Beware the “Me Too” Web Host
You’ve seen them out there: web hosts that appear to be genuine businesses, but underneath the surface, composed of slap together resources that are good enough to make them pass as just about any other web host. Of course it’s easy to start a web hosting company. Think of a brilliant name. Register the domain. Buy a template or design the web site yourself. Get a reseller plan or dedicated server. Come up with package plans. Set prices. Add a buy now button and you’re all set. With the ease of entry into the web hosting business, what is the difference between a web host that is in it for the long haul, and a “Me Too” web host?
“The grim reality is getting a web hosting business off the ground, using quality resources, is a lot of hard work,” explains Greg Moore of Akashik.net. While the reality is vividly clear for established web hosts who have been in the business for years, those who are starting out have a misconception about how much time, effort and money is required to launch a successful web hosting business.
As a web hosting startup that’s in it for the long haul, how do you identify a “Me Too” web host, and what can you do to avoid making their mistakes? Let’s begin by exploring the characteristics of a “Me Too” web host.
A “Me Too” web host focuses on cheap prices.
Perhaps the most annoying sight to see for any established web hosting company is a competitor entering the market with cheap prices. Not only does the sheer presence of competitors dilute market share, lowering the price of service offerings has an undesirable affect on the market for web hosting services. While their intention is founded upon the simple belief that lower prices attract more customers, their pricing strategy jabs a spear at established web hosts who charge a significantly higher but more reasonable price for their services.
What does the “Me Too” web host do to prices? The economics is fairly simple. The more “Me Too” web hosts there are, the lower the prices will be. When more web hosts enter the marketplace, the supply of web hosting effectively increases, diluting the potential customer base from the aggregate number of web hosting companies. Depending on market conditions and how well a web hosting company can capitalize on niche market opportunities, the general trend is that web hosts begin competing by lowering prices, and lower prices give customers an incentive to gravitate towards the cheapest web hosting service being offered.
“Me Too” web hosts will eventually learn that charging cheap for web hosting services does not provide them with the financial gain they were originally seeking. While some startups may offer low prices as part of an initial launch incentive, “Me Too” web hosts do not have the same capital to be able to survive with their low pricing schemes. In the long term, basing your strategy purely on providing cheap prices is a losing plan. Not only does this affect the margins of your operation, it also affects your ability to reinvest earnings in improving the resources that you need to run an effective web hosting business, including the hiring and training of employees, expanding your advertising campaigns, investing in technology and so forth. As a web host startup, do not fall into the temptation of offering cheap prices. Push for quality and service, and charge for it.
A “Me Too” web host is driven primarily by financial gain.
In our capitalist society, striving for financial gain is not necessarily a bad motive. But in a business where technology and customer service requires a holistic approach, the “Me Too” web host who is in it only for financial rewards does not fare well to their counterparts. A “Me Too” web host sees a quick road to riches, that isn’t quite there. Many wannabe web hosts visit community forums, usually posting messages asking other web hosts how much they can expect to make in the business. There is no definite answer, and as with any business, what you can expect to earn will more or less be determined by the amount of work that you put in.
Web hosts that are entering the business with a long term perspective realize that they may not even see profit for the first few years. Much of the revenue earned will barely reach the breakeven point, and will most likely be infused back into the web hosting business to manage expenses, expand advertising and promotions and remunerate employees. Web hosts that have prepared a strong financial plan and have done their homework will realize just how much financial resources it will really take to get their web hosting business off the ground. Most of that investment will be used in the startup phase, as part of the initial round of marketing to attract customers.
A “Me Too” web host is not unique.
In a business where there is so much competition, a “Me Too” web host looks just about the same as everyone else. Their name matches the apparently common theme that has prevailed in web hosting. Their web site matches the same pattern as other web hosts. Nothing is noticeably different or exciting about them.
But why change something when it works so well with other web hosts and their web sites? To answer that question, let us look at it from a customer’s perspective. To a customer, a web hosting service is a means by which they can publish their web site on the internet, for whatever purpose they require. When comparing web hosts, the primary sales reference customers will see is the web site. Supposing a customer is a smart consumer who shops around, what will become the basis of comparison if none of the web hosts offer a unique selling point?
