I've been in the web hosting business since early 97 and compared to back then, web hosting prices have taken a serious dive.. pretty soon, profitable web hosting will be extinct. I put the blame on all these startups who sell "more than enough" plans at cheap (<$10) rates... what's the deal with that? Are these people so inconfident in their marketing skills that they think they'll never get customers paying $14 p/mo for their packages?

Let's face it, we slashed the profits right out of a booming industry! It's not that people were not buying web hosting selling at $20 p/mo, so why did these new startups start selling complete packages for <$10??? Did they think more customers = more profit?? I wonder because they could have easily been making 50% more profit they are making now and managing 50% less accounts.

But if I was to explain the self destruction of the industry, I would say that too many "kids" got into the business who didn't know much about business!

You just don't come into the industry with prices lower than your competition when the consumer base is growing! It's just stupid!!

Anyways, I know half of you fall into the above category and will lash out at me, but what the hell.. i like to express myself!

Originally posted by hostmaniac
It's not that people were not buying web hosting selling at $20 p/mo, so why did these new startups start selling complete packages for <$10??? Did they think more customers = more profit?? I wonder because they could have easily been making 50% more profit they are making now and managing 50% less accounts.

If I were to speculate, I'd suggest that people are dropping their prices because they aren't gaining customers as quickly as they'd like. From posts here, it does not sound particularly unusual for a host to spend weeks waiting before they get their first customer; at that point it must be very tempting to think "maybe if I reduce my prices I'll get some business".

More customers doesn't necessarily mean more profit; but no customers *always* means no profit.

hostmaniac,
I do agree with you.........

however, the problem is also that this has to be one of the most dishonest industries around, there are countless companies popping up offering what is just not possible.......at very cheap prices.........

anyway we will see what happens

I will also get killed for this but the bottom line is (in the forum anyway) too many kids getting into the business to make a quick buck and sell their clients to competitors and run. Search the forum and you'll see what I mean.

I'm not saying that kids shouldn't start their own business as discussed many times here but I am saying the drive MAY be different. I have been wondering about this myself for a while now. We are killing ourselves with these crazy low prices. I just don't see how it adds up. For long term planning, no! Short term, probably yes.

Just my 2 cents! As always I could be wrong.

Originally posted by hostmaniac

You just don't come into the industry with prices lower than your competition when the consumer base is growing! It's just stupid!!


Umm -- with deference to certain moderators on this board -- I think you are suffering from the chicken and the egg syndrome. The industry is growing precisely because hosting prices are falling. I started working for the hosting division of an Internet company in 1996. At that time our shared hosting accounts were $300 a month. Needless to say, there were not a lot of hobby sites floating around. The industry began to grow when comapanies like Earthlink and [insertnameofanycompanyacquiredbyverio] began selling accounts for sub-$30 a month, and it is continuing to grow because the barriers to entry have gotten so low. I remember in 1993 when I tried to register my first domain, no one could tell me how to do it. When I finally found answers as to how the process worked, it was so convoluted that I decided not to do it. Now, I can have a domain registered in a couple of minutes, and it only costs me $10. This, combined with a $10 a month hosting account is what the average home user is looking for, and right now, that is where the growth in hosting and domain name registration is: home users, hobby sites, and side businesses. If you raise the barriers to entry again, the market will drop off.

I'm as surprised as you are by the fall in webhosting, but hey thats business. It happens all over, not just in webhosting. Don't blame this just on "kids" getting into the business. Its also the big time price drop in colo and dedicated hosting so anything with an extra 150 a month can start a business. The companies that will survive are the ones with a good business model and have a plan in the future. If you have that there is no need to complain and worry. Its just business, if you don't like it get out of the webhosting business.

Easy zupanm!! :) Just a discussion. I'm not blaming kids I just took this forum as an example. You're 100% correct on the future plans. That's my point exactly. Personally, I think any host selling hosting for $2 a month and giving the world won't make it in the long term but that's my view. You also have to have a value added service when doing hosting not just providing hosting. customers that opt to these free or low end hosting will also be willing to bounce from host to host so that's what you also have to think of.

Is it worth it to have a customer for three months and then loose them because they found a cheaper price somewhere else (not service but price), my answer is NO. If someone leaves me because of service then I have a problem but if they leave b/c of price, then hey good luck. I've been in the hosting business for a while also and I've seen several trends.

The price pressure model is not only in web hosting, but it's in every aspect of business on the Internet.

