Since you've been involved, Web hosting has evolved from a sort of loosely organized cottage industry into one in which there are some larger organizations and public companies setting standards a little differently than perhaps they had been in the past. Do you think this is a point where some big-money business sense is going to start influencing the way that Web hosts operate?

Isabel Wang: First of all, what do you mean by "Web hosting?" There is Web hosting in terms of putting up servers for content, in which case colocation would count and big companies - such as Proctor & Gamble's in-house data center would count. Are they Web hosting? Yahoo! and Google are each spending several billion dollars to build out their data center infrastructure. They build the infrastructure for the sake of hosting data and applications. So are they in the Web hosting business? I think it's hard to draw the line between what is Web hosting and what is not.

Let's say a company that would actively define itself as a Web host. I doubt that, say, MySpace would consider itself a Web host.

IW: That's interesting, because will big money come to people who consider themselves Web hosts? What will big money consider the investments? For instance let's think about GI Partners. Do they think about Web hosting the way The Planet might think of themselves, or do they have different ideas about the way it should be?

I would imagine they do have different ideas.

IW: Right, so Web hosting is a very hard to define term. It's different things to different people. And if you go out on the street and ask someone at Starbucks, they probably still don't know what Web hosting is. So there is such a diversity of viewpoint.

You know, I think of Web hosting as giving space and connectivity to stuff that needs to be on the Internet. And in that sense, there is hardly anything that is not Web hosting related. If you think about what the Google technicians are doing in their data centers, it's not all that different from what I was helping EV1 customers to do. And so should we include people whose goals are the same technically - to keep things up and running nicely - or should we only consider people who are doing it on behalf of a third party.

The fact that Google is basically doing the same thing technically behind the scenes might the potential to impact the way somebody else who does it for a third party might run their business.

IW: At the SWsoft Summit, Serguei's definition was that Web hosting is more about community. It's the group of people who have been offering hosting to third parties. And they're doing it for the mass market. So not enterprise level, and not millions of dollars a year. But they offer smallish hosting to large numbers of customers - and it falls into the usual shared, dedicated, VPS and these kinds of products. So Web hosting is defined by people who are involved in these types of activities and have been for the last 10 years. And so the question is, are they still relevant? Where should they go now?

And you have to think about resellers. If you think about one of EV1's resellers, and then you go down several levels, are they still Web hosts if they don't have any responsibility for managing the infrastructure?

Do you think that the money of big investors who might be consolidating some of these resources has some potential to influence the way that community is doing business right now?

IW: You know, I was at an ISPCon session, and every single person raised their hand when Dean Mann from DH Capital asked if they were planning to either buy or sell. Seriously, every single person in the room raised their hand. So I think some consolidation will be going on, but I don't know that a lot of external money will be coming in.

You mentioned that there was a distinction between that the innovation and instinct that a lot of these providers, say EV1, brought to the business, and that got them to where they are, and the way that, say, GI Partners does business.

IW: I think the larger hosting providers may have grown to the point where systems and processes become important. I learned a lot from working with Robert [Marsh]. He was a real entrepreneur. And he actively took risks. He would think "well this is a real interesting product. Let's go out and buy 1,000 and, you know, see if it takes off."

[GI Partners] thinks Web hosting has grown to a large enough and professional enough point where to further grow a company you need the market studies and beta testers and the kind of typical things that a technology company does.

Is that something that businesses like GI Partners will bring to Web hosting?

IW: I don't know. There haven't been a lot of GI Partners around. So far it's just an isolated incident of one large private equity fund deciding that it would like to get into the business, so it made a few acquisitions. But I don't think this alone is indicative of a trend that more and more people will come and snap up hosting companies.

Large hosting companies like EV1 and The Planet are not that numerous. The whole market is very segmented. I think Serguei said that among his customers, the largest probably have 5 percent of their local markets. And so that's why you'll see a lot of smaller providers joining forces. I met someone at ISPCon who said that he made 27 acquisitions recently, and he set up a 300-step process to consolidate them into his platform after the deals.

So I think there will be a lot of joining of forces and building of larger organizations. But I'm not sure that there are enough obvious targets in the market for someone to come in and buy. Like 1&1 in Germany. They're already publicly traded and they're quite large, so I would imagine they might be interested in a few more acquisitions.

There's an example of a company that's largely owned by a very large organization that might be more adverse to the kind of risk-taking you were describing earlier with Robert Marsh.

