Acquisitions, acquisitions, acquisitions

[aeromit]

Just opened a hosting industry in review bulletin and what to see... acquisitions again. Does anyone try to work and attract new customers at all Since the "Wall Street" paid more attention on web hosting in the beginning of 2006 all the corporate guys do is to buy web hosts.

If we go this way they will be less competition. Don't you think so... or new smaller companies will appear on a market that went too corporate?

 

[GnomeyNewt]

I think it is pretty common in any market so saturated as the hosting industry to see a lot of acquisitions. Also because of that trend to buy-out other smaller companies, I'm sure there are people who are just starting their hosting company in order to sell it within a few months once they've gained enough presence/customers to make a good deal selling out.

Maybe there will be less "serious" competition, but since its so easy to start a hosting company, I think those new smaller companies will keep springing up. Some to sell and some to try to make it!

 

[Harry]

It's very comman these days, since so many small hosting biz have to sell out. Many new hosting biz, usually sell out at some point due to lack of sales. The larger firms buy it to kill competition and at the same time, so they can gain a larger user database.

 

[ldcdc]

If we go this way they will be less competition.

In a market that is so fragmented, it will take a while before competition levels will start to be effectively diminished.

Not to mention that so many acquisitions are followed by a dramatic decrease in the quality of service and subsequently, a high churn rate. The customers who leave, end up being customers of the competition, and possible lifetime detractors of the company they've just left, with incalculable long term effects. The whole thing gets quite complicated.

 

[Harry]

In a market that is so fragmented, it will take a while before competition levels will start to be effectively diminished.

Not to mention that so many acquisitions are followed by a dramatic decrease in the quality of service and subsequently, a high churn rate. The customers who leave, end up being customers of the competition, and possible lifetime detractors of the company they've just left, with incalculable long term effects. The whole thing gets quite complicated.

True, however I think he user is thinking long term here. Though I agree with you on the poor service area. That's why some people have opened up their own biz, because they had a lack of support at various hosting companies. Then again, if more and more opens sell out, at some point there could be less competition. On the internet though, I find it almost impossible long term for competition to be driven to a low. Especially now with everyone having access to a PC and the WWW.

 

[GnomeyNewt]

I think long term hosting companies are moving more toward niche markets, competition as whole is going down. Meaning that not that many companies are targeting a wide range of users, rather certain type.

 

[aeromit]

OK acquisitions are fine and it is good that financial capital flew to web hosting industry. But this made the average price of a web host to decrese about 5 times. It was standard deal to sell a small company with 1000 customers paying $50/year each for $200k - $250k. Now it costs no more than $50k. The investors buy only customers and dont care about trademark and web host's history.

If you were web host, would you agree to sell your customers for a price that covered the annual revenue of your company?