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  • Traditionally, web hosting providers have been in the business of selling “containers” for customers’ content – without regard to what end users fill these buckets with
  • As 1&1 puts it, the “core features” of web hosting are web space and bandwidth
  • Customers are encouraged to compare web hosts based on amount of oversold bandwidth and web space
  • Let’s consider these costs per click in the context of click fraud rates (supposedly 15%) and conversation rates (let’s say 10%?). Based on my experience, it’s not uncommon for the same customer to click on search engine AND affiliate ads before signing up. With these bids, advertisers could be paying multiple years of revenue for each account.
  • The worst part is, no matter how much you’re willing to pay, audience interest in web hosting seems to be declining.
  • Instead of web space, people are becoming interested in web apps
  • And instead of any particular hardware model, maybe all people need is a secure computing environment?
  • Is container colo the next big thing? Facilities would be cheaper/faster to build than data centers with raised floor. James Hamilton argues that pre-filled containers will become units of deployment. Also, by using large numbers of small containers, you eliminate the need for super redundant power infrastructure. You don’t need your generators to last for days, because you can shift the load to another container within hours – especially if your apps are running on a virtualized platform.
  • Instead of giving customers web space on any particular server, Cleversafe breaks data into multiple encrypted slices and stores each at a different data center. It takes a majority of slices to reconstitute the original file.
  • More users used to equal more bandwidth consumption, but with P2P, the situation is reversed. This approach seems to be gaining traction: VeriSign bought Kontiki last year, and Akamai bought RedSwoosh recently. Both are partners of Joost, the P2P Internet TV startup. With P2P, customers become real assets - not just in terms of revenue generation.
  • RyanAir’s annualized revenue is about 3.2 billion. Last year, they made $332 million from selling items other than air tickets. 10% is huge, but the company’s CEO thinks he’ll be generating 100% of his future revenue from audience monetization. He envisions giving every single ticket away for the opportunity to sell to passengers.
  • The difference is, web hosting directories monetize each and every page view multiple times. Web hosting companies, on the other hand, generate zero incremental revenue from prospects who don’t sign up, or repeat visitors from current customers.
  • Advertising-related technology innovation will help Google and Yahoo get more value out of each visitor. Web hosting related technology innovation may help you host each website more cheaply and reliably, but it will not increase the value of each customer.
  • Give us your credit card number and we’ll give you everything! That’s how the traditional web hosting pricing model works. Create unlimited email accounts. Host unlimited domains. Use unlimited databases. Most customers don’t need 3,000 email accounts. Instead of appreciating your generosity, they probably feel like they’re paying for what they don’t need. More importantly, your incentives aren’t aligned. The more resources they use, the more money they lose. Shouldn’t it be the other way around?
  • Salesforce.com, Google Apps, Hosted Exchange – pay per seat is the next big thing, and it aligns your incentive with the customers’. Same goes for Amazon. 200,000+ developers are hosting 5 billion objects on Amazon’s S3, and they’re paying for every single one of them. OpSource is really intriguing. It’s founded by Treb Ryan, whose last company sold for more than a billion dollars after less than a year. OpSource charges customers based on the amount of activity their applications generate – and customers get to define what counts as a unit of usage Shopster is interesting too. They not only host online stores, but provide 750K wholesale products that customers can sell. They even ship directly to buyers.
  • I read recently that Web 3.0 equals 4C + P + V. The first C is commerce; getting from prospect to customer requires communicating with different audiences in different ways. Most web hosting companies have one single product page for everyone from experienced developers to first time site owners who have no idea what FTP means. If you think about how Amazon’s auto-recommendations are responsible for 30% of its sales, is that the most effective way?
  • Speaking of Amazon’s auto-recommendations, Aggregate Knowledge drove $100 million in new sales on Overstock.com. They recommend next steps based on people’s navigation behavior, and their service is offered on a pay per performance basis. I think this would be a great match with any big hosting company. Dan Kimball from ModernBill recently told me about RobotReplay. It’s AMAZING. You can watch videos of individual visitors’ mouse movements across your site. Microsoft and Yahoo have both implemented cobranded versions of Krugle for their developer communities. Krugle is a search engine for code. For those of you who see developers as part of your target audience, something like this could be a value added service for customers, a market research tool to see what kinds of things they search for, and a revenue source from the ad impressions they generate. Back in the late 1990s, every web hosting company wanted to advertise on a site called Matt Scripts Archive. 10 years later, the paradigm has changed. It’s time for successful web hosting companies to play the role of Matt Scripts Archive.

Transcript

  • 1. What’s Next in Web Hosting? Isabel Wang and David Snead May 8, 2007
  • 2. Web Hosting As We Know It What's Next in Web Hosting?
    • Data Centers
    • Colo Cages
    • Racks
    • Dedicated Servers
    • Reseller Accounts
    • Shared Hosting
  • 3. One Simple Formula What's Next in Web Hosting? Web Space + Bandwidth = Monthly Fee
  • 4. How To Get Ahead? What's Next in Web Hosting?