Domain registrars selling domains at cost, or with a 10% margin will not stay in business. They end up selling domains as a loss leader, or they charge hidden fees, or they make their money on another service and use domain sales to drive traffic to their sites. All of this is fine. There will be more customers transfering away from these services in the future. If you have a strong business model, you will survive.

Digital certs are another interesting market. There are companies selling digital certs for below cost, and then surprising you when it's time to renew. Digital certs are good for one year. Your $79 cert may cost you $125 next year. Should you have paid $95 a year for your cert, rather than $79 and then punt? It's all about the business model and relationship with a supplier.

Web Design services fall into the same boat. Can you compete with the business who sells web sites at $10 a page? We don't even talk to businesses who want a website and don't have a $50k budget. It's our web development business model. We don't sell $300 websites on the Internet - at least not as a service. This is what you would pay for a "product" that is already developed, not a service which would run $150-$200 an hour for analysis and consulting. Are there customers for all three models? Absolutely. Is any one better than the others? Well they all have their good and bad points.

All in all, some people will be here for a year. Some until they graduate from college and get a real job, when they realize that they can't make a living from $12k a year. Some will be here for the long run, and will weave and bob and modify their business as needed to survive.

I've been here since 1995, and have no plans to go anywhere anytime soon. There is good money to be made on the Internet, with technical challenges, marketing challenges, and intellectual challenges. You aren't going to do that with $2 a month hosting, $6 domain names, and $10 web pages, but there are plenty of opportunities if you know how to find them.

-t

The thing about the Internet is anyone can run a company and make it seem like a big time business. Its not that hard. I've known 15 year olds running a webhosting company before and made good money but they had no clue about business so they didn't invest any of it back into their company and ended up in debt. Something I have always said about anything you buy, from cars to web hosting right up to web design. The slogan is "you get what you pay for." Sure i can goto the dollar store and buy batteries, but they are only gonna last for 5 minutes. You can get someone to design a site for $150 but is it gonna be quality? Maybe.. but i'd rather spend money and get what i paid for.

IMHO,

I see it this way. There are mega hosting servers out there and disk space is cheap. If all one wants is 100 megs of disk space that come with support that rates at "it's easier to be on your own support", you can find cheap hosting anywhere. Let someone else take those customers who primary concern is "cheap" than "quality & service" (really a good busness match). How tough is it to rent a little tiny slice of disk space (other than setup). It's worth a lot less today than 1997.

I think successful hosting needs to turn more to a full service "service". People will pay $15-$40 bucks a month (personal & small buis. sites) if their purchase included design, upgrades, functionality of their web site. But that entails the host to do more than setup and collect rent (at least from a customers point of view).

It's the evolution of the hosting biz.

Just my 2 cents worth.

These were the same concerns about Internet Access. (Although the cost barrier is a little higher then hosting). Look how many people still pay over $20.00/mo for that.

Yep, mainly since you usually get good customer support and a reliable connection with paying 10 bucks more a month then the bargin dialup services.

Its not just kids offering low prices. The fact is I can offer incredibly low prices and be quite profitable as long as my suppliers (carriers and colo centers) keep their prices where they are now. They are the ones not charging enough to be profitable. And when they wake up, my current pricing structure will no longer work. Should I charge more now, however, knowing they are undercharging? Can't do. Wouldn't then be competitive unless everyone did. As long as some in the industry are willing to sell at prices too low, everyone is affected.

Personally, I think we are at least 3 years away from sanity in this industry when the loss leaders are gone and the survivors are using good business sense. That is if we ever find sanity. So many providers looking to be the biggest....instead of the most profitable.

So, I ride along buying below my providers true cost of business and selling for a ridiculously low, but profitable, price....knowing that this has to change....I think .... maybe ... probably ... perhaps .... sometime.

Originally posted by Incognito
[clip]Personally, I think we are at least 3 years away from sanity in this industry when the loss leaders are gone and the survivors are using good business sense. That is if we ever find sanity. So many providers looking to be the biggest....instead of the most profitable.[clip]
I suspect there will always be someone lowballing it and getting business only on price. They will go away one by one, but they will be replaced with the next guy who can run a webhosting company with $10k a year in revenue.

The customers will continue to come. They will learn what $2 a month or $6 a domain gets you, and they will trade up the next time around.

If I take my domain transfer business as an example - I have an equal number of people transfering in from $35 registrars as I have from <$10 registrars. It's not all about price, but the full package.

