Host Europe Buy Makes Hosting Force By Jay Lyman
This story appeared in the June 2004 issue of Web Host Industry Review magazine. Click here to subscribe for free.
June 16, 2004 — (WEB HOST INDUSTRY REVIEW) — There is no doubt that the Pipex Communications (pipex.net) acquisition of Host Europe (hosteurope.com) creates a bigger force in the European market, but the joining of the broadband service provider and hosting and services company may also represent a new wave of partnerships, products and services emerging in the area.
Both British companies have called the £33 million deal a recognition that customers want telecom services from a single company, calling broadband connectivity and hosting a “compelling bundled offering.” The unified company, now among the top telecoms and hosting providers in Europe with a recent six-fold increase in customers, is also planning to put more priority on the hosting and managed services market, balance the current services it offers and lay the foundation for future hosting growth from the combined businesses.
The Pipex acquisition of Host Europe, which specializes in domain registration and hosting for small and medium-sized companies, also represents the recognition of opportunity in the lower end, shared hosting market, particularly in Europe, according to Gartner Inc. principal analyst Ted Chamberlain.
“That’s one slice of hosting globally that we see growing,” Chamberlain says. “Dedicated hosting is certainly doing well, but shared hosting is too. It’s budding in Europe.”
Chamberlain says ISP hosts in Sweden, Norway, Germany and the UK have signaled to him that they are increasingly looking to shared hosting and next-generation services. Those companies are also looking for partners and acquisitions, which means the Pipex deal could be a harbinger of more consolidation and partnership on the horizon.
“They’re looking at other market opportunities and who to partner with,” he says. Host Europe’s chief executive Abby Hardoon said the acquisition, a recognition of Host Europe’s value, would combine hosting and Internet services with “a strong, ambitious and growing telecommunications services business.”
Hardoon also indicated that Host Europe may have been reaching its limits in terms of serving a growing customer base. “Pipex Communications’s existing data center capacity removes a constraint to our growth,” Hardoon said.
Pipex chairman Peter Dubens called the acquisition a reinforcement of the company’s position in the UK. “This acquisition will expand our hosting services, further improve the mix of products that we currently offer our customers and increase our gross margin,” Dubens said.
Gartner’s Chamberlain says the deal may actually serve as more of a platform for future products and services that are similar to more advanced offerings in North America and in demand in Europe.
“These companies are realizing that now is the time we have to start building our products and they’re looking across the shore,” Chamberlain says. “They’re now looking outside of data to voice and applications. This should spawn a little more of a product rev up from the European guys.”
Chamberlain says that despite the lagging linchpins of shared hosting ? weaker-than-expected broadband penetration and domain name demand and availability ? the sometimes overlooked hosting segment is still an expanding part of the market.
“Managed and dedicated hosting is growing the most, but shared hosting is not far behind,” he says. “Shared hosting is growing.”
European Price Plungers
While the Pipex-Host Europe deal may highlight a trend toward similar bedfellows in that market, some European companies are aggressively setting their sites on the US market, according to Helen Chan, a senior analyst with the Yankee Group.
“There’s a lot more expansion effort from European companies coming to the US,” she says. Accordingt to Chan, companies such as UK-based 1&1 Internet, among the most aggressive, are using low prices to try to pry away market share from others in the US small and medium market.
“They don’t have the brand cachet to compete, so they’re using very aggressive pricing and driving some price pressure,” Chan says. “It’s all value proposition at this point.”
She says prices have gone as low as $45 per month for a dedicated server, or $7 per month for a shared hosting seat. “Five dollars for a Web hosting account is really, really cheap.”
She adds that while the US market share of the European companies was still small, larger US providers such as Interland and Yahoo, as well as others, are feeling the ripple effects.
“They’re not going to compete on price,” says Chan, “so what they’re doing is layering on services that add value.”
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