I’ve spoken last week to the owner of a very popular U.S. shared web hosting company about how does he see the market. We discussed services shared hosts provide, billing and fraud issues, marketing techniques as well as the future of the shared web hosting.

He told me he is used to pay about $450,000 to affiliates each month. I have to admit I was surprised of the big money paid only to get customers. As I’ve been told his company pays up to $120 per sign up for web hosting plans which cost $85 per year. The host guy has also told me he makes a profit from the second year, when its customers renew the account.

Let’s resume. This shared web host makes $40 per year on $170 paid by web site owners but only if they renew. If they don’t it looses money. At least virtualy.

Another important thing that consumers should know is that any affiliate program saves to providers some money which have to be paid as commissions to publishers. This is because some providers keep the affiliate cookie for 30 days only and do not pay commission if they have to issue a partial or full refund to a customer. It other cases users just do not allow cookies to be saved on their computers or just delete them from time to time.

So the profit that the shared the web host mentioned above makes is probably higher than those $40 for two years. But even a little bit higher the payout is still not to high.

Drawing the future growth. How to change?

Shared web hosting market changed a lot within the last two years. The number of providers has increased a lot and the profit they share is decreasing year by year. So the questions is how to keep a company profitable and competitive so it should be able to produce and deliver a quality service?

There are many ways to make a hosting business to keep growing. Some of them include outsourcing as a way to reduce costs. Buying an advanced technologies which help the web hosting business to be more innovative, and investing in knowledgeable staff are also important thing to do. But the step that I believe is a key to success is change of the business philosophy.

What does an average shared web host do? A standard company buys dedicated servers or colocates its own machines in any datacenter. In most cases the servers come fully equipped so web host can focus on sales. Some companies develop their own in-house hosting automation software in effort to brand the service, but most buy the software from third parties.

The way most companies do shared web hosting results in a less innovative, standard products and services, which do not allow most of them to stand out of their competitors. At the same time the growing number of so called free providers which offer hosting services similar to those shared hosts provide is killing the shared hosting market. Free web hosts of course can not compete the budged ones concerning the customer care and technical support. They just don’t have them. But at the same time most of them offer a decent uptime.

So if someone has to pay a few dollars per month to host a web site which is not very important for them they might decide to go for a free hosting account. There are millions of web sites that do not require a frequent update, database support and regular correspondence with technical staff. And their owners might choose a free web host.

What would make a shared web host attractive is its business philosophy. Providing a web space, file transfer and a few pre-configured software applications is just not enough. it does not brind value. The web hosting company can brand the business or either to work on building its own service platform that would allow it to offer an unique services and products.

This may include an owned hosting automation system, and and unique model of providing customer service and support. Spending money on research and development as well as the implementation of various value-added products and services are also essential. Shared web hosting becomes more platform that helps web based business to grow than a standard service.

The time when thinking of how to change the basis of web hosting and business approach to customers has already come. Both are more vital than the technical features and the numbers.