Web Hosting Marketing - Then and Now

We all know how competitive it is in the web hosting industry these days. With all of the increased competition it has become increasingly difficult to acquire new customers - especially on any kind of budget. So instead of dwelling on all of our current hardships, let’s take a stroll down memory lane and remember a simpler time. A time when the Internet was fresh and new. A time when budgets were high, and scrutiny was low. A time before Google and max bids. A time of banner ads and keyword stuffing. Let’s compare web hosting marketing then and now.

Search Engines

Search engines have always provided a fertile ground for web hosting marketers. Even in the early days it was easy to see the clear relationship between top keywords listings and a growing customer base. Things have changed dramatically in the last few years where search engine marketing is concerned - below are a few examples.

Then - Yahoo! and Alta Vista, Banner Ads and Doorway Pages

Back in the day, you wanted to be found in search engines - even though Yahoo! kept calling themselves a directory. There were a few pretty serious search contenders. Some of the biggies were: Yahoo!, Alta Vista, Ask Jeeves, Go.com and Excite. If you were lucky enough to get in on the early side, you could lock up an exclusive advertising spot to show your 468x60 banners at the top of the search results for the coveted keywords, ‘web hosting and hosting’. You would negotiate a CPM rate of between $10 - $45 and most importantly, you would almost certainly get first right of refusal on your keyword buy. Thus, you could own a 100% monopoly on your keywords for a specific search engine until you decided otherwise.

If you chose the search engine optimization (SEO) route, you were entering a strange world of uber-nerds with almost mystic powers of divination. They would set up mysterious ‘doorway’ pages that would grab the search engine spider’s attention and then trick them into listing the doorway page as a page full of wonderful, keyword-rich content when a user performed a search. Another early SEO tactic was ‘keyword stuffing’. Who could ever forget selecting a top search result from a major search engine, only to find an entire page (or more) of the exact same keyword printed over and over and OVER again on the page! Search engines eventually banned the practice, but a mutated version soon emerged: keyword stuffing, but using either transparent text, or text matched to the same color as the web page background to remain ‘invisible’.

Now - Google and Yahoo!, Text Ads and Exacting Keyword Densities

Today search engines are just as important as ever. It is every web marketer’s dream to show up for the relevant searches. There are many fewer real contenders in search, however. Google is now the most dominant search technology, followed at a distance by Yahoo! And soon MSN. Alta Vista, Ask Jeeves, Go.com and Excite have all been relegated to tier 2 status as their market share has been stripped by an overwhelming Google onslaught. Exclusive advertising has all but disappeared, and in its place has emerged a relatively egalitarian free-market system based on the highest bidder for each search result. These advertisements take the form of text ads which adhere to a strict set of character limits and editorial guidelines. The rates are not CPM based, but metered out on a pay-per-click basis. Each click is a billable charge - with little or even no emphasis placed on the number of impressions required to get the click.

One interesting thing that is appears not many realize is that the industry can really control the overall cost of CPC advertising. This of course means that competition would have to be friendly and everyone would have to bid low, so basically this will never happen. But hey it’s a nice thought.

Search engine optimization (SEO) has matured to an extent. There are now larger firms with more established reputations and business models that are available to market hosting within search engines. Doorway pages and keyword stuffing have all but disappeared, replaced by more sophisticated algorithms that seem to produce more relevant search results. Today’s SEO gurus are more apt to really understand the nature of the businesses that they are marketing, and have access to modern software that reveals the specific traffic for each search term as well as the optimum page set up and keyword densities that consistently yield the highest rankings.

SEO itself has changed quite a bit, then it was about over-optimization etc.., now it is all about quality inbound links. The future of SEO is always changing and if we ever revisit this article I am sure we will all laugh about the time when links were king and under optimization was rewarded.

Budgets and Acquisition Metrics

In any business you’re going to work with a marketing budget and be held accountable for acquisition costs. Sometimes they’re bigger and sometimes more modest. At least that’s how it was until the dot com boom.

Then - Drive Traffic (ANY Traffic!) and Spend ALL This Money (Now)!