IW: The only reason we have the low-end dedicated and managed hosting today is that Cobalt gave Robert Marsh a call and asked him if he'd like to buy 2,000 servers and he said yes, sight unseen, without even knowing that he was going to launch a hosting business. He just thought "hey, why not? This sounds great. What can we do? We'll make it cheap. We'll make it fast. And it'll go out the door." And it did. And before that point, hosting was $500 per month or more. So I think as hosting grows larger, there will be fewer of these really exciting "let's do it now" decisions.

I'd like to talk a bit more about that potential for smaller providers to protect their share of the market by banding together. Does that necessarily mean acquisition, or is there another way for that smaller segment of the hosting community to work together to protect their market share even against foks like Microsoft and Google?

IW: I think when multiple companies consolidate there is more economy of scale - you can maintain fewer data centers, have fewer employees and have more marketing resources. In that respect you can be more profitable.

But I think Microsoft and Google continue to be a risk. According to Microsoft, the Office Live service, which has free hosting with minimal amounts of storage space and a free domain name, already has in the "hundreds of thousands" of users. That's meaningless, because it's free and people may or may not be actively using it. So the question is how well they will convert afterwards, and if they do convert, they'll take away market share from people who might have signed up for a paid account.

But scale is not the way to compete against Google or Microsoft.

IW: I think the industry needs to be more innovative. Right now there are so many Web-presence-like services; they are not Web hosting, but they serve many of the same functions. I've been checking out a lot of the AJAX homepages. And they let you drag and drop a lot of tiny applications onto a page. And Things like this, I think, are probably more likely than Microsoft Office Live to attract entry-level end users. If you just want some kind of photo sharing capability or a group calendar, it's not worth your while to learn HTML and download PHP scripts.

So somebody might turn to Flickr instead of Go Daddy?

IW: Definitely. Because with Flickr you can have your Photos up and running immediately. And with Go Daddy, I've downloaded every single one of their photo displaying applications, and none of them are as flexible or user friendly.

I think Go Daddy is very easy to use, and very user friendly in comparison with other hosting providers, but when you compare it to other consumer based Web services, it feels a little bit behind the times.

Let me give you an example. I used to host my blog at Go Daddy. And it was user friendly, it was fast, it was easy to configure and all that. But compared to TypePad, it doesn't have the plug-and-play capability, or all kinds of other third-party applications. A lot of the newer Web services, they're very good at working together with other applications so that you can drag and drop a lot of things like stats tracking, calendars and photos. You can integrate a lot of things into your Web site really easily, whereas in the traditional Web hosting environment it requires a lot more savvy. And maybe today's consumer will not have the patience for that.

One view the SWsoft people have is that a lot of the Web hosting providers today need to hurry and move upstream, because while all the Googles and Microsofts and venture-funded Web service providers might capture the low end, they're not ever going to do complex hosting or help people set up a complex infrastructure. So if you target the high end, it's not going to be eroded by these free services.

Do you think that's the answer?

IW: I think you have to move upstream if you want to offer some traditional "here's some space, you install your application." Or you have to compete in the modern space, where you really get to know these plug and play applications, and you build a really slick interface.

All these applications seem to be inviting a whole new audience of sort of do-it-yourself publishers to the Web, but at the same time limiting their need for any traditional kind of hosting.

IW: If you think about MySpace, it's gotten 70 or 80 million people online. And these people are really active on the Internet. They discuss things with their friends. They exchange data. And now there are all these Widgets on MySpace, which allows you to set up a store, or participate in an affiliate program. So you're used to social networking and commerce and all that online, but that doesn't mean that you have the technical savvy to maintain a Web hosting account, Nor will you ever feel like you need to. You'll say to yourself "hey, I can do these things already." So when the MySpace generation grows up, they will most likely see the value of having business Web sites, but will they want to rent out a dedicated server and try to configure things? I'm not so sure.

So what lies upstream for these hosts that go there?

IW: Well, first of all, one prime market is developers. Because more and more people will be building diverse types of Web services. So that once again goes back to the message that you need to have higher-end hosting solutions that include different database capabilities, more bandwidth.

There are two diverse types of audiences, I guess. There are the really technical people, who will always exist. And their requirements will only continue to grow. They will need the latest and greatest platforms and technology and more and more CPU and RAM and bandwidth. Imagine the hosting requirements that MySpace must have.

I would imagine they are considerable.

IW: And at the same time, imagine the MySpace users. What kinds of hosting will they grow up needing? Something easier to use. Something with more drag-and-drop features. Something more seamless to them.

So is there an opportunity to cater to those users as they move beyond something like MySpace?

IW: Even when you read Go Daddy's FAQ, which it seems like they've put significant resources into, it's not going to be comprehensible to someone who is not technical. I think there's definitely room to make today's Web hosting services a little more user friendly.