Web Hosting Year in Review: 2005
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Let's take a look at the trends that shaped the web hosting industry in 2005. Will they continue to be important in 2006?
Now that the New Year's parties are over, the champagne all finished, cake eaten, noisemakers put away, and confetti cleaned up, it's time to take a look back at 2005 and see how the year shaped up for the web hosting community. The biggest trend, to nobody's surprise, was expansion. This expressed itself in a variety of ways, from companies purchasing data centers to companies purchasing other companies.
The trend of data center expansion is particularly noteworthy. For the past few years, most web hosts have been able to tap into plenty of excess, unused data center space to support their growth. But 2005 saw significant construction and acquisition of data center space, signaling that web hosting demand is at last catching up with supply.
C I Host, for example, opened an entirely new data center facility in July. Located in Newark, New Jersey, near both Rutgers University and Manhattan, the new facility has a direct, private fiber connection to C I Host's planned London facility. The company also added to its Dallas area data center, which already boasts 38,000 square feet.
Peak 10 expanded two of its data centers, in Raleigh and Louisville. The expansion 每 which adds 10,000 square feet to the Louisville data center alone 每 will support redundancy options for Peak 10's clients.
In September, 365 Main acquired a huge data center 每 131,000 square feet 每 in El Segundo, California.
AT&T opened two data centers this year, one in California and one in China. That brings the telecommunications giant's total number of data centers worldwide to 28. More specifically, the California data center doubled AT&T's hosting capacity in the San Francisco area, and the data center in China was the first AT&T facility to offer hosting on the Chinese mainland. (You'll be hearing more about AT&T later in this article).
But most companies would be hard put to beat Digital Realty Trust's space additions in 2005. The company added seven 每 count them, seven 每 new data centers. Five of the data centers, plus an office building, are located in Denver, Colorado. The other two are in California. Digital added the whopping 642,000 square feet for an equally whopping 9 million. That doesn't even count the two data center properties Digital purchased in Europe: the IBM Technology Park in Mainz, Germany, and the Geneva Data Center in Geneva, Switzerland.
Web Hosting Year in Review: 2005 - Telecoms Catch Acquisition Fever
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Excitement about the money to be made in web hosting may well have awakened some sleeping giants. Take Cable & Wireless, for instance. The UK-based telecom and enterprise hosting company last made a move in the web hosting space way back in early 2004, when it sold its US hosting arm to SAVVIS. This year, it put up .08 billion 每 with a "b" 每 to purchase managed and application hosting provider Energis. It seems like a high price to pay, but the deal includes Energis' four hosting data centers: two in Leeds, one in Walford, and one in Dublin. Together, the four data centers boast a total of 213,000 square feet.
When it comes to telecoms, though, some of the most exciting deals happened right here in the United States. They started fairly early in 2005 at that. Those of us who were around when the government broke up the monopoly that AT&T held on phone service in 1983 all but wondered if history was reversing itself.
In January, SBC Communications acquired AT&T in a billion deal, thus becoming the largest telecommunications company in the US. Naturally, this increased SBC's web hosting profile 每 remember those 28 data centers owned by AT&T? Let's not forget that AT&T also boasts some really well-known clients, such as Kodak, Marriott, and several agencies of the U.S. government. After the merger, SBC took the step of dropping its own name and deciding to have the merged company be known as AT&T. SBC's giving up its own name might seem like a surprising move, given that it was the purchasing company; then again, it's hard to beat a name with nearly 130 years of brand recognition behind it.
The other big telecommunications deal of 2005 was a bit more contentious. MCI managed to emerge from the largest bankruptcy in history, and was looking for a buyer. Two companies expressed their interest: Verizon and Qwest. It's no wonder that MCI attracted more than one suitor, either; it brought quite a lot to the table. It boasts an extensive national infrastructure, a strong corporate customer base, and did we mention what it gained from buying managed hosting company Digex? At the time, MCI was the world's ninth largest web host, home to 878,000 names, including high profile clients such as The Weather Channel.