-t

Originally posted by thewitt

I suspect there will always be someone lowballing it and getting business only on price. They will go away one by one, but they will be replaced with the next guy who can run a webhosting company with $10k a year in revenue.

The customers will continue to come. They will learn what $2 a month or $6 a domain gets you, and they will trade up the next time around.

-t

I really think this is the most accurate assessment of what's going on. The 'decline of the industry' is capitalism and consumer choice at work. Not all web hosting businesses are going to survive, and not all ought to. Who gets to decide which will be successful and which will fail? The market.
If it turns out that consumers want $2/mo accounts hosted with companies run by 12-year old on cable modems, then we should invest in 12-year-olds rather than complain about it.

It's all easy. A kid starts a company, makes money sells out, and makes even more money. The process is then continued.

You can blame them all you want, but the problem is here so why not do something about it?

When I was in the shipping industry there was a very observable cycle that happend on a 3 year base.

three years prices would rise a steady 25% then on the 3rd. year
bang, right back to where it started. this could be reflected in the import or the export market. but all you know that when it happens the price drop accross the board.

why, well some simple reason really.
1) developement of technology
a) bigger ships
b) faster turn around times

2) ecomonic spending
a) europe would be hot, but the states were cold export rates were high, import rates low
b) asia would be hot, states cold, same as above
c) states hot, import prices high, outbound low.

the web hosting industry based on my views is governed by Moores Law ( 18 months then there is a double in speed ) by the way it behaves. You get a ton of players, bang then it's back down to the basics players plus some survivors, seems that back in 1997 you had this problem, then again in 2000 now it should be happening again.

those that are lucky enough to ride this ride and make it past the next bust should do real well.

Sqposter / Michael

Originally posted by UnifiedCons

I really think this is the most accurate assessment of what's going on. The 'decline of the industry' is capitalism and consumer choice at work. Not all web hosting businesses are going to survive, and not all ought to. Who gets to decide which will be successful and which will fail? The market.
If it turns out that consumers want $2/mo accounts hosted with companies run by 12-year old on cable modems, then we should invest in 12-year-olds rather than complain about it.

Consumer choice dictates where the industry goes, I agree, but who defines what are the choices? We do, and I believe it doesn't help us one bit that consumers have the choice of paying only $6 per month which I believe how much we should charge just for our time doing support each month, never mind the whole server operation. Aren't we IT professionals? Plus they want 99.9% server uptime guarantee, toll-free support 24x7, and whatever else a company can offer. And they think paying more than $10 per month for all that is expensive. Let's value our time and service more than!

A 12 year old will be happy making $500 a month because that's more than his allowance. I consider myself a professional and my time is certainly worth more than that.

Consumer also wants a BMW for $2000 if you give it to him. But is that good for the auto industry? Is it right? How much is value and service worth? You can go ahead and invest on 12 year olds selling $2 p/mo accounts, I rather complain about it. It's better than contributing to the destruction of the web hosting industry.

Originally posted by hostmaniac


Consumer choice dictates where the industry goes, I agree, but who defines what are the choices? We do, and I believe it doesn't help us one bit that consumers have the choice of paying only $6 per month which I believe how much we should charge just for our time doing support each month, never mind the whole server operation.
...
You can go ahead and invest on 12 year olds selling $2 p/mo accounts, I rather complain about it. It's better than contributing to the destruction of the web hosting industry.

Well, I've generally found that complaining by itself doesn't change much. Just saying 'we shouldn't offer these accounts' isn't going to stop people from offering them. Do you really want to impose some sort of formal regulation on the web hosting industry?
I can understand your feelings that it's bad for the industry that some fraction of the customers are being absorbed by these tiny soon-to-be-bankrupt operations. As someone who provides services that are targeted towards HSPs selling accounts that go for more than $2/mo, I would love to see more high-end providers. But really, what can any of us do about it? :confused: I'm more than willing to listen to any suggestions!

UnifiedCons,
I'm not sure what can be done at this point, but I'll tell you that I think there is *something* that can be done. I'll let you know when I figure it out :stickout If something can be figured out, there is no better place to initiate the idea than WHT.

for starters how about a certificate hosts can display on their site that reads "This company is operated by an adult" :D The certificate authority could have the host owners fax an ID to prove they are of age!

But seriously, there IS something we can do.. let's put our heads together and start a movement to salvage our own future!

