Guest writer: James McNiece

During the last 10 years, James McNiece has driven innovation and business growth as a product and operations leader for technology companies in a variety of industries. Most recently, he has spent the past four years leading initiatives at Squarespace to grow its website building and domains businesses.

Please note: The views expressed in this piece are the author’s own and do not necessarily represent those of Squarespace or OpenSRS.

In the past decade, we’ve seen not only significant expansion in the web hosting space but evolutions to the landscape itself that would have been difficult to predict 10 years ago. Here, we’ll look at how we got to this point, the current challenges faced by CMS companies and web hosts, and what these businesses need to do to stay relevant in an increasingly competitive market.

How did the website solutions space evolve to where it is today?

There are three major trends which have led us to where we are now. The first is the dramatic improvement in the capabilities and efficiency of front-end web technologies; the second is the rise of highly scalable, managed cloud service providers; and the last is the growth and centrality of mobile browsing. Ultimately, it was the convergence of all three that paved the way for the explosive growth of web builders, while making the competitive environment for hosting providers much more challenging.

Prior to the emergence of these trends, consumers expected building a custom website to be a very difficult enterprise, one that required lots of technical configuration and coding expertise. The only exceptions to this were blogging platforms, which offered very limited customization options. God forbid you wanted to make a mobile-responsive website. Before the advent of mobile-responsive frameworks like Bootstrap or Angular, that would have involved spending thousands on a developer to build a specialized mobile version of your site.

But those times are behind us now. The vast improvement in JavaScript and CSS, and the development of front-end frameworks like Angular and React unlocked the expressive power of the web, in part by making it possible for web builders to enable intuitive drag-and-drop functionality for building sites which mimicked a desktop editing experience and could also perform efficiently in the browser. At the same time, the rise of mobile browsing, and the huge variety of form factors which emerged in its wake, made it very difficult for a casual developer to create a site that looked great on all formats. The web builders took advantage of all this by baking great responsive tools into their templates to create solutions that offered huge advantages over what was readily attainable to small businesses through developers. And finally, cloud hosting has become much more reliable, cheaper, and feature-rich over the past decade or so. This has allowed the web builders to bundle hosting into their core product at low cost to offer turnkey solutions that require zero technical configuration. All of the above made site building accessible to a much larger, less technical population. At the same time, many custom website developers migrated to developer-centric platforms like Google Cloud or AWS in order to leverage their ridiculous scale and deep feature set. While these trends have been a boon to the industry as a whole, they’ve created headwinds for traditional hosting companies who find their pricing power diluted and their offering trapped in the middle ground between the “all-in-one” website builders that target the non-technical set and the AWSes of the world that cater to software developers.

What challenges do players in the web hosting space face today?

As an industry, our biggest challenge to overcome is the threat to the open web caused by the rise of the proprietary internet. By that, I mean things like LinkedIn pages, TripAdvisor pages, Instagram accounts, and Messenger accounts serving as substitutes for a website.

This is less obvious in North American and Western Europe, where the website is still seen as a critical piece of a business’s marketing portfolio, than it is in emerging markets, where consumers have grown up on a mobile-first internet experience consumed on their smartphone. They’ve primarily engaged with apps instead of websites and chat and SMS instead of email. They didn’t experience the same progression from desktop computing to web search engines that primed users in the developed world to see websites as the Internet’s essential building blocks.

This really hit home for me on a recent vacation to Colombia. Colombia is full of small-scale, scrappy entrepreneurs with limited means to build a professional web presence. In America, these would be perfect targets for a DIY web hosting company. However, driving through Colombia, you will notice that most businesses with signage do not put a domain name for their business on their sign. Instead, you will most often see a phone number with a WhatsApp icon, Instagram handle, or Facebook page next to it. The reality is that eCommerce is done via WhatsApp chat and settled in cash. Only the most established businesses have websites or online stores.

To rise to this challenge, we must strive relentlessly to make the open web more accessible and compelling, so that it continues to grow. Sites must be beautiful, secure, performant, and offer richer and richer functionality. Content needs to be easy to syndicate and harmonize across platforms. Getting up and running needs to be frictionless.

To the last point, I’ve been encouraged by the response of registrars to the GDPR. They have proposed a number of changes which would reduce the amount of personally identifiable information required in the domain registration and transfer process. Hopefully, this will make the process of registering a domain consistent with that of nearly every other subscription consumer internet service, reducing friction and enhancing trust with domain retailers. The net result of this would be more domains registered, a more secure internet, and a faster expansion of the open web.

How to grow a web hosting, ISP, or CMS business in today’s market and future-proof it for tomorrow’s

After several years of intense interest in the web hosting space, our industry seems to be entering a period of consolidation and stable growth.

Modern web builders have convinced the market that building a great website should be intuitive, require no technical support, and cost orders of magnitude less than hiring a developer to do it.

Meanwhile, the AWSes and Google Clouds of the world have been incredibly successful at winning over the developer community to host professionally built websites on their infrastructure. The incredible breadth, scale, flexibility, and reliability of their offerings is just very difficult for a developer to say no to.

This leaves traditional managed hosting providers in a difficult position: they require a lot more configuration and technical know-how than the web builders do to accomplish a similar task but don’t offer the advantages that a developer can obtain by running their service on a major public cloud provider.

The keys to success in this environment will be differentiation and rock-solid unit economics. You have to secure a big market segment, tailor your product offering and marketing to it, and continue to deliver more value to those customers than your competitors.

You also need the resources to invest in innovation and marketing. The web hosting market has dozens of major players who are collectively spending billions on R&D and marketing to win. The only way to compete with them is to acquire customers profitably and sell value-added products to them over time to increase the ROI of your initial investments. This is where strong differentiation will help: it will drive down your cost of customer acquisition, improve retention, and make building compelling products more straightforward because it will be obvious which customers you are serving.

Without both strategic differentiation and R&D investment, web hosting businesses will struggle to compete with the big, established players.

Add your voice to the conversation

OpenSRS takes an active role in shaping the future of our online landscape. If you are interested in sharing your thoughts in a piece that builds on this one or presents an alternative perspective, reach out to us about being a guest writer for our blog!