Over the past decade, I've bought and sold many millions worth of online ads. When I ran ISPcheck, I had no real answer for prospective advertisers who wanted to know what results my customers were able to achieve. And when I became responsible for RackShack/EV1's ad buys, I found that there was no easy way to measure ROI.

All I wanted to know at the time was how many visitors from TopHosts versus TheWHIR signed up. But as I've subsequently learned from Ted Smith at Peer 1, I should have been tracking customers throughout their lifecycle. If my cost per sale from Site A is 20% less than Site B, but the average account gets canceled 50% sooner, B would be a better long term investment.

A couple of weeks ago I convinced Ben Gabler at HostNine to install StatCounter, the better to look up new customers and find out where they came from, and which parts of HostNine's website they visited before deciding to sign up. (I've also used Clicktracks and Google Analytics, which provide aggregated data on visitor behavior, but don't allow you to drill down to each visitor's click path.) It just occur to me that it'd be very cool if this functionality were built into ModernBill.

Imagine being able to generate sales reports that tabulate order amounts against referring sources? Or pinpoint content on your site that's most-viewed by your most profitable new customers? Better yet, what if you could instantly compute the lifetime ROI from those $20 Google Adwords bids? Wouldn't you like to know if customers who clicked on your "cPanel hosting" ad stick around 3x longer than those who came through "cheap hosting"?

HostNine already gives all of its resellers free ModernBill licenses, and being able to automate signup/provisioning is awesome. But what if every $19.95 hosting plan came with a business intelligence system that delivers up-to-the-minute knowledge on what website copy and ad venues work? Wouldn't that be something?

AND, what if ModernBill could collect and publish aggregate, industry-wide data on how profitable TopHost-referred customers are, relative to those who came through TheWHIR? Having been on both sides of the table, I think that would really help both ad salespeople and media buyers.

I read about this on Bert Amijo's blog. 3Tera CEO Vlad Miloushev did the math:

1. Google's infrastructure consists of 500,000 to 1 million servers.

2. Google's Q4, 2006 revenue was $3.2 billion. On an annualized basis, that's $12.8 billion.

If you divide #2 by #1, you'd get $12,800 to $25,600 of revenue per server. If you take the average and divide the amount by 12, you'd end up with $1,422/month in sales for each server. Google spends about 10% of its revenue on operations, which equals $142 per server.

As a point of reference, let's consider HostGator's announcement that it will expand its presence at The Planet. HostGator currently leases 1,700 servers, which are home to 500,000 websites. That's 294 sites per server. If HostGator collected as little as $4.84 from each site owner, it'd generate more revenue per server than Google!

HostGator's cheapest service plan costs $6.95/month, but it allows customers paying $9.95 or more to host multiple sites. Which most - including HostGator's 10,000 resellers - do. So Brent doesn't have Larry and Sergey beat. Yet. But while I was doing the calculations above, I remembered a conversation with Lenkov from SiteKreator. Thanks to some kind of caching magic (which ISP-Planet discusses in this article), Lenkov's software can support up to 30,000 simple websites on a two CPU machine.

Let's say Brent springs for a quad core Clovertown from The Planet, hosts only 15,000 websites, and charges each site owner $1/month. This would put him ahead of Google in terms of both revenue/hosting expense ratio, and sales per server.

ISP-Planet says SiteKreator can be licensed for an "unpublished fee". I'll have to ask Lenkov about that...

Liam says this week's most important trend is web hosting providers' continued expansion of data center footprints. The strong demand for hosting facilities seems like a good sign. At the same time, there are a number of outside-world developments that folks in the hosting business ought to keep an eye on.

1. On Wednesday, in addition to officially releasing RHEL5, Red Hat announced that it will soon launch an open source marketplace called Red Hat Exchange (RHX). As Business Week reports, Red Hat will guarantee the compatibility of RHX products with its platform AND provide tech support for each and every 3rd party product on the exchange. In addition, RHX will allow end users to submit ratings, read reviews and compare notes.

2. Later that afternoon, Microsoft said it will buy Tellme Networks. The Associated Press thinks the deal is worth $800 million to $1 billion.

3. Less than a day later, Cisco announced that it has agreed to acquire WebEx for $3.2 billion (or $2.9 billion, if you deduct WebEx's $300 million cash balance).