Originally posted by hostmaniac
But seriously, there IS something we can do.. let's put our heads together and start a movement to salvage our own future!

Of course there is.. Just draw a line in the sand and stick to it. If your business plan allows you to sell hosting for X amount of dollars a month and still allow you a decent profit then that's where you position yourself.

We built our customer base on higher prices and smaller plans to begin with. Slower growth sure, but it allowed us the breathing room a start-up needs to stay afloat. We dropped prices and increased plans when it suited us rather than due to any pressure to do so from outside.

There's a customer for every price range from free to $100 a month, and believe me, not all of them even want a cheap plan. There are a lot of people who are willing to pay a premium rate knowing that company is pricing themselves to last into the future.

Greg Moore

Originally posted by hostmaniac
A 12 year old will be happy making $500 a month because that's more than his allowance. I consider myself a professional and my time is certainly worth more than that.

If your time is worth more than his time, then you must have more skills than him. You must be able to either do more work in the same time, or do better work. Personally I don't think either of those should be very hard.

I don't buy the "it's not fair" argument. If you can't compete with a 12 year old then you should find a different job.

Originally posted by cperciva


If your time is worth more than his time, then you must have more skills than him. You must be able to either do more work in the same time, or do better work. Personally I don't think either of those should be very hard.

I don't buy the "it's not fair" argument. If you can't compete with a 12 year old then you should find a different job.

Of course my time is worth more than that of a 12 year old! You don't go graduate from University with a CS degree and take business admin courses on the side just so you can be insulted and leveled with a 12 year old (no disrespect to 12 year olds). Technical skills is not all that matters in running a web hosting business if that's what you think??? Experience, education, people skills, these are all things that increase the worth of someone (ask any company hiring). That's why you don't see too many 12 year olds employed in companies now do you?

If you would like to hand the industry over to poeple who aren't of drinking age yet, go right ahead but that's why we keep hearing all these consumer horror stories. And that's also why hosting isn't as profitable anymore.

Aside from that, shouldn't 12 year olds be 12 years olds playing with their friends instead of trying to run companies? They can play businessman once they get their driving license.

Originally posted by hostmaniac
Of course my time is worth more than that of a 12 year old! You don't go graduate from University with a CS degree and take business admin courses on the side just so you can be insulted and leveled with a 12 year old (no disrespect to 12 year olds).

Exactly. You have skills which the 12 year old doesn't. Use them. Provide a service which the 12 year old can't. Don't just sit there complaining about how 12 year olds are ruining the industry.

Originally posted by cperciva


Exactly. You have skills which the 12 year old doesn't. Use them. Provide a service which the 12 year old can't. Don't just sit there complaining about how 12 year olds are ruining the industry.

I'm not complaining about 12 year olds. I'm complaining about hosts which sell dirt cheap hosting plans and shove 600 accounts on each server because that's how they can profit. I'm saying there is no need for any host (including those ran by 12 year olds) to be doing this simply because the consumer base is huge and still growing. I started this threat because I read a few posts about host owners complaining about their business and wether all the work is worth it...

Nothing breaks my heart like watching 12 year olds doing linux support all day and making slightly more money than their parents allowance. I would much rather them be 12 years olds with lots of expensive toys and the time to play with them.. get it?

Originally posted by hostmaniac
Nothing breaks my heart like watching 12 year olds doing linux support all day and making slightly more money than their parents allowance. I would much rather them be 12 years olds with lots of expensive toys and the time to play with them.. get it?

You would much rather... but would they? Some kids don't want to be "normal kids". I know because I was one of them -- while everyone else my age was playing video games I was learning integral calculus.

Personally, I'm guessing that these oft-mentioned 12 year olds are doing this because they are enjoying it, not because they really need or want the money.

cperciva,
I agree with you.. but there's a difference when you're taking peoples money and pretending you're a big ass company. People have the right to know if a kid is hosting their online business.

I can understand what you're saying because I'm 24 now and used to run a successful BBS 10 years ago. I've always been great with computers but you ask me for the truth and I'll tell you that I didn't know jack about business and how to talk to customers when I was 14.

Originally posted by hostmaniac
I've always been great with computers but you ask me for the truth and I'll tell you that I didn't know jack about business and how to talk to customers when I was 14.

Sure. But there's an awful lot of adults running web hosting companies -- including those with a great deal of business expertise -- who lack the basic technical knowledge which I'd consider a prerequisite.

