Jeff is making me want to start a hosting company

Jeff from rackAID points out a whole bunch of auxiliary revenue opportunities that hardly anyone is taking advantage of.  9 out of 10 hosting companies claim their target audience is small business owners - so why not go one step farther and think about what these folks might need besides a website?

"Why not have a deal with CafePress or Zazzle to sell merc based on the domain? Want a coffee cup with that shared hosting account?

Why not take the info entered at sales time and pipe to a VistPrint API to order new business cards?

Why not immediately suggest all related domain names and offer discounted pricing on purchasing them?  Go beyond the silly .net and .org suggestions.  Offer mis-spellings, synonyms, plurals?

Why not offer boiler-plate press releases ready for submission with name and hosting info filled in?  Work out a deal with PRWeb to auto submit a mini-release for a client every time a new account is purchased. The client can edit and select a release date?

Why not have a Q&A form to find out the types of apps the client needs and either pre-install them for link them to appropriate software that has paid support options?"

Also, why not sell customers web design/online marketing/server security books from Amazon? Partner with Staples and let them order office supplies right from their web hosting control panel? Show them flight deals from their home city?

I think GoDaddy, in particular, could start a marketplace like Threadless for customers to share TheirName.com t-shirt designs. There must be sooo much creative talent among the millions of domain name owners it serves.

I keep telling my web hosting friends about this BusinessWeek article, which says RyanAir  (aka "Wal-Mart with Wings") made $332 million last year through sales of non-air-ticket items such as rental cars, hotel rooms, ski packages, etc. But maybe nobody wants to be "Wal-Mart with servers" because Josh from DreamHost might say they've sold out :)

Comments

[Alex Leverington]

I don't see how these things actually add value to hosting. Sure, they are neat, but how are they going to help anything but a fanboy site?

Second, while these ideas *sound* easy, they really aren't. Unlike the Internet, there's no standard with regard to business to business interactions. The Internet is based on standard protocols so moving things back and forth and growth is easy and free. This also doesn't take into account the price for quality of those products for which local vendors are usually more cost effective (shirts, mugs, cards).

Regarding in-site advertising; nobody wants spam unless service is free and even then folks are hesitant to adopt such a product for a professional presence for fear of the 'free' price leveraging more from the customer than they originally bargained for.

Last, who is going to code all this and maintain that code? Code - especially that which extends more than one domain (ie, printing system vs hosting service) is high maintenance and you're looking at $1m/yr in costs to house developers, their software, monitoring, maintenance, and operations to power the codebase. This is why everyone uses the same control panel... if they were that easy, folks would be building their own. Adding additional services to those control panels isn't any easier than building them to begin with.

[Isabel Wang]

Alex,

The goal is to add value not just to hosting, but to the customer's day to day life. Ski lift tickets, for instance, don't add value to a customer's air travel experience. Yet some find it convenient to purchase them through RyanAir. As a result RyanAir makes $332M.

And no, fanboy sites are not the only ones that need branded merchandise - ever been to a trade show? And many experienced developers of serious applications regularly buy technical and marketing books on Amazon. TypePad, by the way, has an Amazon aStore (http://books.typepad.com/store/), which takes about 10 minutes to build. I don't see why traditional web hosting companies can't do the same.

Speaking of TypePad, they don't use the same control panel as anyone else! Nor does WordPress. Or Amazon's S3 or EC2. Or Google Apps. Or Microsoft's Office Live. Or MySpace or Facebook. Or eBay. Developing and maintaining your own code base allows you to deliver unique features that meet specific customer requirements.

In contrast, what distinguishes the thousands of powered-by-Plesk/cPanel/Ensim hosting companies from one another? "Customer service!" all of them will say. Except very few of them have any clue at all who their customers are, and whether these people's hosting needs are actually being met. If a feature isn't included in one of the major control panels, too bad for any customers who might want it. Does that sound like "customer service" to you? It doesn't to me.

You keep talking about standards, but standards are not enough. Companies that want to succeed need to add value above and beyond the common denominator. And I don't see enough of that happening in the web hosting.

[Alex]

I'm not saying standards are what will differentiate. Without them the barrier to entry and costs go up. What I'm trying to say that it's *easy* to be a web host because of POSIX, TCP/IP and HTTP. It's not easy to do more than that. There are costs and the value has to be justified and the company behind it has to have a passion for their product and their customer, not just making money. Becoming a web host and then plugging in "added value" is just a concession. RyanAir is great because of the personal, relevant attention, not just tacking things on. In retrospect there's a lot of good ideas here, but for example, Printing + Staples + Hosting wouldn't work. That's like godaddy trying to resell wifi service - related, but distracting. That said, typepad+amazon books is a novel idea. But, why can't I find it on their front page? I'm sure there's a link to it in your control panel, and it creates a miniature social network, but what value does it actually give you? I question typepads motivation. Did they do it for extra change from amazon or to improve the experience of their bloggers? Their book store is so dry, I'm wary of the latter.

I'm not saying it can't happen, simply that these idea will naturally become more feasible and relevant as standards enable interoperability between systems.

A wonderful, related event on this came up on this subject:
http://www.computerworld.com.au/index.php/id;1249882244;fp;16;fpid;1

[Isabel Wang]

I disagree. These ideas will NOT naturally become more feasible through standards. Instead, it'll only happen if individual hosting providers get to know who their customers are, and what these people want.

You may not like hosting + office supplies or TypePad's aStore, but RyanAir's experience goes to show that auxiliary products can be a super profitable revenue stream. The ideal progression, I think, is for web hosting companies to figure out who customers are and how they behave, then develop algorithms for auto-recommending add-on products/services. Remember our discussion some time ago about how Aggregate Knowledge increased Overstock.com's holiday sales by $100 million?

[Misha]

I was all lathered up for a lesson in value-add revenue courtesy of RyanAir and got a lesson in irritating your customers instead. Perhaps its just the writing, but the buying experience sounds like an absolute nightmare for the customer. Their success sounds like a short term phenomenon to me.

[Isabel Wang]

I agree that there are more/less elegant ways to sell add-ons, but it doesn't look like auxiliary revenues will be a short term phenomenon in the airline business. Northwest, for instance, generated $100M in non-ticket sales last year and is looking into introducing car rentals/hotels/third party ads. Delta, too, is considering the RyanAir model. Even American, who worries about consistency with its brand, said it's "not ignoring the opportunity".

If RyanAir's implementation of add-ons seems particularly obnoxious, keep in mind that their tickets are nearly free. In fact, their CEO thinks that within 10 years, most seats on his flights will be 100% free. All he wants is an opportunity to sell you stuff.

This reminds me of a Morgan Stanley presentation last year, which said Google/Yahoo should be able to double or perhaps even triple their per-user revenue within 5 years thanks to improved personalization/ad targeting technologies. In contrast, I'm not sure any company that sells only what it makes without leveraging its knowledge of customers can expect to achieve the same revenue growth.