4. And last but not least Google sort of confirmed that it's working on a mobile phone.

It's a Wal-Mart-ized web; every Big Co wants to assemble a broader range of more seamlessly integrated products for a wider and better networked audience. This leaves less and less of a market for old school vendors who sell standalone widgets to isolated prospects.

For instance, consider 1&1's recent survey of 765 small business owners. Andreas says 100% of the respondents agree that the absence of a company website is bad for sales, but there's much more to these customers' operations beyond setting up a web presence. Might they not benefit from Zoho or ThinkFree powered productivity apps? SharePoint based collaboration? CRM?

More importantly, Andreas counts "hundreds of thousands of US small businesses" among his customers. As such, one super valuable feature that he's uniquely positioned to deliver is a 1&1 social network through which customers can connect with potential vendors, partners and buyers. I feel like 1&1 is really missing out by amassing a sizable community without leveraging it for its members' benefit.

As SWSoft CEO Serguei Beloussov likes to point out, 1&1 and its competitors have sold tens of millions of "web hosting 1.0" accounts, which collectively generate billions in annual revenue. He's absolutely right - but as you see above, the world's not standing still...

Dave Young from Joyent recently blogged about Twitter's use of Joyent Accelerators. Accelerators are Solaris Containers on Sun Fire X4100s with Sun Fire X4500s (also known as "Thumpers") for storage. Joyent promises on-demand, no-leash computing and offers virtual servers for as little as $45/month (includes 256 MB RAM, 5 GB storage, 15 GB bandwidth). It sounds pretty cool - and check out the video of Dave and Jason on Sun's website!

The problem is, after reading Dave's post, I think of him every time Twitter is down. Which, as many of his readers pointed out, happens often. Dave says us complainers are missing the point. Twitter is growing like crazy! It serves 4,000+ requests per second! That's a lot - and Joyent helped get them there! Unfortunately (or fortunately?), Twitter users' demand seems to exceed its already-substantial capacity.

If I were Dave, I'd move Twitter to as many XXL Accelerator Sparcs as it takes. Having come a long way just doesn't make good enough PR fodder when you've got John Edwards live blogging from the campaign trail ("About to make remarks at the Int'l Assoc. of Firefighters. Then remarks at the Boilermakers conference.").

A few months ago, I was telling Steve Kahan over at The Planet that he ought to turn a couple of his sales reps into venture capitalists, of sorts. These folks would scan the customer database for major brand names as well as up and coming influencers. They'd proactively monitor these VIPs' infrastructure and offer free scalability advice and migration assistance. They'd set up an invitation-only beta program and strong arm Dell into providing test units of its latest gear. They'd research these customers' industries and make introductions if they come across people in similar markets...

More recently, RedMonk analyst James Governor suggested something much more radical. Forget that beta program; how about long-term loans for future movers and shakers? And instead of my idea of creating case studies out of The Planet's great working relationships with today's news-makers, take a great leap forward to the open source hardware business model. Put your tools in the hands of tomorrow's innovators. You need to do this quickly, because you're competing with Jeff Barr. In Joyent's case, I have no doubt that last part is true...

PS - It just occurred to me that SoftLayer, in particular, might have much to gain from being a patron to soon-to-be influencers. Softlayer announced a private meet me room a few weeks ago, where developers of different SoftLayer-hosted applications can interconnect without incurring bandwidth charges. So if someone's created a community that many others are eager to extend and/or leverage, wouldn't it be worthwhile for SoftLayer to make itself that community's home base?

PPS - Hosted Solutions, too! It's cool that they're spearheading the Carolina SaaS User Group, but I think what would really enhance their appeal is if they hosted the most-mash-upped apps.

I learned about the IDC storage paradox on Zoli Erdos' blog. Zoli mentions this Associated Press article, which cites IDC's estimate that "the world had 185 exabytes of storage available last year and will have 601 exabytes in 2010. But the amount of stuff generated is expected to jump from 161 exabytes last year to 988 exabytes in 2010".

