How the Web Hosting Industry Revolutionized E-Commerce | WebReference

How the Web Hosting Industry Revolutionized E-Commerce

How the Web Hosting Industry Revolutionized E-Commerce

By Ben R. Neumann

The Battlefield Is Defined

The Web hosting industry is a colossal virtual battlefield populated by a number of disparate groups, some in allegiance, some actively at war, but each ultimately fighting to maintain or gain on its own piece of the field. Surrounded on all sides, in the middle of the battlefield, are the customers who attempt to choose their own alliances wisely.

The Web hosting industry has, for all practical purposes, existed for about nine years and is maturing rapidly, with many of the mid-sized companies being consolidated into larger concerns and a general increase in the quality of service industry-wide. The battles in the Web hosting industry are relatively healthy, particularly for consumers. As more and more hosting companies enter the fray, the larger companies are forced to differentiate themselves through quality of service, reliability, and their price point, meaning that customers are always getting more for less.

So what has caused such a boom in the Web hosting industry in the past few years? How is such a seemingly over-saturated industry still expanding and providing fresh opportunities to industry newcomers and customers alike? More importantly, what does it mean for you as a customer?

Collapsing Costs Mean More Opportunities

In 2004, it's possible for almost anyone to set up an e-commerce Web site, although this is a recent development. In the '90s companies would spend millions of dollars to launch a Web site and to license technologies which anybody can obtain for less than a few hundred dollars in today's market. There are a few reasons for this, and the primary one is due to changes in the Web hosting industry.

The biggest catalyst in the Web hosting industry in recent years has been a crash in business costs at all levels of operation. The cost of servers and disk space are at an all time low while processing power has increased exponentially, allowing companies to make the most out of the least equipment. Bandwidth is cheaper due to major investments by the large backbones and telcos and, partly due to September 11th and the world's current economic problems, office rental, salary, and data-center costs have slumped, making entry into the market easy.

When I entered into the Web hosting industry in 1995, things were radically different. In 1997, for example, my first Web hosting company was offering a 10 megabyte hosting package for $19.95 per month, very competitive at the time but a price point far above the industry average now. Most hosts can now offer you at least several hundred megabytes of Web space for under $10 a month, supplying high-end technologies at low-end prices. Hosting an e-commerce site with hundreds of graphics, complex shopping cart systems, and secure checkout functionality would have cost you hundreds - or even thousands - of dollars per month just several years ago!

The Rise of the Ubiquitous Domain Name

If the Web seems to be in another boom stage in 2004, it's thanks to the tumbling costs of domain names. Chances are, you know several people with their own domain names, and possibly their own weblogs, but this was probably not the case in the late '90s when prices were high. The industry was shaken up in the late '90s with the introduction of competing registration companies for .COM, .NET, and .ORG domains. Network Solutions previously held a monopoly over all of these top level domains and charged $35 per year per domain name, putting a personal domain name out of the reach of most regular users.

Nowadays, domain name companies only have to pay Verisign, the central administrator of .COM domain names, $6 per year for each .COM domain name they register. This, combined with the increase in competition, has resulted in domain name prices tumbling down with most registrars offering domains for between $7 and $15 per year. Some registration companies even offer domains at below the $6 Verisign fee and try to make up the difference by selling extra services such as Web hosting and e-mail forwarding services, leading to yet more competition in the Web hosting industry.

It's beginning to become commonplace for Web hosting companies to offer domain names for free with their packages, although usually only if you buy for a year in advance. The $6 wholesale domain name fee has allowed the domain name market to boom, with many "vanity" domains being purchased, and domain names have even become perfect gifts. Who would turn down receiving their own name as a .com domain name? It beats an anonymous <em> or <em> suffix, and mail forwarding services mean that mail to the new domain can be forwarded to the recipient's address of choice!

Savvy Customers Keep Us on Our Toes

With the reduction in business and technology costs, the barriers to becoming a Web host have disappeared. Anyone can rent a server at a reliable data-center for less than $200 per month, set up a PayPal account, and claim to be a "Web hosting company" all within a few days. To talk of people running businesses "from their bedroom" is a cliché, but not far from the truth in many cases. While some of these small hosts can provide reasonable levels of reliability, customers are usually not made aware of the size of the Web hosting company they're checking out. It's important, therefore, for anyone who's buying a Web hosting package to get a good sense of how established each prospective company is before typing in the all important credit card digits.

Customers are getting wiser, however, and the amount of "Net savvy" customers is beginning to outnumber those who still need regular hands-on assistance. The prevalence of the Web in our daily lives has dramatically lowered the barriers of entry. A small-budget local sports team, or a club of any sort, can maintain a Web site, and even sell memorabilia online, without breaking the bank.

With the increase in customer know-how, Web hosting companies are being pushed into an age where they can't blind customers with science, but have to actually give customers what they want and have to develop new services for a savvy customer base.

If you're interested in getting into the world of e-commerce, now's the time to look around at the current offerings. The wars on the Web hosting industry battlefield will continue as the industry matures, but so far the victors are the customers who are able to get thousands of dollars of services for less than ten dollars per month. Consider this, how many other industries can make the same boast?

About The Author

Ben R. Neumann is the founder of, a Web hosting company with a particular focus on providing e-commerce tools and functionality to enable any business to sell products and services online. Ben is one of the few people credited with pioneering the low-cost Web hosting industry when in 1995 he founded Internet Communications, a leading Web hosting company of its time, which he sold to Interliant in 1998 and is today owned by Interland. For more information, please call 323-874-9000 or visit

Revised: September 10, 2004