How SMBs, Partnerships and Marketing will Save the Web Host Industry

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The world of web hosting is a competitive jungle. Those who adapt survive and thrive. One of the best ways to adapt is to add new features. Grow wings, change the color of your feathers, learn to swim. Or, in the case of web hosts, offer additional features in order to provide a comprehensive set of solution for your customers. This is nothing new and hosts have been doing this since the beginning.

So, what’s changed? Well, in fact, everything has changed. A large cloud has come over the horizon and is casting a long shadow over the jungle and the animals are getting nervous. There is little need to explain that the cloud consists mostly, among other players, of AWS and that the web hosts are the ones getting nervous. Why? Because they see that their customers are already starting to trickle away, tempted by lower prices or promises of greater scalability. And, with their customers go their profits and eventually their business. (Jad Jebara sums this up well in his blog entry:

It’s true that this is not going to happen overnight, nor is it going to affect all web hosts, but if there was ever a time to adapt to survive, now is that time. There are, of course, a number of hosts, those who have realized that this day has been coming for a long time, which have already begun adapting. The question though is how they are adapting? To answer this, let’s look at another change that has occurred really only within the past year.

This change is more of a realization: that SMB customers are going to be the lifeblood of web hosts. Again, it’s true that several hosts have been focused on SMBs for years, but none have really come out swinging for them until this year. EIG revamped their website to focus purely on this market, GoDaddy has done the same, is all over small businesses and other hosts have SMB sections which will no doubt soon become more prominent.

CEO and founder of EIG, Hari Ravichandran, states on his bio on the corporate website that his goal is to “help small business owners harness the promise and the power of the web.” GoDaddy’s latest marketing campaign features a spandex-clad Jean Claude Van Damme inspiring “courageous” small business owners for “go time.”

These hosts are savvy marketers. According to the Directory Journal, 99.7 percent of employers in the USA are small businesses – 44 percent of the total US private payroll. And it doesn’t stop with the USA. Gartner predicts that the global SMB market will go from a multi-billion to trillion-dollar amount by 2015.

However, it is all well and good saying that you help SMBs, but how exactly are these hosts helping small businesses? The answer is simple. Web hosts such as GoDaddy and, and to an extent EIG, understand that when SMBs “buy additional services through their web service provider, they are less likely to leave.” SMBs come for the hosting, but they stay for other reasons: website design, email, security features, marketing options and so on.

This is the model that has worked so far, to an extent. However, the fact remains that only 22 percent of SMBs use hosted services (Parallels). This represents a lack of penetration, yet also a great market potential for hosts.

First, why the lack of penetration? The obvious answer is that when every host offers them they no longer become a differentiator. The other answer is that they simply aren’t up to scratch (let’s face it, SEO and Adwords are hardly going to help SMBs grow significantly). Certainly the reasons are more complex, but the 22 percent remains.

The flip side, however, is a 78 percent potential market share in a multi-billion dollar market. EIG, GoDaddy, and several other hosts see this potential and they have begun to offer more robust solutions; solutions that SMBs need, and solutions that might actually help them grow.

Hosting services alone are now the minimum and the minimum will not be enough to survive, let alone thrive. So what is going to distinguish the true adaptive host from the endangered pretender?I believe that the add-on that will be that necessary adaptation. Yes, lots of hosts already offer email marketing, largely because it is one of the most common, and profitable, methods of online marketing – studies show that SMB spending on email marketing is expected to reach $2 billion by 2014.

Yet the danger is that email marketing is quickly becoming the norm and many hosts, EIG brands included, have had to go with low-margin affiliate relationships with email marketing platforms just to keep up. And this is not offering robust solutions, this is simply trying to squeeze cash from customers who could find these solutions on their own.

If hosts truly want to become one-stop-shops for SMBs they need to understand SMB needs: SMBs want to drive local customers onto their sites and into their stores, and they understand that they can do this via social and mobile marketing – LoSoMo is a current buzzword for a reason.

Email marketing simply is not enough. Eighty-six percent of marketing professionals believe that integrating multiple channels under a single solution is critical for their success. However, over 60 percent of SMBs only have a single person acting as marketer (Marketing Sherpa).What does this mean for hosts? It means that SMBs are looking for easy-to-manage, multiple channel marketing solutions that will help their businesses not just exist, but grow.

So, will hosts adapt? Well, it depends on the host. The larger brands with revenue to spare will probably develop their own platforms. Whether they’ll be up to standard depends on how seriously they take their development. The hosts who can’t afford to develop their own technology will have one of two options: 1) ignore the problem and hope it goes away (it won’t) or 2) partner with companies who are able to offer quality add-ons and share in the considerable revenues.

By offering solutions that SMBs really need in order to grow, web hosts will be able to meet the increasing requirements of SMBs and build strong, lasting relationships. It is now time for hosts not just to adapt to survive, but also adapt to thrive.

ariel-circle1Meet the Author: Ariel Hopper is in charge of the Reseller program at He works with web hosts and other global organizations to extend their reach through developing valuable partnerships. SimplyCast is a proud sponsor of HostingCon 2014.

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