Sunday, March 19, 2006

More or Less

After almost 10 years in the web hosting industry, I'd gotten used to the idea that more is better. One-upping the competition means building data centers with more square footage and more GigE connections, and offering hosting plans with more disk space and more bandwidth. More advertising is also key. Bid more on Google Adwords and buy more ad pages in every magazine you can think of. 1&1 does, and according to Netcraft they're the world's second largest web host!

I've just finished reading Blue Ocean Strategy, though, and here the authors argue that more is... bad. When multiple companies try to make nearly identical products bigger/better/cheaper, consumers are encouraged to comparison-shop based on price, and profit margins plummet. Instead, look through a list of value propositions that you and your competitors share - what can you eliminate? For instance, take the money-losing circus business, get rid of expensive-to-maintain elephants and bears, add a dash of high culture, and voila! Cirque du Soleil has sold out Vegas shows at high ticket prices!

Rackshack's (now EV1Servers) 2001 success fits this pattern as well. Robert Marsh created a mass market for dedicated web servers by eliminating customizable hardware configs and adding automated instant setup. He offered Cobalt RaQs and only Cobalt RaQs at a standard $99/month price - and was flooded with business even during the dotcom bust. More recently, EV1's private racks program became another Blue Ocean case study (disclaimer: I used to manage it): give users isolated hosting environments with dedicated switches - but modify the traditional 'bring your own equipment' colo model. Instead, offer a selection of EV1 hardware they could lease. Phones have been ringing off the hook: less upfront cap ex for customers, and more recurring revenue for EV1. What could be better?

So... what will be the next web hosting money maker? The winning concept these days seems to be web hosting without web hosting. Take a quick poll the next time you're at a Starbuck's or the dry cleaner's: how many of the folks in line have a web hosting account? I'll bet a good number of them don't even know what web hosting is. And yet these same people might have profiles on MySpace, or photo albums on Flickr, or resumes on Linkedin, or backup space on, etc. Could they be persuaded to build their own websites and consolidate all these functions on I think not. But... as cool tools proliferate, might users be interested in a web-based dashboard from which they could manage logins, view stats and display select content from multiple sources?


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