Would You Like Web Hosting With That?

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Would You Like Web Hosting With That?
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By Wayne Epperson
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This story appeared in the July/August 2004 issue of Web Host Industry Review magazine. Click here to subscribe for free.
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August 24, 2004 — (WEB HOST INDUSTRY
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REVIEW) — For some companies, ISPs and other service providers
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especially, operating on the fringes of the Web hosting industry,
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moving into the business of providing the service themselves is just
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the next logical step. But it takes more than a modicum of finesse for
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such a company to broaden its focus while avoiding conflicts that could
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turn customers into competitors.
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Since Bravenet Web Services Inc. (bravenet.com),
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of Parksville, British Columbia, was launched in 1997, its core
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business model has been to offer free services to webmasters, with
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ad-based revenue support and upgraded premium services.
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With Web hosting always a top concern
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among users, Bravenet made a perfect advertising vehicle for many
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hosting firms. Recently, however, the company decided it was time to
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add Web hosting to its own product offering.
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Bravenet says its motivation for entering
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the hosting business came primarily from customer feedback. It already
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offered just about any tool or service imaginable for Web sites. The
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missing piece of the puzzle was Web site hosting itself. Prior to
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launching the hosting solution, the company had been running a
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co-branded model on a reseller basis for some time. It found, however,
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its options were limited in how it presented and priced the packages,
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what those packages included, and how it dealt with customer support.
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“By entering the market ourselves, we
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were able to provide the services our customers wanted, without
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third-party considerations and completely on our own terms,” says Bruce
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Whitehead, director of business development at Bravenet. “With the
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addition of ad-supported and paid hosting and its associated domain
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name registration services, we have increased both our range and volume
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of free and premium services.”
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The transition, according to Whitehead,
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has been smooth and Bravenet has maintained all of its former
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relationships with both providers and advertisers.
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“We appreciate that the scope of services
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relative to this market is very wide,” he says, “and that consumer
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demand dictates that we maintain a board range of options, which allows
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us to continue marketing related offers from our sponsors and
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partners.”
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The company avoided any possible
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conflicts with advertisers that offer hosting by careful market
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positioning, as Bravenet itself phased out the co-branded offering in
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favor of its own hosting service.
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“Phasing out the co-branded service was
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accomplished with relative ease, as we assimilated the former brand
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into our new service to allow existing users the ability to maintain
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their former sites, as well as review our new product,” Whitehead says.
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A company making that kind of foray into
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Web hosting is just the kind of customer sought by a service provider
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like InQuent Technologies (inquent.com) of Toronto, Canada, a company that recently went through a different sort of transition in its relationship with customers.
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InQuent started as a retail Web hosting
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provider in 1997, and two years later broadened its offering to include
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wholesale hosting. It remained in both businesses until mid 2001 when
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SBC (sbc.com) invested in the company.
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As part of that deal, the roles were divided. SBC, having the big brand
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and marketing dollars, focused on the retail space, and InQuent became
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more wholesale focused.
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When the arrangement with SBC ended in
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March 2002, and InQuent was back on its own, the company sold off its
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retail base to focus solely on the wholesale business.
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“We found that being in both businesses
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meant that we were competing with our wholesale customers. And that was
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a difficult position to be in,” says chief executive officer Kelly
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Hagen, who led the transition to a single business focus. “By exiting
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the retail business we were able to avoid all of that channel conflict.
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It allowed us to more closely focus on R&D and the technology. We
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no longer needed to have that retail marketing arm of focus on customer
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acquisition and the money required for that kind of strategy. Our
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expertise has always been on the R&D side and we decided to focus
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on the things we thought we were good at because it made more sense.
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“The retail provider really needs to have
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a strong retail marketing focus where ours is very much a
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business-to-business sales force type focus.”
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Today, InQuent counts among its private
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label hosting customers some of the top companies in the global
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communications business, including AT&T, Cox Business Services of
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Atlanta, Bell Canada, DSL.net, Radiant Communications and Telecom New
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Zealand.
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“We are going after service provider
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customers and that’s a very different process than the retail market
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where customer acquisition and customer retention are really big
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issues,” Hagen says. “You generally have to spend a fair amount of
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money in brand management and advertising if you want to develop a very
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sizable base.”
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InQuent, which is part of a small group
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of managed service providers owned by Mallory Ventures Inc. of
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Littleton, Massachusetts, has to be capable of supporting more than one
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retail strategy and has built an open technology to integrate with
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other systems.
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“The key differentiator for us,” says
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Hagen, “is the very high degree of flexibility we can offer to allow
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our customers to do whatever they want to do and what’s best for their
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markets. I think we are pretty unique in that sense among other service
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providers that are following this type of model.”
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InQuent’s pull away from the retail
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hosting business is a departure from the more common hosting strategy,
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in which service providers approach resellers as one sales channel
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among several, or many.
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More in tune with the traditional setup is Burlington, Massachusetts-based BizLand Inc. (bizland.com), which also offers its Web hosting services through a reseller program.
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Though BizLand provides retail hosting as
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well, the company only offers those services through its Web site, says
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Eric Rayleonard, director of channel marketing.
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“We don’t have a lot of channel
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conflict,” he says. “We don’t have a direct sales force, we have
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customers who go only directly to our Web site. We are going after
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fairly different customers. Our resellers are typically in niche
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markets or designers who have customers who don’t know anything about
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the Web.”
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Targeting a smaller, simpler type of
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reseller customer, BizLand provides non-branded support and billing,
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through its private label hosting program, to Web designers, Web
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developers and also small business portals that are looking to provide
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shared hosting with round-the-clock support.
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One of the interesting impacts the
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reseller relationship has had on the Web hosting business is that it
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allows companies from all kinds of areas to add Web hosting to their
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offerings, even if those offerings are as different from hosting as
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offline retail sales.
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One of the newest — and biggest — entrants into the Web hosting business is Sam’s Club (samsclub.com), the wholesale division of Wal-Mart, the world’s largest retailer.
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The company announced in early June that
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it had formed a partnership with private label supplier Vista.com of
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Redmond, Washington, to provide an inexpensive hosting solution for
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small businesses.
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The major selling point of this kind of
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outsider Web hosting setup, and really the whole draw of the reseller
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model, is its ability to marry the two sides of a technology offering;
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on the one hand, the solid and reliable technology foundation, and on
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the other hand, the popular brand, the massive marketing budget or,
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perhaps most significantly, the expertise in a specific market niche.
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Without reseller partnerships, that marriage is seldom executed well by
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a single organization.
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Bravenet, probably the best example of a
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company with an existing client base among whom the added-on Web
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hosting offering is almost certain to be a hit, is relying on that
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variety and specialization of Web hosting customers’ needs to dodge the
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conflict that might have arisen with advertisers.
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“We learned that no single provider can
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completely dominate the hosting marketplace,” says Bravenet’s
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Whitehead. “There are many niche markets to exploit, and to us that
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means we can continue to expand our services to maintain a growing
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client base, while continuing to provide marketing exposure to other
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providers. Obviously, it’s a lucrative business and competition is
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strong, but we have not seen a need to completely shut our doors to
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promoting alternative solutions. It’s just a matter of constant
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research and analysis to determine where the boundaries lie.”
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