By: Derek Vaughan

September 27th, 2004

Reader Rating: 8

The mighty (and now public) juggernaut that is Google is emerging as the most formidable potential competitor in the Web hosting space. Who will suffer the most when Google enters Website hosting? Yahoo!

"No way!" you say. "Google doesn't even offer Web hosting." You mean Google doesn't even offer Web hosting yet. Let's look at the facts and see exactly why Google will defeat Yahoo! in the Web hosting war.

Why Will Google Launch a Web Hosting Product?

Web hosting is a (still) highly fragmented marketplace.

Even the very largest hosting providers garner no more that 4-5% of the market. While there are easily more than 100 sizable (more than 25,000 active shared accounts) Web hosting companies, there may be more than 10,000 small to mid-sized (less than 10,000 active shared accounts) hosting competitors.

Why Google will get in: with the millions in extra cash that they have lying around, Google can easily acquire even the most premier hosting company and use it as a base to build a business around. Alternatively, Google could simply buy up tons of customers from smaller hosts. Of course, they could always start from scratch and be a top 25 hosting company in about 3 months…

The barriers to entry are extremely low.

In fact, anyone with a Web connection can simply resell any of a dozen fairly competitive packages.

Why Google will get in: last I heard, Google still had a Web connection.

Arguably, the single most important element in gaining new customers is online advertising.

A survey of the top slots in the pay-per-click search engines tells the story: hosting clicks are in very high demand, and the top players are willing to pay handsomely to get them. For example, a recent glance at Overture's max bids yields the following results:

Why Google will get in: while competing with their customers may never have crossed Google's mind, the simple economics of Web hosting will necessitate a different approach. Google will give up the number 1 advertising slot to market a Google Web hosting package. This will not even dent the vast ad revenues generated by the hosting industry.

Additionally, Google could simply create a new ad unit that rests at the very top of the page, preserving all existing advertising slots. Adding thousands of new hosting accounts each month will quickly generate millions in recurring revenues for Google. Oh yeah, one other thing I forgot -- Yahoo! did this a while ago and they're making bank.

Web hosting requires tons of servers, data centers, and skilled technical support staff.

A great hosting company needs to stave off DDOS attacks, worms, viruses, and a litany of other hacker-induced mayhem. It also needs super-fat redundant pipes to handle all the traffic, and the additional mandatory goodies like physical security, fire suppression, and backup generators to maintain 100% uptime.

Why Google will get in: It's not a stretch to say that some of the Web's best technical minds are currently employed in Mountain View -- and they've been protecting a premier Web property from hackers for the last 6 years. I think they also know a thing or two about data centers and redundant connectivity.

Email and Web hosting go hand in hand.

Many customers register a domain name and set up a hosting account mainly to have the email address that they want, such as you@yourcompany.com. The ability to process and manage a high volume of email while excluding spam, viruses and other security exploits is a mandatory skill set for hosting.

Why Google will get in: one word: Gmail! Okay, so they messed up a little with the whole privacy/big brother issue. They'll get past that. The point is that Google knows email. Even with the throttled launch and invitation-only system of Gmail, they probably already have more email customers that most hosting companies. This gives Google 2 more clear reasons to get into hosting: they can handle email as well as anybody, and they have a huge email list to which they can market their service.

Many businesses and consumers will only do business with a brand that they trust.

If a no-name company were to attempt to enter the Web hosting arena today, they would face an uphill battle to overcome the branding efforts of the large hosting companies that got into the game early.

Why Google will get in: no-brainer -- it's Google, for goodness sake! They may have the most trusted and well-known brand online. The moment that Google enters the Web hosting space, they will attract a new, untapped audience that will overcome their reservations about having their own Website, simply because Google says it's okay to do so.

Why Will Google's Web Hosting Product Reign Supreme?

It's pretty much a given that Google will launch a Web hosting product at some point. But how will they crush Yahoo! (and every other Web host out there)? Here are a few points on which Google trumps its nearest rival…

• Google brand versus Yahoo! brand. Winner = Google. Google is now, hip, and exciting. Yahoo! is yesterday, tired, and old-school.
• Google's execution versus Yahoo's execution. Winner = Google. Google's awesome tactic of launching full blown, fully developed products as 'beta' tests overcomes the pressure and scrutiny of conventional product launches. Plus, they're just really good at executing Web-based technology.
• Google's reach versus Yahoo's reach. Winner = Google. By some accounts Google now accepts 70% of all Web searches each day. Unless it stumbles, Google will keep growing at Yahoo's! (and everybody else's) expense.
• Google's synergies versus Yahoo's! synergies. Winner = Google. Google bought Blogger, and it already knows and understands how to attract, market to, and partner with content builders. Google's AdWords and AdSense products are already in use by well over 150,000 individual Websites. Google has made a science out of knowing which markets are searching for what, and where they go to find it.

Conclusion

Poor Yahoo! Poor, poor Yahoo! First, they had their butt kicked by Google in the search space. Then, they play catch-up and once again get bested by Google in the pay-per-click marketing space as Yahoo's Overture property lags behind Google's AdWords in both luster and market penetration.

Now, Google seems poised to crush Yahoo's fledgling Web hosting effort. If it's any consolation, at least Yahoo! has been leading the way -- and blazing a clear profit trail for Google to follow.