By Liam Eagle, theWHIR.com
August 31, 2005 — (WEB HOST INDUSTRY REVIEW) — More than a year and a half since its entry into the North American market, European hosting giant 1&1 Internet (1and1.com) says it is meeting, and even exceeding, its expectations for success. The next big challenge, says the company, will be clawing for a place at the top of that market as well.
1&1′s relatively brief North American history – 18 months since its official launch in January 2004 – has been active and controversial. The company was the target of widespread criticism for a pre-launch promotion through which it offered free three-year hosting accounts to anybody that signed up. 1&1′s willingness to undercut the competition, and to spend money building its name, worried companies competing for price-conscious customers. Critics feared losing customers to a cheaper offering, and warned that customers taking 1&1 up on the offer would get what they paid for – in this case, not much.
But value is exactly what 1&1 is offering, says Andreas Gauger, the company’s CEO. Building a customer base with a free offering and relying heavily on word of mouth to develop the company’s brand made service quality and customer service critical to the company’s success.
And value is at the heart of the company’s latest offering – a domain deal designed to set 1&1 apart among hosting companies, particularly its two very well known competitors Yahoo! and Go Daddy.
“We’ve been offering domain names for a very low price since we’ve been on the market. But we are starting a new promotion where we add new features to domain names. Still the same low price – $5.99 per year, every year. And the new features will be private domain registration, a starter page, and an IMAP account. So you get all the features you need with your domain for a very low price.”
The key to 1&1′s new offering, says Gauger, is the packaging of more features for less cost. Several hosting companies and registrars offer domains for prices close to 1&1′s, particularly Go Daddy and Yahoo!. But neither of those offer the range of add-on features that 1&1 does, says Gauger. 1&1′s domains include the recently added ICANN fee, a POP/IMAP email account and private registration.
And while other hosts offer discounted domains with the purchase of a hosting package, 1&1 says it will include a domain for free with Web hosting.
Gauger says the goal for 1&1 is to capture that customer at the domain registration stage. The company is content to profit at the point that customer picks up Web hosting services, or expands on that entry-level hosting.
“We feel that domains are the first step into the Web hosting business,” he says. “And that’s why we have to be there for the customer with the best offer. Afterwards they will go up to a Web hosting plan, and we are the preferred choice for the guys who have a domain with us. This is just another extension of our marketing giving them the first step into the Web hosting for a very good price. And then give them the Web hosting for a very good price too.”
1&1′s aggressive promotions have helped the company grow quickly. Its 100-day free hosting promotion gained the company 140,000 customers. By March of 2005, it had gained another 200,000 paid customers. But, while Netcraft data places 1&1 well in the lead for both hostnames and active sites, the company is still well behind Go Daddy in the US.
Part of that challenge, says Gauger, is the much more recognizable brands of companies like Go Daddy and Yahoo!. Customers, he says, aren’t aware of the value that 1&1 offers. The company says it plans to highlight this comparison in its advertising.
“I think what customers don’t really believe is that our price is a real price, that there are no additional fees and that it is sustainable,” he says. “You don’t have to buy anything else and you don’t get another price in the next year. You can buy as many domains as you want. This is just the real price.”
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