Are you an owner of a startup web hosting company and you are about to decide how to develop your business? Do you consider to start providing web hosting services or probably to buy a web host? Cloud computing and “Service Clouds” accelerate certain changes in the web hosting market. One has a number things to consider before make a decision on whether to enter the hosting industry, continue developing web hosting services or to focus on any thing else.

I would suggest anyone who’s involved in web hosting business one way or another to consider the following:

1. Oversaturated Market
Competition in today’s web hosting industry is huge. Five or ten years ago whoever started with one server and put some money on advertising, already got hundreds of customers. It was easy and very profitable business. As of 2015, there are ten thousands web hosting providers of any kind. I’d suggest anyone to research the market very carefully, to review where, in which market niche, one would have better chances to succeed.

2. Getting Customers
Where does a new web hosting provider (or even a well-established one) get customers from? Would the company focus on selling locally or it’d search for customers nationwide (if the web host is in the U.S., UK, Germany, France, Spain, Italy, Canada or any other very populated country) or even globally. Whatever the target is, it will require different approach to sales and marketing.

3. Advertising. Where And How To Organize It?
Google Adwords charges up to $40 per click or even more on certain keywords and phrases? Facebook ads cost more than $1 per action depending on the advertising campaign. A new company might need to spend a fortune bidding for clicks, without any guarantees that it’d get quality targeted visitors or covert those visitors to customers. Anyone who advertises with Google Adwords should be very careful as Google’s Ad service would virtually waste one’s advertising budget displaying ads on irrelevant websites of low quality and to send visitors who are just not interested to buy web hosting services. There are millions of websites part of Google AdSense publisher network, who’s owners do everything possible to make people to click on the ads they display and use various tricks to “force” a click. A good example are the free online steaming websites. Their owners “force” users to click on ads in order to start content delivery. This is a waste of money for advertisers.

4. Traffic Conversion
One would probably use any traffic analytics system not just track website visitors, but to see which traffic sources are effective and which aren’t. Some websites would work for branding and would send a huge amount of traffic with low or even zero conversion. Others would send very few, but quality targeted visitors, who’d become customers. One needs to research, manage traffic sources and website analytics. Otherwise the web hosting provider would either loose money on advertising or miss opportunities.

5. Remarketing
What does one do with those who visited the web hosting provider’s website and then moved forward without buying or using a contact form? Are they future clients? Can you use them as referrals? Many people might visit web host’s website today without having an intention to buy. Does the web host management team want to get the best of them? Any web hosting company has make sure that it has the right tools to make people to interact with the website, to leave feedback or even to make a referral. I have seen some web hosts to display messages to visitors who are about to leave their website asking them a simple question or giving them a discount? It is cheap, it is annoying, but I guess that it works!

6. Customer Support
Would a web hosting company spend a lot on supporting customers internally by employing and training support or it’d outsource customers support operations to any 3rd party? There are many companies that specialize in providing Customer Support, would you hire one of them. If you do, this would mean to give full control over company’s web hosting accounts to a third party.

Keeping your support operations in-house is the best option, but it is the most expensive one, as well. So this is something one needs to decide about. And it has to be the right decision!

7. Billing & Fraud Prevention
There are plenty of options to bill customers if the web hosting company is a well established, legal entity in any country with developed financial service industry. One would get an online merchant account from any bank and would use many other options, with PayPal on top of the list. However, operating a merchant account means that the company has liability to deal with online fraud. It is not that hard to deal with fraudsters, but any online merchant has to apply an advanced fraud prevention technology and order screening procedures to prevent fraudsters to become “customers”. Any fraudulent transaction that would go through will result in a chargeback, which means a loss of money and a fraudster onboard.

One should also consider the fact that there are dishonest people, who’d use a web hosting company’s services and then try to reverse the payment and get their money back. I have been experiencing this myself through the years, having few customers who were very abusive and even brutal to my team. Those would not just abuse your services, they would reverse their payments and even start submitting negative reviews in consumer feedback websites. Be ready to respond adequately. You cannot afford to be impolite or aggressive and go against them. This would ruin your company’s reputation, despite that you or your employees did not do anything wrong.

8. Web Hosting Plans – What’s In The box?
If you one is about to start a new web hosting business, one would need to come up with a service that has all the tools that other, well established hosting providers offer.

Most people like going with big brands and big names in any industry. It is the same in web hosting. In order to make one to choose your company you’d need a competitive advantage. This means to offer the same services and applications the big guys do and to go even further.

9. Keeping Customers
As soon as you get the customer, you’d try to understand one’s business, to review any website the customer hosts with your company, to add notes to account and to find a way to offer any value added services. This would make customers to appreciate the web hosting company’s business, to start talking about it or even to brag about the services they get from your company. It is not easy to do that, it takes time and significant effort. It pays off however.

10. Service Development & Upgrades
Depending on the market niche, in which the company is positioned, it is important to consider what one would do with those customers who need to downgrade or upgrade their services. Your web hosting company might or might not have infrastructure and capacity to cover all service levels, starting with cheap Virtual Hosting (popular as Shared Hosting) and ending up with the enterprise level hosting services. So it would help a lot to create partnerships with web hosting providers, which operate in different market niches.

11. Terms of Service
Do you know what most new online service providers do when it comes to create their business terms and conditions? They go and copy someone else’s terms. This is the worst practice to follow. Each business has something unique. Any web hosting company’s Terms of Service (or Terms And Conditions) must represent its own service model, to define what is possible and what’s not, to create a service framework in which provider operates. If the company’s management doesn’t know where to start and how to draw the service terms, it has consult with those who’d provide the company with infrastructure services. It is important to incorporate some of their terms in the web hosting provider’s legal terms.

12. Hosting Infrastructure Provider
Each and every web host buys capacity from other companies. In order to start a web hosting business, everyone should buy computing resources and services. My advise here is simple “Do not allow to be fooled by marketeers!”. I don’t know a sales person, who’d be fair and who’d tell you any single disadvantage that his company might have. They are all “the best”! So do not get caught! Ask for more information about any service or product, get into details and take your time to understand the options you got offered. If you are willing to take risks during the negotiation process, make sure you sign a short term contract or even go for month to month contract, with no obligations to renew. At the same time you need to understand that there rules in any industry and you’d not push to the point where the other side is expected to make an exception. Try to find a reasonable compromise during the negotiation process and never ever count on any promises which have not been documented. Sellers like having you on the phone and talking a lot. What you need is to get everything you have requested and they promised, written in the Service Order.

Finally. Make yourself known with your provider’s terms of service and if possible find someone to work with in your infrastructure hosting provider. When you open support tickets or have correspondence, be very descriptive and always provide detailed instructions, step by step. It is important to be friendly, patient, respectful and not to abuse the services you receive, or to be arrogant or impolite with your provider’s employees.

That’s it. These 12 points (not “Top 10”, as top ten is a simplified, untrustworthy way to describe anything) could be extended. The best one would do, if one has been patient a enough to finish reading this article, is to rewrite those 12 points in accordance to one’s business plan to establish successful web hosting company. That’s all folks.

About Author

The author, Dimitar Avramov is a founder of U.S. Colocation and IT Hosting service provider HostColor.com and European Colocation and Cloud service provider Rax.bg. He has 14 years experience in the web hosting industry, working in the field developing and positioning IT hosting brands.