    • GoDaddy: 1000 GB for $6.99
    • DreamHost: 1600 GB for $7.99
    • 1&1: 2500 GB for $7.49
    • LunarPages: 2500 GB for $6.95
    • iPowerWeb: 3000 GB for $7.95
    • BlueHost: 3000 GB for $6.95
    • PowWeb: 3000 GB for $5.77
  • 5. “What We’re Paying” What's Next in Web Hosting? (Source: The WHIR)
  • 6. What's Next in Web Hosting? What We’re Getting Source: Google Trends
  • 7. What's Next in Web Hosting? Meanwhile, In The Outside World… Web Hosting vs Wiki
  • 8. What's Next in Web Hosting? As Serguei Says, Virtualization *IS* The Future Dedicated Servers vs Virtualization
  • 9. What's Next in Web Hosting? New Form Factors
  • 10. “Where Do You Want To Compute Today?” What's Next in Web Hosting? Source: Presentation by Microsoft Windows Live Architect James Hamilton
  • 11. “Your Data is Everywhere And Nowhere” What's Next in Web Hosting? Participants include Hostway, Softlayer and The Planet
  • 12. Large User Base = High Capacity Network? What's Next in Web Hosting? + +
  • 13. What's Next in Web Hosting? New Assets
  • 14. “Wal-Mart With Wings” What's Next in Web Hosting? BusinessWeek: “Ryanair's profits for the six months ended Sept. 30 soared to $422 million, on sales of $1.6 billion … Ryanair uses its website, with 15M unique visitors/month, to boost ancillary revenues. The company gets commissions from sales rental cars, hotel rooms, ski packages, and travel insurance. For the year ended Mar. 31, such ancillary revenues rose to $332 million .”
  • 15. DreamHost vs TheWHIR What's Next in Web Hosting? Fun fact: The 10 highest traffic web hosting providers each have more reach than the 10 highest traffic web hosting directories.
  • 16. Is Your ARPU Increasing by 42% Per Year? What's Next in Web Hosting? Morgan Stanley Says: “Significant targeting / conversion improvements could bolster annual global revenue per unique user of $9 for Google (+42%) and $10 for Yahoo! (+29%) 2-3x in next 5 years.”
  • 17. What's Next in Web Hosting? New Product Units
  • 18. The Industry Standard Approach What's Next in Web Hosting?
    • GoDaddy: 1,000 email accounts
    • DreamHost: 3,000 email accounts
    • 1&1: 2,500 email accounts
    • LunarPages: Unlimited email accounts
    • iPowerWeb: 2,500 email accounts
    • BlueHost: 2,500 email accounts
    • PowWeb: Unlimited email accounts
  • 19. A Few Other Options What's Next in Web Hosting?
    • SaaS Apps: Pay Per Seat
    • Amazon EC2: Pay Per Hour
    • Amazon S3: Pay Per GB
    • OpSource: “Success Based Pricing”
    • Shopster: Hosting + Drop Shipping
    • MySpace: Free; made $900M in Advertising
  • 20. What's Next in Web Hosting? New Communication Strategies
  • 21. One Size Doesn’t Fit All What's Next in Web Hosting? Commerce: what we’re aiming for Content: reaches out to prospects Context: different info for different audience Community: gets multiple parties involved in conversation Personalization: the better to deliver the most effective sales pitch for every customer Vertical Search: better customer service + possible monetization opportunity Source: Read/Write Web’s Web 3.0 equation
  • 22. Knowledge is Power: Three Case Studies What's Next in Web Hosting?
  • 23. What's Next in Web Hosting? New Risks
  • 24. New Business Models = New Definitions
    • What’s The Scope of Your Relationship?
      • Joint venture?
      • Partnership?
      • Vendor?
    • Document Your Relationship
      • Customer
      • Vendor
      • Value-added Service Provider
    What's Next in Web Hosting?
  • 25. Do Your Current Contacts Work?
    • SLA
      • Not just about hardware replacement any more
      • How to define uptime?
    • AUP
      • How will new services be abused?
      • How to police conduct?
    • Terms of Service
      • Does it reflect your relationship?
    What's Next in Web Hosting?
  • 26. Selling Services vs Ping/Power/Pipe
    • General Legal Issues
    • Communications Decency Act/Conduit Status
      • Are you creating data?
      • Are you manipulating data?
    • Contracts
      • What risks are you prepared to take?
      • Does a clickwrap contract work?
      • What are the customer’s true expectations?
    What's Next in Web Hosting?
  • 27. Service Sales Issues
    • Can You Sell The Services?
    • Flow Down Provisions
    • Modify AUP/TOS
    • Contact With Personal Information
    • Are You Providing Professional Services?
    • Are You Providing Professional Advice?
    • Can You Support The Services?
    What's Next in Web Hosting?
  • 28. New Privacy Paradigm
    • Privacy Expectations Follow Data
      • Synchronize with vendors
      • Anticipate future uses of data
    • Privacy Policies/Expectations Are Analyzed From Consumers’ Point of View
      • Draft documents in basic language
      • Don’t play hide the ball
      • Chain of custody is transparent
    • Understand Regulatory Requirements
      • Specific: HIPPA, SOX, etc
      • FTC: unfair/deceptive trade practices
    What's Next in Web Hosting?