Hosting: keep doing the same thing, you have already been eaten

We don’t really like provocative headlines, but if you work in the hosting industry, you’ll be interested to know what we saw in Parallels, studying hosting trends around the world (including Russia). And we saw that the traditional market is rapidly being conquered by non-traditional providers like Digital Ocean and Linode, while the majority of our and Western hosters continue to sit straight and do what they did 10 years ago.
Under the cat - different statistics, information for consideration for those of you who want to develop your hosting business. And we will be happy to discuss in the comments your own (even radically opposite) opinion.


Once, the entire cloud market began with hosting services. And today, there are already more than 600 million websites in the world, and 300 thousand of them appeared literally in the last year. According to the International Telecommunication Union , by the end of this year the number of Internet users in the world will reach almost 3 billion (and this is 40% of the entire world population).
The owners of data centers, analyzing the volume of workloads, argue that most of them are generated by hosters. The audience is booming everywhere: for example, in Russia, according to our Parallels SMB Cloud Insights research, in 2012, only 37% of small and medium-sized businesses had a website. In 2013 - already at 54%. It would seem: sit still, the market is enough for everyone. But somehow it turned out unnoticed that most coupons were cut off by some newbies.

Fact 1. Non-traditional and new players have already taken a share from traditional providers and continue to widen the gap.
Amazon Web Services, Linode, Digital Ocean four years ago were content with 5% of all new web servers. Last year they controlled already 31%. Forecasts for this year reach 50%. And at 250 leading infrastructure providers, taken together, this share at the same time decreased to 12%. At this trio, infrastructure rental services are growing 60% faster than the next 10 fastest growing service providers in the list.
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Fact 2. The target audience in web hosting is changing: the focus shifts from general users and universal tariffs to certain web industry professionals and targeted offers.
To the naked eye, it’s clear that Amazon Web Services, Linode and Digital Ocean do not rely on web administrators (who used to know how, and were forced to do absolutely everything related to the web), but much more specifically - web designers, developers, digital agencies and a powerful new force - just the owners of their own resources (and even bloggers!).





Some traditional providers, by the way, have already realized everything and rushed to catch up. In GoDaddy, they hurried to buy Media Temple company (they are strong in solutions for web designers and developers), WordPress Engine raised an investment of $ 15 million. Endurance is investing in WordPress’s Automattic company , along with other investors (the entire round is $ 160 million). At the same time, they explain their goals to all companies in the same way - they need a market for web professionals. In Russia, Reg.ru, InfoboxCloud and Rusonyx are deployed in this regard.

Fact 3. Users are now looking for something completely different from what they were looking for 9 years ago.
We analyzed the results of issuing on different hosting terms in Google Trends. The number of once popular requests "web hosting", "e-commerce hosting", "dedicated server" and "PHP hosting" has dropped sharply (almost to zero) in recent years.

But such “specialized” requests as “WordPress hosting”, “Shopify”, “Linode”, “hosting of web applications”, etc. - over the same period, soared sharply.


By the way, for the sake of interest, we studied the composition of users of our own hosting product — the Parallels Plesk control panel — there are the same trends: the share of managed hosting, including web professionals and other specialized hosting companies, is steadily growing, the share of traditional “web-hosting sites” has decreased, the category “Web administrators” (they are site owners) are sluggishly lagging at the same low level.

Plesk license distribution by user type (2012-2014)


Fact 4. "Specialization" is more expensive.
Gradually, the Internet becomes part of the business for so many companies and individuals, respectively, increasing orders from web designers, web developers or digital agencies. For example, analytic agency Structure Research estimated that digital agencies order up to 160,000 new web servers per year, but most providers do not work with this audience at all.
In Europe, the average price for a typical VPS service offer today ranges from 20 to 24 euros. And now look at the tariffs for managed WordPress - the average price is already 90 euros! The same in Russia: the average price of a VPS is 300 rubles, and, for example, at a tariff optimized for 1C-Bitrix, the average price is already from 1000 rubles.
In addition, the specialization gives the hosting company the opportunity to sell additional applications and platforms demanded by certain professionals, which allows proportionally increasing the cost of tariffs. The most popular for today in the world is WordPress (82% of Plesk users work with WordPress sites, including owners of their own sites, more than 100 thousand sites of our clients are running on WordPress).



Fact 5. Hosting does not migrate to the clouds: it develops on its own.
It is considered that now hosters services are being migrated - from virtual and dedicated servers to cloud-based offers. In fact, this is not the case: typical hosting services continue to be in demand, but here the growth rates of this market are reduced by 3-4% every year. In Russia, for example, in monetary terms, the market for hosting services has grown by 23% over the past year. About 16% of small and medium-sized businesses (this is about 500 thousand companies) last year for the first time ever got their own website. We have already discussed above the large market potential (46% of small and medium-sized businesses still do not have a website).
Already, more than 35% of companies buy web applications in the package with the initial purchase of a website. Over 30% of websites require mobile optimization.

Nevertheless, the growth forecast of the hosting services market in Russia for this year was only 10%. That is, even despite the growth in monetary terms, to sit exactly (on what they usually sit there exactly) for a long time will not work. Especially if you remember about the trinity of providers and the like with a targeted offer. And what to do?

Fact 6. Most traditional hosting providers behave as before.

It does not work for the convenience of using the interface. For a long time does not make new tariffs. Not invested in promotion. If you look at their advertising campaigns, you can see that there are the same messages that we saw 10 years ago. "We put new powerful equipment." "We put even more powerful equipment!". "We put the super-equipment, and even reduced prices !!!"

Typical offer traditional hosting:



And a hoster who "bites off" his market share:



Obviously, if you take the same position and offer exactly what you offered 5-10 years ago - be sure that you will lose your market share. There are about 400 hosters in Russia now. According to our estimates, more than half of them still do not know that they have already been “eaten”.

We were interested to find out if you feel any pressure in the hosting business, what it is connected with, whether you are targeting particular categories of customers and how you act for survival.