If you're going to run a "this host is run by an adult" certification scheme, you should also run a parallel "this host is run by someone who would not fail an MSCE exam" certification. (MSCE chosen because it's bloody hard to fail, not because it actually says much about your abilities.)

Have you ever seen a cert "run by an adult" on a computer shop or a bank? No good idea.
But I understand the point of hostmaniac: people start a hosting business, without money or a business plan, then they get no signups, lower the prices, lower them again, get a lot of signups, problems with support arise, and so on. But I don't think that's related to the age....

I think that web hosting prices have moved with the times ( but some web hosts have not ) here is my simple reasoning.

1) We have seen in influx of cheaper telco's i.e almost every houshold in developeded countries and indeed in some developing countires now have broadband 2MB+ line, web hosts used o pay a fortune just for this knind of capacity 3years ago.

2) Hosting automation, now you dont need 2 techs just to setup ann account or indeed to resolve problems when they arrive, with development in products like plesk, cpanel etc...this greatly reduces direct overheads.

3) Hardware developments. Back in the days of 486's ( that used to cost an arm and a leg ) you could only host so many sites per server and additional servers meant big bucks, now a host can put together a PIIII server for under $700 and host 10X as many clients on each

These are just some of the few things i can list here, the eventuality is simple...prices are going to keep falling to better reflect the developments going on around us.....remeber that just 10years a whole lot of us knew nothing about the internet....had no email addresses etc, but now just a few years....everyone has an email address.....so how can you justify this kind of pricing

-----------------------------
package (A) $10/month
----------------------------
30MB
( we now have 100GB+ sized drives so why the little 30MB )

5pop3 accounts
( 5 email accounts only......really!!)

Frontpage extensions
( a standard feature of almost and control panel software out there, so why add it onm you list like its an added feature )

now this is were it gets silly, the same host will have another plan

-------------------------
Package (B) $19.99
------------------------

50 Mb ( WOW i get 20MB !!!! )

10 pop3 accounts ( WOW 5 more emails )

php, cgi-bin ( again standard features , why show them as if you had to do so much more just to give them to the customer )


Its just like those dedicated server companies that offer you a dedicated server for $200/month...with the following upgrade examples


128MB ram --- ( $30/month ) you can buy 128mb for 30bucks

IP address --- ( $5/month ) these are FREE

20GB hard drive upgrade ( $40/month ) you can buy 20GB for 80bucks


So the reality of it is that some web hosts have been enjoying inflated profits for too long did not have insight to realize that the market was changing.....so i think they have noone to blame but themselves..............

The fact that john bloggs ( 18years ) can now start a web hosting business
----- while sitting at his home

------and remotely manage a $99/month dedicated server from rackshack

-------- have his mateshelp him with support

------ sit aroung and chat to customers online while he surfs the net ( live helper )

------- offer credit card payment using cybercash ( it took you 6months just to convince your bank in 1997 to give you a merchant account )


all this should let you know that things HAVE changed and you need to adapt.

p.s wait two more years, you wont even be able to give webhosting away for free........

Tuvok, point 1 to 3 are valid, but you have missed one of the biggest cost factors: technicians.

On the subject of techs and staffing, this is indeed one of the big reasons why larger companies are going bust and here is the simple reason why.


OUTSOURCING

most webhost spent a lot of money of infrustucture ( offices ) and a lot of mony on employing technical support staff ( usually local staff ) now there is a new concept outsourcing.....i have a tech who is the GURU of all GURU..( just to stress how good this guy is, he can break aprt the linux kernel and put it back together lol ) now while we have our data center, theonly staff we employ there is the guy that just looks things over, ( mid-range tech ) and almost 90% of our problems are resolved remotely by a team of super techs who are in countries ( not to mention any ) where $500 pay your rent, your kids fees, your car load, pay for you house workers ....so by outsourcing our staffing, we have managed to cut down costs to a level that can justify selling web hosting packages for under $5/month.......

but the big guys are still paying $10.hour techs in $10 000/month offices for the same level of work that a tech sittinng at his house getting paid is doing at a fraction of the cost.

Hello
We discovered that most of our customer churn was caused by people leaving to go to cheaper hosts.
I think this was caused by the rackshack situation, although in some cases we were even losing customers to our own resellers (mad).

I considered a drop in prices but rather than diluting the brand Idecided to revamp our existing (but dormant) cheap brand.
This has allowed us to pick up some customers from the bottom end of the market where there is definitely a demand - without it impacting adversley on the main brand.

