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.
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