Even more alarmingly, Dan Farber over at ZDNet reports that according to IBM, "the world's information base will be doubling in size every 11 hours" by 2010. Does this mean that on Jan 1, 2011, our 988 exabytes of data will double to 1,976 exabytes by 11am, and 3,952 exabytes by 10pm?

Fortunately, we don't need permanent storage for all the data we generate. For instance, spam accounted for just 8% of all emails in 2001 (said CNet); its volume rose to 36% by 2002 and 66% by 2004 (MSNBC), and is expected to exceed 90% by the end of this year (IT News). That's a huge amount of data that isn't being saved.

Still, Rich D'Ambrise from Maxell says he expects significant growth in data archiving requirements: in 2007, we will back up 75% more data than we did in 2006. But unlike IDC analyst John Gantz, he's not concerned that we'll run out of space. The storage industry is not standing still. Maxell, for instance, is beta testing 300 GB holographic disks that are no bigger than a DVD, but offer 63x more capacity. 800 GB second generation disks should be on the market by next year, and a 1.6 TB version is planned for 2010. And let's not forget stacked volumetric optical discs (SVOD); each 92-micrometer layer stores up to 9.4 GB. Available storage capacity will absolutely keep up with demand; no question about that!

The real issue is, will we store our zettabytes of data on- or offline? Rich is betting on removable media; he'd rather have mission critical data in his own possession than depend on any service provider. Zoli, on the other hand, says online is more efficient. By sharing/linking to files, we won't each need space for our own copies of the same content. Sun CEO Jonathan Schwartz says offline storage is greener ("when data's at rest, it consumes no electricity") - and easier to transport on a large scale. (As the New Yorker points out, if you made tiny chariots with DVD wheels and hitched them to snails, you'd get faster data transfer speeds than DSL.)

So, what's this got to do with web hosting? For one, you should probably monitor your oversold disk space closely. At the moment, I'm sure hardly any of GoDaddy's $7 hosting customers are using their entire 100 GB quota. But if you consider Rich's 75% growth projection, the number of customers that same 100 GB is allocated to may have to come down.

PS - Here's a GigaOM post on a 10 more fun storage facts.

Last Thursday night, I came across this SearchStorage.com article via the Storagezilla blog. Beth Pariseau wrote that Amazon's Simple Storage Service (S3) has had "performance and reliability issues serious enough" to prompt second thoughts among early adopters. In particular, SmugMug CEO Don MacAskill recently decided to move hot storage back in-house.

The instant I finishing reading the article, my RSS reader lit up with Don's response. He still loves Amazon, even if S3 hasn't solved the "speed of light problem". It takes at least 60-80ms for bytes of data to travel the distance between SmugMug's west coast location and Amazon's east coast data center. There's no getting around that. He moved hot storage closer to his web servers NOT to solve Amazon's performance problems, but to reduce those thousands of miles to inches. Don also tracked down the Storagezilla post and added a comment there.

Fast forward to this morning, when someone sent me a snippet from a Tier 1 Research news brief in which Dan Golding wrote about Amazon's disillusioned users. I gave Dan a hard time for basing his article on the same two customers Beth interviewed without giving her credit. Dan argued that attribution isn't customary in the analyst world. Besides, we shouldn't even be having this conversation. As a non-subscriber, I should have deleted any T1R content that came my way upon receipt.

Ironically, during his HostingCon presentation last year, T1R founder Andy Schoepfer's key message was "don't be an island". It's important for web hosting providers to connect customers to external ecosystems like eBay and Amazon, because no e-business can thrive in isolation. Given T1R's Hosting 2.0 advocacy, Dan's reaction seemed... Analyst 1.0-ish. But towards the end of our conversation, he did promise that an upgrade is on the way. As a point of reference, Burton Group, Dan's former employer, has a great blog that links to external sources. Same goes for Forrester. And at least 220 other research firms, including T1R parent company The 451 Group. Raven Zachary, who leads 451's open source practice, is even on Twitter!

Anyway, I'll get off my soapbox now and back to Amazon. I think every web hosting exec needs to read Don's blog post - along with Robert Cichon's post on customer satisfaction metrics. Robert said a hosting provider has done a good job if (a) the company gets written testimonials, (b) customers refer other customers because they're happy with service quality, and (c) customers defend the company against negative remarks. Amazon gets three points based on Don's reaction. What's your score?

