is not enough to justify that, but I guess that depends on what you are charging.

I'm not sure what the future is, I haven't figured that much out yet. I just wanted to share my observations and see what others think of them...

Doug

Gonzour,

You are correct.