Website Hosting Investment 2008
As the year 2008 comes to a close, I have been reflecting back on what a monumental year it has been for the web hosting industry. We are all now aware of the great financial crises that has gripped the world, but at the start of this year optimism reigned. It was a time that saw several very bold investments in the web hosting space. Here are a few of the events that occurred in web hosting investment this year:
Rackspace Launches its Initial Public Offering – The most bold of the bold investment moves in web hosting in 2008 has to be the IPO of Rackspace. Ironically, the company had actually prepared to go public once before in the year 2000, but put off the plans due to the dot com bust. In August of 2008 Rackspace pulled the trigger on going public, and shares initially traded at around $10 per share. Unfortunately for the company, the global financial meltdown was bearing down on the stock price, almost from the launch. As of Friday, the stock was trading at around $6 per share – representing a decline of nearly 40%. The entire hosting industry hopes that the strong past performance of Rackspace will hold in the future and reward investors richly for their continued confidence in the managed hosting business model.
Slicehost Acquired by Rackspace – So then Rackspace turns around and acquires Slicehost, a virtual hosting provider. The company is described on their website: ”Slicehost brings the experiences, high expectations and support demands of business hosting to the consumer market. We aim to please developers – people who know their stuff. People who write software, build servers and get things done.” This $11+ investment (also used to acquire JungleDisk, an online backup company) puts Rackspace firmly in the VPS and cloud computing landscape.
Wachovia Capital Partners Acquires HostMySite Inc. – The former founders of Inflow orchestrated the acquisition of customer service focused web hosting gem HostMySite.com. According to information published by the company HostMySite at the time was characterized as follows, ”With over 250 employees, 4,000 servers and state of the art datacenter facilities, the founders have built a highly successful business with a strong service culture.” Terms of the acquisition were not disclosed. One can only speculate on how the multiple paid would be re-calculated post-world financial crises meltdown.
iNET Interactive Acquires Web Hosting Talk Australia – This one is kind of a ”no brainer” for iNET. According to iNET investment guru and CEO Troy Augustine, ”We are pleased that we were able to make Web Hosting Talk Australia part of the iNET Interactive network of online communities. The acquisition reduces brand confusion in the marketplace, but it also adds a growing, well-moderated web hosting community to our network.”
HostingCon Sold to iNET Interactive – Another one of the back-to-back acquisitions. The industry’s premier tradeshow event and conference becomes the property of iNET. So why does iNET move into the trade show business? According to information published by the company, ”iNET Interactive operates multiple online communities for Internet professionals and technology enthusiasts, who utilize various media beyond the Web to gather, collaborate and learn. HostingCon – the world’s largest physical gathering of hosted services professionals – is a perfect complement to Web Hosting Talk – the largest online gathering of hosting services professionals.”
So the big unanswered question that arises from these investments is: Will the economic downturn adversely affect these businesses, and if so – how much. I turned to two industry experts to weigh in on what the downturn will mean for hosting. Lee Brant is an industry veteran and has run the sales function as Operations Manager at Web Host Directory for many years. Lee had this analysis, ”At present the (hosting) directory market conditions are very good. Given the current economic situation, we have actually seen an increase in advertisers month on month during 2008. Companies need to increase advertising to attract more customers during this period. I feel this is also down to the Internet being one of the few growing markets where in other industries there has been nothing but negative news. The Internet is still in its infancy, so is the first place people tend to look for new opportunities and business ventures.”
Daniel Foster with vps hosting firm, 34sp.com has been running a hosting company for the past decade and adds, ”The hosting solutions that we provide are at the budget end of the market. We’re not seeing any particular downturn from the current economic situation, indeed our product may be more attractive to potential customers then the expensive offerings of our competitors. Hosting is host one of those expenses that companies need to bear, like telephone or electricity bills. The only change that we expect to see in the current climate is customers searching for better value in their hosting purchases.”
This content was written by Derek Vaughan exclusively for Host Discussion Blog.
Tags: 2008, 34sp.com, HostMySite, iNET Interactive, investment, Rackspace, slicehost, website hosting