I came across Uptime Institute founder Ken Brill's CIO Magazine article via 3tera VP Marketing Bert Armijo's blog.

Ken says while hardware prices are falling, total cost of data center ownership is headed through the roof. 5 years from now, the purchase price for a rack of servers will drop 27.5% from $138K today to just $103K. But while it only takes 15 kilowatts to power that rack right now, the energy requirement will rise to 22 - 170 kilowatts by 2012. It could cost as much as $2.3 million to power/cool $103K worth of gear throughout its 3-year lifespan.

(I'm not sure if this figure includes switches and routers and such. A recent Cisco/APC/Emerson study shows that servers/storage/cooling consume 76% of data center power, with 11% going to networking equipment, 3% lighting, and 10% power conversion losses. If Uptime's calculations didn't take the other 24% into account, Ken's $2.3M becomes over $3M!)

I've been thinking about Ken's stats and trying to understand what they mean. As a point of reference, I was looking at Dell's website, which advertises the 4U PowerEdge 6950 dual core, dual processor Opteron server for about $9K. Is Ken saying that:

(a) This particular machine will cost 27.5% less 5 years from now?

(b) 2012's late model machines will sell for 27.5% less than what's on the market today?

(c) The amount of server hardware that fills up 4U of space will be available for $6500 in 2012?

If we assume he means (c), and we accept Sun's claim that "server performance, power and space efficiencies are improving at up to 40% annually on average, and could double every 2 years", then 4U of space may be able to accommodate not one but 4 servers that each feature 4x more processing power and 4x greater energy efficiency.

In other words, $6,500 could buy you 16x more computing resources than that dual Opteron! If that's the case, you might even be able to afford $1M per rack per year in electricity. But only if you virtualize like crazy. No more leasing data center space per square foot or per rack. No more dedicated servers, either. The average customer won't need 4x more processing power in 5 years, which means you won't be able to justify turning on a whole entire server just for them.

You'd also have to replace hardware early and often. Sun recently announced a refresh service for swapping out your servers at least 3 times over 42 months. At first I thought that sounded wasteful, but if server power efficiency is improving at 40% per year, holding on to old gear might end up costing you more. Again, virtualization would be a must. You wouldn't want customer apps to become attached to machines that will be phased out before long.

Bert from 3tera says changes in data center economics will make it increasingly difficult for enterprise CIOs to justify operating their own facilities. But they won't outsource to traditional colo or dedicated server providers. Instead, he agrees with Cassatt CEO Bill Coleman that in the near-ish future, you'll be "paying for data center horsepower the same way you pay for electricity or gas". I think so too. How about you?

PS - On a somewhat related note, eWeek says Intel will release its "Clovertown" chips today. The quad core processors have a 50 watt thermal envelope, versus 80-120 watts on earlier models. That's a 38-60% drop.

PPS - Also, speaking of the Uptime Institute, check out this SearchDataCenter.com interview on how they've helped The Planet save $10K/month on electricity. The Planet, the article says, is looking to expand beyond Texas into the Midwest.

ThinkFree is way cool! I signed up for an account earlier this week, and its web-based spreadsheet, word processor and slide presentation apps work beautifully. TJ Kang, the company's founder, has been developing office productivity software since the 1980s, and it shows.

Founded in 1999. ThinkFree spent its early years as a desktop software company. Its online edition was released in April 2005. Now the LA Library offers it on 2,200 computers across 71 branches, and NHN, a Korean telco with 20 million subscribers, has integrated the product with its email system. In addition, over 250,000 individual users have signed up for accounts.

Unlike Zoho, which offers an amazing breadth of hosted services, ThinkFree focuses on three applications - but makes them available in more forms than you can imagine. Let's count them:

1. The ThinkFree-hosted edition
2. The server edition (for self-hosting by enterprise customers and on-premise hosting by telco and ISP partners)
3. The iPod edition (so that you can travel with your sales presentation, but not your computer)
4. The USB edition (which allows you to edit documents on someone else's computer without leaving any trace of your work after you disconnect)
5. The upcoming premier edition (which allows synchronized online/offline document editing), and
6. The also upcoming SMB edition (which allows companies to create groups for different sets of employees to share different documents).

