ISPcon Brings ISPs and Hosts Together

• By theWHIR.com , May 31, 2005

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By Philbert Shih, theWHIR.com

 

May 31, 2005 -- (WEB HOST INDUSTRY REVIEW) -- ISPs are gravitating toward Web hosting in growing numbers. In the past few years the industries have become more intertwined. Last week at Internet service provider conference ISPcon (ispcon.com) this relationship played out among the ISPs, Web hosts and vendors that support them that gathered in Baltimore, Maryland.

 

Paul Engels, vice president of marketing and business development for Hostopia (hostopia.com), conducted the first Web hosting session "How to win against the larger providers," which made note of the growing ISP presence in hosting.

 

He described today's fragmented shared hosting space - comprised of roughly 10,000 retail hosting providers but lacking in any single dominant leader. ISPs represent about 44 percent of the market, says Engels, with national ISPs like Earthlink (earthlink.net) comprising roughly half of the 44 percent, and smaller regional ISPs representing the other half.

 

Engels believes the market is experiencing a significant shift with telecommunications companies and local exchange carriers gaining significant ground in hosting.

 

"Probably the fastest risers that I have noticed recently in the last few years in the hosting space are the telecommunications companies, CLECs. They've come from nowhere in three years to 14 percent market share." And Engels believes that they will occupy a full quarter of the shared hosting market within the next three years.

 

But despite the increased competition from telecommunications companies and even registrars, and the fact that the shared space is growing slower than the dedicated, says Engels, it is still a remarkably even playing field. But to make a mark, hosts and ISPs must focus on competing against the larger providers.

 

First and foremost, he says, they have to understand the new breed of customer represented by the small and medium-sized business. Today's hosting consumer is "a dramatically different individual, somebody that literally knows less than nothing about hosting."

 

Such customers are finicky, fearful and frugal, says Engels, and these characteristics require a careful approach from hosts. They love money-back guarantees, buy what's popular, want support even if they don't use it, have a need to be educated first and are comforted by testimonials and successful case studies. They also need to be spoken to in a way they can understand. It's all in the presentation and packaging.

 

Pricing, contrary to many perceptions, is not important. Getting the right service and solution in place without a great deal of stress is. "They are willing to pay the higher price to get their hand held, educated and to feel that they are making the right decision," says Engels.

 

Bundling of value-added services to make hosting more compelling is another must with the most critically important of these being Web site building software.

 

There are great opportunities for hosts, says Engels. They can leverage the cost advantage they have over telecommunications carriers and publicly traded companies like Interland which have much higher cost structures, he says. And they can offer more competitive prices and use their position as pure-play providers to present their offerings in a more effective way. Engels says ISPs have, to this point, done a relatively poor job of selling their hosting services.

 

Web hosting was also the focus of the panel discussion titled "Pathways to profitable hosting." The panel included Serguei Beloussov, CEO of SWsoft (sw-soft.com), David Wippich, vice president of sales and marketing for Ensim (ensim.com), Shelley Siebert, general manager of Alabanza (alabanza.com), Scott Medenhall, CEO of OpenHosting (openhosting.com) and John Mckown, president and CEO of Delaware.Net (delaware.net).

 

The panelists were asked what feature was most commonly requested by end users. Siebert said tools for making sites more interactive are a popular request and Mckown pegged email, spam and virus filtering, in addition to site content management. Meanwhile, Wippich and Beloussov both cited the importance of more advanced Web site building tools and content management systems.

 

The panelists also tackled the service provider angle, discussing what hosts must do in order to increase revenue per customer. Siebert, Wippich and Beloussov all agreed that up-selling is the best way, using easily accessible revenue sources with little associated acquisitions costs. Mckown and Medenhall cited cost cutting through automation and the use of open source tools.

 

Customer acquisition strategies were also touched on. The panelists agreed that PPC continues to be a viable strategy, but Beloussov noted that, Google Adwords in particular, is making it a more expensive endeavor. As a result hosts need to look at other marketing avenues. Wippich pointed out the low-cost benefits of case studies and press coverage while Beloussov encouraged hosts to contemplate more traditional forms of advertising such as TV and print, and get creative and think about putting ads in office catalogues for example.

 

On the last day, a seminar that focused on customer service for Web hosts and ISPs was given by Lou Honick, CEO of HostMySite.com (hostmysite.com). Honick said companies have to nurture the right environment in order for a positive customer service ethos to grow. "It's about creating and crafting your own service culture," he says. "Ultimately it has to take on its own persona, it has to be your own."

 

The process starts at the top, Honick says. "Management must make it happen. As you grow it really becomes important to indoctrinate your employees with your customer service philosophy."

 

ISPcon's Web hosting sessions touched on a wide range of topics. And the depth of the discussion, along with hosting's growing appeal among ISPs and registrars, point to the industry's continued evolution and relevance outside the hosting business.

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