At the same time we increaed our UK brand prices and did not notice any down turn in sales and the customers we are recruiting are not leaving at the same rate as when prices were lower. We noticed the same thing with domain names when we increased the price to $15 from $13, there was no difference in sales.

Also at the upper end of the market there is less tech support required. We have a customer with over 30 of our most expensive plans and we never hear from him except when he is ordering another one. With $7.95 plans you need to provide help with e-mail, cgi etc

The companies that survive a recession are generally those who increase marketing spend when times are tough.
Its also a case of looking ahead and trying to second guess the market.
I thing that Windows web hosting is probably the future of web hosting. Demand for it is increasing and as time goes on its likely to become the norm in the US as it is in the UK. The costs are considerably higher than Linux but we are considering putting in a system based on the Sphera control panel system.

Overall the market is still in good health. I still have no debts, the company has no debts and I am about to buy a new house.
I really don't see any massive down turn on the horizon.

Gordon

I have to agree with greg, that there is a customer for every price range.

Our inflow of customers has not at all been affected by these $3.00/month web hosting plans that are all over the place. Our customers don't leave for these plans, and we have not noticed a decline in new customers.

We have never even wanted the customers who can only afford $3.00/month for web hosting. I'm curious about the kind of web hosting customer that thinks $15.00/month is expensive. No matter what anyone says, you do get what you pay for. You're not just saving money, you're getting less service.

If the Internet presence and email for your organization is only worth $3.00, what does this say about your organization? That an Internet presence is something that you could do without, but now that it's so cheap, you no longer have to?

Our customers find $15.00 a month for hosting as an incredibly good value, otherwise they wouldn't be here. And I doubt that they would want to pay a lower price if we could save them the money by outsourcing our support to India.

The thing that I think everyone is noticing is the boom in the $3.00/month hosting industry. Everyone who couldn't afford web hosting can now afford it. In a very limited way, but it's more than they had before.

There is no reason to be jealous of that market. The higher priced markets are still there, and probably always will be.

I see the $3 hosting companies as good training grounds for new potential customers for me. :D

Here's why. It won't be long till they find out that support sucks, that hidden costs are everywhere, that unlimited really means limited, that shared hosting means 1000 customers on one machine, that billing is messed up, that 99% uptime only applies from 9-5.

So in the end these suckers learn the truth... and by that time their sites are already pulling enough traffic that they don't want to end it all. So then they jump ship and go with a "real" host.

So people, don't get so depressed. You gotta thank the $3 hosts for bringing in the newbies and priming them up.

Or maybe I'm just crazy. :blush: :bawling:

Hello
It is possible to run a viable cheap hosting service with reasonable support.
Here is how we do it:


Normal Brand
-----------------
Support within 1 hour
Help with CGI etc when we are able to help
Monthly billing option (expensive to monitor)
Modifications to accounts possible (perl modules and add ons)


Cheap Brand
----------------
Support within 24 hours
No help with CGI
Annual billing only
No modifications outwith the plan spec.


It does not make the cheaper brand bad in any sense, but it allows us to offer a service to both markets whil emaking aprofit from each.
The annual billing puts off a lot of people who are looking for $3 - $4 monthly but I estimate if we had to offer monmthly billing the cost would be around $8 per month due to having to chanse up all the non payers (which is a significant part of our day to day work with the other brands - which is why we are considering recruiting someone just to deal with that aspect :) )

Gordon

GordonH: I thing that Windows web hosting is probably the future of web hosting. Demand for it is increasing and as time goes on its likely to become the norm in the US as it is in the UK.

Why you say that, Gordon? MS have got a lot of stick, especially in the UK over license costs. Secondly, isn't the UK a bit unusual because of the original dominance of Fasthosts?

I think you hit on a problem that has one solution nobody may like. This is not a regulated industry - you can say 99.999999999 and then not deliver, tell people to screw themselves and sell out. You can say whatever you'd like - nobody is going to come around and say - "You're lying and here are the penalties" State AG's don't care, lawyers charge too much to make it worthwhile - and the profit is way below any federal radar (They've got Enron's to worry about!). I'd argue there isn't a dang thing you or me or anyone can do about it in the near term. Let the state's or fed regulate this - you get what you want and a whole lot more (crap that is!)

A business/economic perspective...