All of the above offer round trip compatibility with Microsoft Word/Excel/PowerPoint.

But I think what makes ThinkFree really, truly awesome is the company's idea of what SaaS should be like. VP Marketing Jonathan Crow says that one of his most important priorities is DocExchange, a shared repository of user-submitted documents. Because there's more to online collaboration than sharing documents with people you already know. It's also about leveraging and building upon the enormous amount of collective knowledge out there - knowledge that would have been inaccessible without SaaS. SlideShare and Swivel will have to watch out; as DocExchange evolves, ThinkFree users will be able to view public slides/datasets/documents - and reuse them on the spot.

This is as exciting as Amazon's EC2 machine image sharing announcement earlier this year. As Amazon puts it, sharing accelerates community-wide innovation. Not coincidentally, ThinkFree's document viewer runs on EC2, and DocExchange files are stored on S3. (SlideShare is an S3 customer as well.)

Earlier today Dennis Howlett wrote that being a Connector (in the Tipping Point sense) is part of every service provider's job description. Some connections are specific (you could introduce two customers to each other), others are sort of self-organizing (SlideShare making customer A's knowledge accessible to B, C and D through tags, auto-recommendations, etc), and still others are implicit (Freshbooks making aggregated invoice data available to customers within the same industry).

In the future of SaaS, I think, winning vendors will get ahead by being the best Connectors rather than the snazziest technology providers. (Which is why biggest community wins.) ThinkFree is well on its way. Google will most likely catch up. And Zoho; I'd bet on that. 1&1 CEO Andreas Gauger tells eWeek that he hopes to generate more SaaS than hosting revenues within 3-4 years. Could it happen? While he's got a sizable customer base, he's far from being in the Connector business. If I were him, I'd give TJ a call :)

I've been reading a lot about OpenID, a free, decentralized framework for managing digital identities. You start with an URI (think of it as a master username) and store your password and other creditials with an OpenID provider. You can then log into any OpenID enabled service with your URI. The service will fetch whatever credentials it needs from your identity provider.

Simon Willison wrote a great post on cool things you can do with OpenID. My favorite is restricted single sign on. Simon suggested that if everyone in an organization had "username.internal.example.org" OpenIDs, all internal apps behind the firewall could be configured to grant automatic access to such users. This eliminates the hassle of creating/deleting accounts on each service for incoming/departing employees. Couldn't GoDaddy use a similar method to apply the same logins across its many services?

I'm also intrigued by Kai Hendry's comment that maybe OpenID can be used for brokering payments. This would allow access pass holders to view content, download songs, etc across multiple sites. Not that this technology isn't already available, but OpenID would save subscribers from having to keep track of different logins for different networks.

Anyway, Microsoft announced last month that it would make Windows Cardspace interoperable with OpenID. A couple of weeks later, AOL announced its support as well. SixApart is in (in fact, OpenID creator Brad Fitzpatrick also developed LiveJournal, and is SixApart's chief architect). And Digg. And ImageShack, WordPress, Technorati, SmugMug, 37Signals...

Recently I signed up for isabel.wang.name as my OpenID through FreeYourID (which I read about on TechCrunch). If nothing else, they managed to sell me a .name domain. My question is, why isn't 1&1 in this market as well?

So far this year, at least 31 web hosts and domain registrars (see list) have reduced prices or increased resource allocations. Here's a quick breakdown based on a few different parameters:

(a) 11 offers were limited time; 20 were permanent adjustments;
(b) 19 had monetary impact, 12 did not;
(c) 19 were available only to new customers, 11 were available to all customers; JaguarPC was the only company whose offer benefited just current customers;
(d) Only Netazen offered non-overage-incurring current customers any financial benefit.

If I look at these stats with my end user's hat on, I would conclude that bandwidth, data storage and domain registration fees must be getting cheaper by the minute. Unfortunately, if I stay with my current provider, the best I can hope for is an unneeded increase in resource allocations. Loyalty doesn't pay if I want a deal that reflects current market conditions.

Given the going price of AdWords bids, is it such a good idea to reward switching? Instead of offering new customers a discount during the initial months of their contracts, what about a reverse promo that gives long-time customers a better price after they've maintained their accounts for some amount of time?