Undervalued & illiquid near-equals a long way from achieving escape velocity

Andy Schroepfer wrote a long post about the WebSitePros/Web.com merger earlier this week. He points out that the combined entity joins Hostway/Affinity and Endurance/iPowerweb as new members of the $100M+ annual revenue club. The "undervalued and illiquid near-equals" he says, remain "undiscovered for the most part, and still battling for a slice of the massive SME market opportunity, which both firms have always talked about but barely shown the results..."

Will consolidation make WebSitePros/Web.com more appealing to end users? Based on the services that they offer, I'm not optimistic. WebSitePros says its "web designers, copywriters, editors and quality control specialists" will "take the time to get your site right". Sadly, your content will start going stale the minute your brochureware package is delivered. And Web.com's site creation software provides "relevant starter text based on the template you select". With this wonderful time saver, you could launch a website just like 1000s of others!

In short, both WebSitePros and Web.com (not to mention many of their competitors) are still stuck on the increasingly antiquated notion of web presence. Microsoft's Chris Jones, on the other hand, says web services are all about helping customers stay connected. Marc Andreessen, too, thinks over 1 billion people have become Internet users because we want "new ways to connect, new ways to share, new ways to communicate -- new ways to be part of the network, part of the world."

With many millions of MySpace and Facebook users, Marc says social networking has reached escape velocity. With 234K subscribers, WebSitePros/Web.com haven't - and won't. Unless they start thinking beyond hosting static websites to helping customers engage their audiences. BT Tradespace (which is powered by software from my friend Matt Howar'ds company SMBLive!) for one, invites visitors to rate and comment on vendors' products. And TypePad offers a growing catalog of widgets that help site owners collect feedback and build communities.

Of course, Web.com, as Andy mentions, is holding on to the hope that its control panel patent claim will be upheld.  The legal proceedings might cause GoDaddy some grief, but it sure won't create market leadership in the "massive SME opportunity".

Comments

[Jeffrey Huckaby]

Typically, when hosting companies merge such as this WebSitePros/Web.com or ThePlanet/EV1servers merger, you typically see customization make room for standardization. In the past, I see the largest benefit of these mergers has been economies of scale for the company not a synergy of services for the consumer.

One interesting thing with SaaS and open APIs is that small firms can now tap incredibly complex services for a very low cost. They gain some of the economies of scale while still being small.

A small 2-3 person web design firm can leverage the power of much larger companies, such as Amazon via their S3 and EC2 services, to deliver very powerful and inexpensive services.

[Isabel Wang]

Exactly! Smaller players will build interesting, innovative solutions out of open APIs and utility-priced services. In which case, what advantage will newly merged behemoths have left - unless they offer up their systems as platforms?