Tier1 Research: Mass-Market Web Hosting Sector Enters Critical Period of Transformation

June 13, 2007; 08:00 AM
A new report by Tier1 Research finds that the mass-market Web hosting sector – defined as the shared, virtualized service and standardized dedicated server segments of the market – is in a critical period of transformation. Broadband is ubiquitous, mobile access and devices are proliferating, and multiple Web presence possibilities exist for all. Shared Web hosting remains under assault from all directions – new players are entering the space, and there is an increase in market consolidation. Meanwhile, virtualized infrastructure threatens to revolutionize the delivery of hosting services.

Noteworthy changes in market share along with current trends are presenting significant challenges and opportunities in this sector. These findings are contained in a report released today by New York-based Tier1 Research (T1R), an independent research firm that analyzes the financial and industry implications of developments affecting public and private companies within the hosting, IT, communications and Internet sectors. This is the fourth report from the T1R Mass-Market Quarterly Series – a series of reports designed to provide timely analysis and perspective on key technology trends and marketplace developments in mass-market hosting.

"Web service firms not normally thought of as hosters have now successfully entered the sector," said Philbert Shih, Senior Analyst at T1R and lead author of the report. "At the same time, the Internet giants continue to encroach on this sector as well. Ad-supporting hosting services remain young, but they are driving Google and Microsoft while also serving as an alternative revenue source for companies that take the necessary steps to reinvent the way they do business. All are important developments for a fragmented industry that is entering this critical period of transformation."

This 45-page report, titled 'A Review of the Mass-Market Hosting Sector – M&A is the DNA of change, but transformation continues to take hold,' recaps the key events of the quarter and assesses their impact. It provides analysis of changes in market share and offers detailed discussion and analysis of important trends and developments that are driving the mass-market hosting sector in Q1 2007, as well as insight into where this market is going.

The trends covered in this report include:

• M&A activity on the rise again: After a slow Q4 2006, M&A activity gathered momentum with several smaller deals and a major transaction in the shared hosting space with Hostway's acquisition of Affinity Internet.
• The changing competitive landscape: The competitive landscape continues to evolve as Web hosting increasingly becomes commodified and grouped within larger Web service suites.
• Clustered hosting emerges: Clustered and grid hosting technologies are emerging and threaten to revolutionize traditional delivery models based on physical infrastructure.
• Google continues inroads: In Q1 2007, Google took steps toward becoming a factor in the mass-market hosting sector.

Key Companies Covered

The report covers more than 20 key public and private companies in the mass-market hosting sector, including: 1&1, 3Tera, Affinity Internet, Amazon, Apptix, BlueFreeway, Catalyst Investors, eBay, Go Daddy, Google, Group NBT, Hostway, Mamut, MelbourneIT, Microsoft, Network Solutions, Peer1 Network, Pipex, Rackspace, Register.com, The Planet, Verio, Web.com, Website Pros and Yahoo.

Report Orders

To learn more about this report, visit www.t1r.com or contact Dan Ephraim, Vice President, Business Development with Tier1 Research, at 212-505-3030 x 122 or at dan.ephraim@tier1research.com.

About Tier1 Research

Tier1 Research (T1R), a division of The 451 Group, analyzes the financial and industry implications of developments affecting public and private companies within the IT, communications and Internet sectors – with a particular focus on hosting, Internet infrastructure and IT services. Clients include institutional investors and technology vendors, along with end users and venture capitalists. These clients leverage T1R's analytical insight for idea generation, trend identification, due diligence and grounded opinions, as well as metrics and forecasts on companies and industries covered.

Tier1 Research is headquartered in New York. For additional information on its research coverage and services, visit www.t1r.com.