January 15, 2003 -- (WEB HOST INDUSTRY REVIEW) -- While it is most often the largest of service providers and the most coveted of clients that attract the most attention in the Web hosting industry, it is quite commonly the smaller hosting operators focused on the lower end of the market, that supply the business's true success stories.
In 2002, a year that saw more than a few high-end, high-profile hosting providers fall on hard times, FatCow (FatCow.com), a New Mexico-based Web hosting company focused on the small to medium-sized enterprise segment, experienced a marquee year, growing 75 percent in terms of its revenue and its customer base.
The company's president and CEO, Jackie Fewell, attributes FatCow's success in the SME market to the unique features of the company's approach to the business, as well as the unique features of the SME market itself.
FatCow began in 1998, operating under a different brand. In the summer of 2000, the company changed its name to FatCow as part of a larger effort to distinguish itself among SME hosting providers.
"We knew we wanted to be a little different, and try something innovative," says Fewell. "So we came up with a plan that initially included a domain name, and all of the typical components of a low-end Web hosting package thrown in at one low price that was affordable. That was the goal, along With a memorable name, something with some personality, and that would carry a brand."
With the revamped brand, the company quickly hit its stride. According to Fewell, FatCow was successful because its hosting product suited the SME hosting clientele so well. Small business customers, she says, tend to have a fairly short list of demands; things like price, reliability and the sense that the company is going to remain in business. A firm commitment to meeting those needs, and a healthy obsession with customer service, says Fewell, made FatCow a favorite with customers.
"Our customers are really infatuated with us," she says "and that's part of the brand personality. I also think the delivery on the brand promise just backs up what people thought they were going to get. And that has spawned an incredible word of mouth growth."
FatCow also found there were certain advantages to serving the SME market from a service standpoint. At the lower end of the market, says Fewell, a hosting provider can take more of a cookie-cutter approach to its service. And the chance to work repeatedly with a standardized service offering means the company's delivery is always improving.
While the SME market for Web hosting may have been underserved a few years ago, its potential is no secret these days. Several major Web hosting organizations have built their businesses on serving the SME market. And, with the trouble in the high-end hosting business, many more large providers are looking at re-tuning their services to capture a piece of the SME market.
"I think it's pretty much unanimous that the small business market represents the highest opportunity for growth right now," says FatCow's marketing and development director Peter Zeismann. "And a lot of larger service providers are moving down-market." Recent research reports suggest that fewer than 50 percent of small businesses in the US have any presence at all on the Web, and among those, most are in the process of moving from very basic to more complex sites.
According to Zeismann, though, larger providers entering the competition for SME customers aren't necessarily a threat to companies like FatCow.
"They can only take their products and services to a certain margin down-market," he says. "They have very large data centers and they have huge infrastructure, so when they decrease their prices, they're going to have to realize a commensurate reduction in service. We're actually looking forward to some of the larger guys coming into the market so we can potentially pick up the churn from them."
FatCow achieved monthly profitability in mid-2002, an uncommon feat in the high-tech business. And Fewell expects the company to continue experience the same, or greater, rate of growth for the next 12 to 18 months. "Beyond that," she says, "it's hard to tell."