In order to avoid falling into the “Me Too” trap, and to increase chances of survival in the long term, web hosts must derive a differentiation strategy. While many tactics and strategies are proven and may have worked in terms of designing a web site and displaying various features, web hosts have to go an extra step to stimulate the emotion of customers and ignite them into buying mode. It could be the fact that you have interactive tutorials or a live support feature on your web site. It could be a free domain registration offer, or offering easy-to-use blog hosting services. There are many unique avenues to explore that will instantly set a web host apart from the rest of the pack. Find something unique and push it.
A “Me Too” web host has poor support.
Pick up the phone, dial their toll free support number, and see what happens. You’ll either end up with a busy signal, answering machine, or no answer at all. This is not because the “Me Too” web host cares less about their customers. It’s simply because some “Me Too” web hosts fall into believing that they can run their web hosting business part time. As any established web host can vouch, this is not the case at all. Customers demand instant solutions to their problems. While competitors have the resources necessary to provide 24/7 support, a “Me Too” web host whose proprietor is busy with other things does not have the same capability.
Web hosts that intend to stay in business need a foolproof customer service and technical support structure, founded upon talented individuals who are not only capable when it comes to technical savvy, but have the ability to interact well with customers. Possessing technical knowledge but not having the skills to communicate effectively makes it frustrating for customers who are perhaps new to web hosting and unfamiliar with many of the features and terminology. A web host that deploys a talented team of employees will outlast a “Me Too” web host that seeks a shortcut, such as outsourcing support or trying to do everything on their own.
This is not to say that only “Me Too” web hosts have poor support. In fact, many customers are frustrated by larger web hosting service providers who are not meeting their level of expectation when it comes to providing customers with the support they need. What every web host startup should acknowledge is that it takes a lot of careful planning and analysis in order to equip your team with the tools they need to effectively serve your customer base. While there is no perfect model to calculate how many customers will need support at a given time, having useful tools, such as a knowledge base, live support, toll free number, and using these tools in a collaborative manner will help ease the support challenges faced by many startups.
A “Me Too” web host has a short lifespan.
With their cheap prices, lack of originality and poor resources, “Me Too” web hosts will not be in the business for long. This is both good and bad for web hosts in it for the long run. Good because customers of “Me Too” web hosts learn from their experience and choose to do business with a more established web host. Bad because a high turnover of web hosts entering and leaving the marketplace make it all the more challenging for established web hosts to do business.
One of the primary reasons why “Me Too” web hosts have a short lifespan is due to lack of preparedness. Crumbling under the pressure of unexpected growth, or falling apart due to lack of customers and revenue, “Me Too” web hosts have not planned for contingencies and, on my levels, have failed to consider the affects of running a feasible web hosting business. It is this reason why many established web hosts place an emphasis on planning and research. Planning and research does not stop when a web host reaches a certain point of growth, or has accomplished a certain benchmark when it comes to number of customers or amount of revenue. It is a continuous process and it is this process that prolongs the lifespan of a web hosting business. Being prepared to survive through market turbulence and amidst competition is done through committing company resources to planning and research.
Where do I fit in?
As a web host startup, if you have jumped into the business without doing your due diligence, and without going through an extensive phase of planning and research, going through a business plan, and seeking professional advice, the chance of you succeeding in a competitive and arduous business environment is very slim. With more competition comes a greater need for companies to implement different strategies that will propel them ahead of competitors. These strategies have an adverse affect on web hosts that are ill prepared for the marketplace.
If you’re a web hosting company that is in it for the long haul, be prepared. Manage your resources accordingly, take note of your competitors’ strategies, and be watchful of market trends that will affect your business. Web hosting is beyond having the ability to slap together a web site, acquiring a dedicated server and then waiting for business to trickle in. It is not an easy business. But it is a lucrative business for those who invest their time and effort into building a web hosting company that is serious from the start, and not another “Me Too” founded on the prospect of just making money.
Copyright © 2004 Johnder Perez
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