RealTime IT News

U.S Hosting Biz Opens Amid Increasing Competition

By Sean Michael Kerner

After almost five months of giving hosting away for free, 1&1 Internet has now officially opened up shop in the U.S and is signing up paying customers for its hosting services.

1& 1 Internet is a subsidiary of United Internet AG, a European public company with over 3,500 employees. 1&1 operates over 22,000 servers located throughout its four principal data centers.

According to statistics published by hosting industry tracking company Netcraft, 1 & 1 currently hosts more hostnames than any other company in the world today with over 3.5 million domains hosted as of December 2003.

In September 2003, 1 & 1 entered the U.S. with a tantalizing offer of three years of free hosting without any future customer requirement. The offer was heavily promoted in online and print media across the United States.

According to 1 & 1 spokesperson Sebastian Moser, they had a substantial media buy, advertising for months in every major tech publication that was available in the U.S.

"It definitely did cost quite a bit of money," Moser told internetnews.com. "Essentially we had the choice of spending a few million for ads on TV to get exposure, the results of which would be questionable or stick to the message that we know. That is doing print and online advertising and then giving a free offer and letting customers try it out for a long time."

The offer was a tremendous success, garnering more than 100,000 new customer signups. Moser said the original expectation in October was 50,000 signups.

Moser couldn't say how many of its sign-ups his company expects to convert to paying customers after the free hosting expires. Though he hinted that 1&1's parent company would reveal some of those details soon.

"The big question will be how much that promotional offer grabs hold and how fast we can establish ourselves as a player in the market over here," Moser said. "We are here to offer the other hosting companies healthy competition."

US based global hosting company Hostway Corp. isn't concerned about the new entrant to the US market.

"We've seen deals like this in other countries, other U.S. companies may have been surprised, we weren't," Hostway Marketing Director John Lee told internetnews.com. "Sometimes it works, sometimes it doesn't. Most times it doesn't."

Hostway still sees growth potential in the market, though at a slower pace than in previous years. "I think you'll see more consolidation and bigger companies getting bigger," Lee said.

There is still room in the U.S. for new hosting providers as long as an entrant is willing to put up a fight.

"I think that 1 & 1, or anyone entering the US market at this point will find is that the competition is fierce," Lee said. "If there is room it's going to be very tight."