The hosting industry for all intents and purposes is quickly becoming a commodity market (as is many of the high-tech sectors). For the most part, you can go to any host and get virtually the same service/product/etc.

So this results in a few things -- since the basic feature-set of hosting has been fairly well defined, additional ease-of-use products (ie the various control panels and 'web-hosting-company on a disc') will continue to emerge which will ultimately make hosting easier and more simplified for anyone to do. The requirement for extensive technical knowledge will lessen.

Naturally, the standardization and increased supply will continue to lower cost. Unfortunately, this will cause hosting companies to compete at a larger scale to maintain profitability.

The mergers and acquisitions that Interland has completed over the past year or so I feel is a good example of this. As support, setup, etc costs continue to decline, less employees/fixed costs are necessary and as a result, prices will inevitably lower.

How does this affect the smaller players? I still think there will be a market for them. Companies and individuals enjoy working with smaller companies when they have an opportunity to as they feel like the company cares for them at a more personal level. Generally these customers are willing to pay more than the going rate if they are able to get quality service and support.

The kid-run hosting companies will continue to be around. Like several posts in this thread, as a kid I was running a bulletin board system, had my own Fido-net based message network and enjoyed learning about running an online service, learning about marketing it, making partnerships, running up against enemies/competition/etc in the process. In many regards, running a hosting company is less expensive and more profitable than running a BBS would ever be and kids with a lot of spare time on their hands will give it a go.

However, as time passes, I have a strong feeling that this will be less of a problem. Consumers will be more knowledgable about hosting and will choose their hosts based on benefits that these small startups simply cannot provide (several years in the business, good reputation, mature/professional image, etc..).

Of course, I could be completely wrong and perhaps all companies, large and small, will have enough bandwidth entering their offices that it makes more sense for them to run a local web/ftp server for their public website. Who knows... thats several years off at the best estimate (not to mention probably not being financially viable) --

O the joy of internet/technology industries.

I used to be a newbie, and heres how I saw things:

1. I went with olm.net because a friend recommended them and they had a cool control panel.

2. I left because I found a place with UNLIMITED SPACE!!

3. I went back to olm.net because the guy screwed me (he wasn't 12 either)

4. I went to a new host because they had UNLIMITED BANDWIDTH!!

5. I learned alot of things, I pay alot for hosting now, and it's worth every dime.

The people filling up these $3 hosts with no support or even half way decent service will come around eventually, theres just a sudden surge of them. Be patient.

I'm 16 and starting my own business now, I tell people I'm 16, I don't hide it.. I don't have to pay rent so I don't need to charge alot... I need customers fast so I don't dive right off, so my prices are low, there are alot of people like me who arn't trying to screw the big companies out of their business... Me, I want a car, thats it.. I don't want a house, employees or anything fancy.

I mostly just host my friends and their friends though, I don't go around acting like a huge company looking for everyone who'd like to pay a little less for a little less.

I see where you guys are coming from though, and I do think it's wrong for alot of these people who are BSing everyone because "they can't catch me."

Originally posted by XDude
the big companies out of their business... Me, I want a car, thats it.. I don't want a house, employees or anything fancy.
[/B]

Yes, that's how it starts.. Once you get your car, you'll want the house and whatever else money can buy! :D

Yes, but my prices won't be as low then.. My mom owns her own espresso business, theres 3 competitors and the population of this town is just 2000, most of those don't drink coffee, theres alot of cometition and when 1 guy lowers the prices he steals my mom's business, I'm affeted by that, I know what it's like.. I'm not trying to steal the hosting industry, I don't want more than 1 server full of clients (full being reasonable, not 700 ppl on 1 machine).

Hello
The weird thing is once you have got the car you will suddenly want the house.
Then you find you have no money so you have to work harder to make it.
Then the kids come along and you need just a bit more.
So you work a bit harder to bring in more cash.

The weird thing is I have the same disposable income I had 16 years ago.
I have a much larger income but a bigger house, more kids and more expenditure!!!