In mid-February, it appeared that Verizon had won MCI's favor, with a deal worth .7 billion. It turned out that was just the beginning. Qwest made an offer worth billion. After some more back and forth between its two suitors, MCI finally closed the deal in May, with Verizon, for .5 billion.
These acquisitions, though, were just two among many moves by telecommunications companies to enhance their web hosting offerings. Bellsouth, for instance, moved its shared hosting infrastructure in-house, in order to gain greater control over its product roadmap. XO Communications expanded its managed hosting offerings, thanks to a partnership with NEXL Systems. In short, hosting, both of the consumer and enterprises variety, is gradually becoming more important as a key service offered by telecommunications companies.
Web Hosting Year in Review: 2005 - General Merger and Acquisition Mania
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Almost every deal after those made by the telecoms may look small in comparison, but the rest of the merger and acquisition activity allowed for some substantial repositioning in the web hosting arena. Take Interland, for instance. Once a very big name in web hosting, the company began to narrow its focus this year. It sold off its Hostcentric shared hosting assets to Caird Corporation for .4 million. Interland also sold off its dedicated server assets to Peer 1 Network. The million deal saw 8,300 dedicated servers change hands, along with data centers in Georgia, Florida, and California.
But Interland didn't simply divest assets. It also made a purchase, namely Web.com, for .4 million in cash, restricted stock and assumed liabilities. The deal included 9,000 hosting accounts, ownership of the Web.com domain and an accredited domain registrar. Interland should make back the money it spent on the acquisition within five years, as Web.com is expected to add about 0,000 to Interland's annual hosting revenues.
Another big name that saw some activity this year was Register.com. Some of you might remember this company as one of the first to become a domain name registrar once ICANN opened domain name registration to companies other than Network Solutions (now owned by VeriSign). Register.com was bought in August by private equity capital firm Vector Capital for .81 per share in cash, in a deal that totaled about 0 million. Vector wasn't the only firm interested in Register.com; the web host had rejected an offer from RCM Acquisition the previous month that amounted to only .10 per share.
Web Hosting Year in Review: 2005 - Web Hosting Goes Mainstream
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How do you make a service like web hosting appeal to the masses? That question was on the lips of many web hosts this year, and was answered with some success. For example, 1&1 Internet, the largest host in Europe (and arguably the world) continued its aggressive promotions. Its UK arm began offering a package that included a domain name and six free months of hosting with no obligations to small businesses. The promotion lasted for two months, starting in March. By the end of August, 1&1 Internet said it had signed up 35,000 new customers during the promotion.
Of course, if you really want to see a web host going mainstream for its marketing efforts, you need to look no further than GoDaddy. On February 6, the company ran an ad in the Super Bowl, putting its name in front of 150 million viewers. The ad blatantly made fun of Janet Jackson's "wardrobe malfunction" during the halftime show at the previous year's Super Bowl. GoDaddy wanted to run a second spot during the Super Bowl, but Fox wouldn't let them, because of its content. Fox wouldn't even let them run the first ad in the second spot.
So GoDaddy CEO Bob Parsons became inventive, and ran the second ad online in a blog he launched. Thanks to people checking out what all the fuss was about, GoDaddy gained far more publicity from the controversy surrounding the ad than it might have otherwise. Parsons has since used his blog to sound off on a variety of topics, from industry issues to American politics. GoDaddy is trying to run an ad during the 2006 Super Bowl, but is again having trouble getting it past the censors 每 this time with ABC. After last year's ad, some folks might be looking forward to what GoDaddy comes up with more than the game itself.
GoDaddy certainly wasn't alone in courting sports fans in 2005. C I Host partnered with advertising firm Spinner Networks to display ads on-screen during Dallas Cowboys game broadcasts. Readyhosting sponsored a racing team, Venturini Motorsports. Pipex became the official sponsor and exclusive broadband partner of soccer team the Fullham Football Club. Its logo appears on the team's jerseys. And EV1Servers support of the Houston Astros gained a boost from the team making it to the World Series.
Whether it involved data centers, mergers, or reaching out to a new audience, expansion was the defining trend for the web hosting industry this year. We will likely see more of this in 2006.
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