Tuesday, July 27, 2004
Seems there are too many web hosting companies. Anyone who's ever tried to bid on those keywords knows that.
But does this convince them to leave the business? Apparently not. They keep trying new ways of outdoing one another, and the result of too many chasing after this commodity business is a race to the bottom. We see free hosting giveaways, companies charging too little per month and then making it up on confusing additional fees, business models that assume massive lifetime value from a customer, etc.
Great for consumers, except for anyone wanting good service. Seems that many web hosts gravitated to this business by default because they were technically inclined and understand how servers work. With a few exceptions, many hosting providers lack a commitment to service. Thus, margins stay razor thin unless they figure out a way to deceive the customer.
In some businesses, overcrowding creates a shakeout. People leave. The hosting business reminds me of acting or grad school. There will always be some folks who won't take a hint and move on, because they can't imagine anything else. Maybe, though, if the customer turns up the heat and begins demanding service instead of just the lowest price, the bargain-basement $4.95/mo. wannabe hosts will see their incomes drop so low that they really will be squeezed out.
But wait, there's more. Even at $4.95, web hosting could be too expensive in a world where larger companies like Google, Microsoft, and Yahoo are figuring out ways of offering massive amounts of storage space to users of their various services for pennies. If web hosting as a commodity is actually overpriced even at the low, low prices that some hosts now charge, this emphasizes even more that service, not "low overhead" or "better technology," is the real reason companies pay what they do for a bit of storage space on a server.
For really reliable service -- and what business, however small, does not rely totally on their website? -- hosting customers will be willing to pay a bit more. If hosting companies don't deliver that, well... why not just go and find a better deal, like maybe a company that would show some ads on your site in exchange for giving the hosting to you for free? Can you say "Hosted by Google"?
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