Gordon

At the moment it is just too easy to start up a web design or hosting business. Hosting Startups, kids, forget it IS a business, and people, their websites, their businesses are depending on your ass being home from school monitoring their web site. I really get sick every time I see another post that says, "I want to start a web hosting company, I have free time. Tell me what to know." How many auto companies were started by 12 year olds with too much free time? None that I know of. If you want to make some extra money and don't know anything about the subject of the business you want to start, mow your neighbors lawns and get 50 bucks for 2 hours of work. You can call it your landscaping company. Your landscaping company will be cheaper than the big one of the town, but you won't scare the big one because of a smaller workforce, less time, and no business model. Its too cheap and too easy to create a web hosting business. Why is web hosting unlike the landscaping company? Instead of reaching the town, you reach the world. There is a 12 year old in every town starting up a web hosting business that applies to the whole world, so the smaller legit web hosting companies are hurting. Verio, Burlee, the big guys aren't feeling is as much.
As for prices going down, I believe it is because it is too easy to start a web hosting business. There are way too many, I mean look at the directories! There are directories of web hosting directories! Many of the people who just get on the internet, decide its time to get a web site, don't know this. They look at 5 companies that pop up, the cheapest one gets the order. The computer literate people are the ones wise enough to go for the quality hosting. It also goes the other way, my uncle 2 years ago signed up for web hosting. 10 megs of space, 100 megs of bandwidth. 150 dollars a month. He simply didn't know better. The profit that company made off of that one account equaled 75 accounts of these 2 dollar hosts! And the 2 dollar hosts are offering 20 times the features!

Alright that was a rant and its 4:50 AM. Time for bed.

Yes
Thats a fair summary which is why we launched a cheap brand to run in competition with our main one.
Its allowing us to pick up some of the trade who are looking for that sort of thing.

It will always be difficult for mediuam sized companies in any field because until you reach "critical mass" you will be struggling for marketing money and effectively invisible to most potential customers.

The long term future of web hosting is that most people will host their sites from home using simple web server software.
Hosting companies will probably make money from DNS services and managed hosting involving some aspects of site maintenance.
Also, there will be a big move to Windows web hosting as opposed to Linux for those who continue to oursource hosting.
This will clear out the small hosts with no cash to invest in software licensing.

At the moment the bits of our business which make serious profit are resellers, domain names and annual hosting plans.
Monthly hosting is becoming more and more of a burden.

I imagine that longer term we will be offering more specialist services like secure e-mail (which we already provide to a number of people in public life).
Its about finding niche markets within which a medium or small company can gain new business.

Of course thats just a crystal ball and my prophesy might end up like all those 1950's films of the house of the year 2000 with robots cleaning the house.

Gordon

Carve out your niche and stick with it. If 12-year-old's are part of your competitive landscape, you have to find creative ways to show what paying your company a few extra dollars per month is providing (better support? better hardware? faster pipes?) -- While the low end of the market (Melvin P. Snerdly buying some webspace for his personal website) may be extremely price sensative, I would have to assume that the bulk of long-term buyers (small businesses, medium businesses, home-based businesses, etc..) are willing to pay more if they understand the added value.

In the grand-scheme of things, for most companies, hosting cost are very reasonable for the benefit provided. Ie a $5 plan vs $10 plan -- over a year, that is only an extra $60 .. Sure, its DOUBLE (OMG!) but compared to other costs that are incurred (merchant accounts, office space, employees, equipment, computer systems, etc, taking a client out to dinner/lunch, etc..) its effectively nothing.

So the question is, how do you as a company show that the service is worth the extra 17 cents per day? Seems to me that just the aggervation of excessive downtime, slow connections, etc would be more than worth that virtually insignificant amount. I ask you --> how do you make the customer feel the same way?

Perhaps by understanding consumer marketing concepts and buying patterns, it is not so much to assume a small or medium size company can very well run a successful hosting company, get above average returns and be successful. Unfortunately (maybe fortunately?) I think way too many hosting companies use the same marketing strategy ("We have 10,000 different features, 4 different platforms and 72 different hosting plans for $2.50/mo!"). As a result, many of these companies are insansely "successful" for a few months -- lots of signups, etc.. but eventually realize their cost structure cannot support their customers effectively and at this time, generally piss off the customers or try to pawn the company off to someone else. Hmm.. so very interesting.

Originally posted by GordonH
The long term future of web hosting is that most people will host their sites from home using simple web server software.
Hosting companies will probably make money from DNS services and managed hosting involving some aspects of site maintenance.
Also, there will be a big move to Windows web hosting as opposed to Linux for those who continue to oursource hosting.
This will clear out the small hosts with no cash to invest in software licensing.


All I can politely say is that you certainly live in a different world :eek3:

Kevin

LOL I don't think the entire internet (AOL) is going to move to broad band fast enough to host their own sites or even want to keep their computers on all day anyways :P.