The Shift in Web Hosting: Are You on the Upside

Session S8 The Shift in Web Hosting

Are You on the Up Side?

David Snead (dsnead@dsnead.com)Isabel Wang (isabel@isabelwang.com)

Overview

Do-it-yourself vs do-it-for-meFront office/back office convergencePing/power/pipe vs new business modelsHardware vs softwareKnowledge is power

Web Hosting Targets DYI Audience

• Large amounts of bandwidth and web space

• Large numbers of databases and email accounts

• CGI-BIN/Perl/PHP…• “Install dozens of free apps”• Google/MSN/Yahoo credits• Customer must assemble

ingredients into solution

(My friend Irakli makes amplifiers by hand!)

Amazon: Do-It-For-Me Purchasing

• “Customers like you” auto-recommendations are responsible for 30% of Amazon’s sales

• Similar technology from Aggregate Knowledge helped Overstock.com generate $100M in additional revenue

• It’s profitable to help customers choose!

Google: Do-It-For-Me Apps

• Google Calendar, Google Talk and Google Docs & Spreadsheet are auto-integrated with Gmail; nothing to install

• Presentation app on its way

• Coming soon: Google Checkout and Google Base integration?

• BTW: Google Apps now has Partner Edition for ISPs

eBay: Do-It-For-Me eCommerce

• All-in-one store building and online advertising process

• Listing tool auto-generates product descriptions based on ISBN

• Built-in traffic from peer-rated buyers

(Even customers)

Online (and offline) business encompasses…• Personal productivity/data management• Collaboration/information sharing• Vendor & inventory management• Customer & transaction management• Sales & Marketing• SMBLive CEO Matt Howard says web services

providers should be facilitators for these “five conversations”

• Check out BTTradespace.com!

Front Office/Back Office Integration

eBay: End-to-end Service

• Market research: competitive sales/pricing data for $10/month

• “Featured items from favorite sellers” newsletter

• Print postage/mailing label, request pick-up and track packages from PayPal interface

Shopster: TOTAL Solution Provider

More than Ping/Power/Pipe

• Alternatives?– Pay per seat? (SaaS)– Pay per hour?

(Amazon EC2)– Pay per item

requested from web server? (Amazon S3)

– Pay per transaction? Pay % of ecommerce proceeds? (eBay)

• Overselling– Billing is NOT

aligned with customer activity

– The more resources customers use, the more hosting providers lose!

• Overselling– Billing is NOT

aligned with customer activity

– The more resources customers use, the more hosting providers lose!

• Alternatives?– Pay per seat? (SaaS)– Pay per hour?

(Amazon EC2)– Pay per item

requested from web server? (Amazon S3)

– Pay per transaction? Pay % of ecommerce proceeds? (eBay)

• Overselling– Billing is NOT

aligned with customer activity

– The more resources customers use, the more hosting providers lose!

Give it Away for Free?

• Google/Yahoo! will double or triple revenue per user within 5 years with improvements in ad targeting technology

• Average hosting provider will not see ARPU growth of 42% per year :(

Says Morgan Stanley

2006 2011

Ryan Air: “Wal-Mart with Wings”

• $300 million+ out of $3 billion annual revenue from sales of 3rd party products

• CEO wants to make all flights free within 10 years; audience monetization more profitable than ticket sales

Hardware vs Software • New technologies reduce

downtime and data loss– Virtualization– Grid hosting– Distributed storage– P2P content delivery

• “Fast hardware replacement” SLAs losing relevance. The question is not how to stay online, but what to do online

Are You a Software Company Too?

• Cisco: “We’re a software company wrapped in steel”

• eBay: 100,000 lines of new code every 2 weeks

• Software encompasses more than end user apps like PhotoShop and PowerPoint. It provides framework for business processes

BT: Phone Co or Software Platform?

• Nicholas Carr: Software kills hardware

• Web 21C API gives .NET. Java & PHP developers access to BT’s underlying telecom network

• Capabilities exposed through web services include SMS, voice call, conference call, mobile subscriber location…

Introducing the SLDN!

• With SoftLayer’s open API, developers can integrate provisioning, remote reboot, bandwidth graphs, etc into control panels, third-party applications and even corporate intranets

• “SoftLayer is evolving into a software oriented company”

Knowledge (via Software) is Power

• Google CEO: “personalization is the future”

• Quantcast CTO: “eCommerce is destiny”

• MIT Media Lab: can predict your schedule with 79% accuracy

Marketing is NOT Game of Numbers

• Amazon: auto-recommendations responsible for 1/3 of sales

• Aggregate Knowledge: drove $100M in additional sales on Overstock.com

• Robot Replay: captures website visitors’ mouse movement – what if data were used to optimize site config on the fly?

• Staying competitive = thinking beyond one-size-fits-all ads, website content & service plans