A funny thing happened during the dot com boom - a few larger companies starting saying things like, "We don’t expect to make a profit anytime soon - in fact, we may not make any profit for a long, long time. We’re just trying to grow as fast as we can right now". For still somewhat inexplicable reasons, those very same companies began to attract investment capital. A LOT of investment capital - actually, OBSCENE amounts of investment capital. And the more companies that jumped on the ‘We’re not trying to earn a profit right now’ , let’s get to IPO bandwagon, the more investment money poured in. No venture capital firm wanted to be left out of the dot com gold rush. Well, a ton of this money flowed into web hosting firms as well. The CEOs and top managers at these web hosting companies needed to show quick growth to justify their huge salaries. So web hosting marketers were being told, "Go spend ALL this money and get customers, THIS quarter! Don’t worry about what our cost to acquire each customer is, just GROW the number of accounts!". Not surprisingly, that’s exactly what the web hosting marketers did. They spent like there was no tomorrow. They drove any traffic they could. As the places to advertise became ever more expensive, they also began paying huge sums to acquire other hosting company’s customers through acquisition.

Now - Drive Only Ultra-Qualified Traffic and Only Spend When You Can Show a Positive Return on Advertising Investment

Then the inevitable happened with respect to the dot com boom - it went bust. Many online firms vanished, as did a number of web hosting companies. In the aftermath of this learning experience, Internet businesses were forced to do something radical and completely new: turn a profit. Management turned their attention to reducing operating costs and growing in a much more conservative fashion. Web hosting marketers now had to justify every marketing placement by generating a minimum number of new customers proportional to the ad dollars spent. Each and every visitor had to be qualified with the expectation that they would convert to sale. Budgets shrank. Expectations soared. A new Darwinian environment prevailed in web hosting marketing - survival of the fittest (marketers). This has evolved into today’s web hosting environment where acquisition costs are closely monitored, and tight competition and expert marketing prevail. So then it was all about CPM and placement, this has been aptly replaced by CTR (Click Thru Ratio), CPC (Cost Per Click), CPA (Cost Per Acquisition) and CPL (Cost Per Lead).

The Players

Wherever you have a large marketplace with big money involved, you will have ‘players’. These are the market movers, the key drivers of the direction and force of the marketplace. The players own the marketplace. Web hosting has seen its share of players both then ad now.

Then - Verio OWNS Web Hosting

In the era preceding the dot com boom, a force emerged in web hosting that began to outpace all others. That force was later to be known as the web hosting company Verio. Verio was not only the largest web hosting company at the time. Verio was HUGE. They had grown faster and further than any other company even dreamed of. Their market presence was undeniable. Their marketing budget was unparalleled. Their marketing message and campaigns were honed and effective. Verio also bought up major chunks of exclusive advertising on almost every site related to web hosting. They also dominated search engine keyword advertising for hosting related searches. Based on this market dominance, Verio was eventually acquired by Japanese telecom NTT for around $5.5 billion (that’s with a ‘B’). Talk about paying a premium for a hosting company - wow.
Now - Affiliate and Reseller Marketing Sites Emerge

While the web hosting market has always been fragmented, and affiliates have long provided customers to the larger companies - the trend has been towards MEGA affiliates with very large budgets and businesses built specifically to sell web hosting. It is not at all unusual to see that the top listings at the most prestigious pay-per-click sites are either affiliates or hosting resellers. The economics of affiliate programs have become more and more favorable for the affiliates over time. The extreme competition to acquire valid and long-lived web hosting customers has driven affiliate bounties above the $100 per sale mark. As web hosting companies are shaving margins ever thinner and paying out more of their profits to the affiliates, the affiliates are also becoming ever more aggressive and promoting themselves as never before. Many of these sites take the form of a ‘Web Hosting Review Site’ or the like - where multiple high-bounty-paying affiliate brands are listed in preferential order according the bounty paid. These sites have supplanted hosting companies at the top of the search engines in a trend that seems likely to continue. The new players are web hosting affiliates and resellers.

But, Hosting marketers have reacted well to this emerging era, the so called white-labeled (who came up with that?), Super Reseller or basically a really easy affiliate program has now become adopted. With this new marketing strategy we see the larger players in the market creating countless numbers of mini-me’s.

The play goes like this; I the host offer you, the aspiring business a way to provide support, take orders, a fully branded interface and a plan that is similar to the original host or even more competitive. What does this mean for the host, a lower CPA and no cost for advertising at all since this is handled by the new reseller. The only real cost in this instance is the bounty paid to the reseller, nice eh?

Summary

While we can’t rewind the clock to get the budgets and acquisition costs of yesteryear, we can all benefit from our industry hindsight. The past several years have seen many changes in web hosting marketing - many for the better. One thing is for certain; as long as there is a need for web hosting there will be dedicated web hosting marketers who use every tool and tactic to gain the most customers for the lowest cost. Good luck in growing your web hosting customer base in the days and months ahead.