Is This Business Worth My Time and Effort or is it a Bunch of Worthless Hype?
Question: Hi Marc, is web hosting a legitimate way to make money? A friend of mine has a small web hosting company. He said he’s barely breaking even, and the overhead expenses are killing him. I follow your recommendations and advice. Is this business worth my time and effort?
R.O. Rochester, NY
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Let’s clear up a misconception. Every business has pitfalls and obstacles. There…I said it!
The trick is to understand the actual “formula” a business uses to generate sales and profit. On top of that, if you know how to address problems before you invest your time, money or passion into a business…you’ll be light-years ahead of the next guy.
Most people believe if a business works for one entrepreneur it should work for every entrepreneur. That’s why franchises sell like hotcakes. If this were true every McDonalds, Pizza Hut or Famous Dave’s franchise would be wildly successful.
The fact your friend is “barely breaking even” with a boatload of expenses doesn’t surprise me. I’ve reviewed, researched, managed, bought and sold a boatload of businesses. Most of them (let’s say 90%) have too much overhead and debt and lacked a clear marketing formula.
When web hosting is done right by reducing overhead and debt it can be a profitable business. What’s more, I’ll show you an angle for getting into web hosting without the endless headaches, costs, overhead and red tape.
Entrepreneurs can make money in this market as a “side” business too. It only requires a small amount of startup cash. I know three entrepreneurs in this business that started with less than $500 each! You won’t need tons of technical expertise or savvy either.
Web Hosting Farms of the Future
A web hosting farm is defined as an operation hosting more than 500 hostnames or websites. But believe me…you don’t need 500 websites to make money in this market!
Is GoDaddy Really Making $24 Million a Month?
GoDaddy is one of the largest web hosting “farms” in the world. The company has been in the news lately because it was acquired by a major investment firm.
GoDaddy hosts more than 5 million hostnames and websites!
Let’s do the math on this puppy….
If you host five million domain hostnames and charge $4.95 per month each (the average cost of GoDaddy’s economy hosting package) it comes out to $24,750,000 per month!
And get this…
You can piggyback with GoDaddy tap into their worldwide brand and advertising…more on this later.
When you partner with a company like GoDaddy as a reseller they handle sales, chargebacks, refunds, customer support and technical issues. On top of that, when GoDaddy upsells products to your customers for you, you get paid!
Another way to profit in this market is to go it alone. You can start your own web hosting company like J.P. on the coast of Maine. He started a local web hosting company and ISP in the mid-nineties and it’s still going strong (in a depression mind you).
If you start a web hosting company on your own the main piece of equipment you’ll need is a “web server”. A web server is a computer dedicated to store websites and web pages on the Internet.
You can even lease a web server from a web hosting company. Most of the time larger hosting companies offer management services for a small fee. The choice is yours. I’ll show you everything you need to make it happen!
I’ve helped dozens of entrepreneurs in this business, including an entrepreneur in New England who is hosting 2,200 websites at approximately $35 each. Can you say $77,000 per month! Let’s take a look at this bad boy!
Web Hosting in All Its Glory
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A web server farm is a collection of computer servers maintained by a company or individual. There are several functions of server farms. But I’ll focus on one aspect – web hosting. Basically, a web hosting farm is a secure location which houses several computer servers with the distinct purpose of hosting hostnames or websites.
Let’s Talk Money
What kind of money can you make with a web hosting farm? The average monthly website hosting charge in the U.S. today is about $40, according to The Hosting Standard magazine.
1&1 Internet Inc. is a web hosting farm with more than 7 million paying customers. The company’s average monthly hosting charge is around $12. By hosting 7 million websites at $12 each, the total approximate monthly revenue stream may be close $84,000,000!
Hang on money bags…the chances of you hosting 7 million websites out of the gates is pretty slim. On top of that, seven million anything can bring problems too.
You don’t need 7 million sites to make money…you don’t even need 7 thousand or even 7 hundred. You can make a nice income stream with less than 70 sites!
Look, 1&1 Internet is an international web hosting mega giant. When you have an operation of this size and scope there can be major costs and expenses associated with it too, so be prepared. The good news, as I said, is you can stay small and offer premium hosting services and still make out like a bandit.
For example, Blizzard Internet in Glenwood Springs, Colorado, focuses on hospitality-related website hosting. The annual web hosting fees at Blizzard range from $240 to $600 per year. They host and manage more than 500 hospitality websites (you can do the math).
You Can Make Money with Only 10 Websites
If you host ten websites and charge an average of $30 (the average price for business websites) it would produce monthly revenue of around $300. Granted, this is far cry from 24 million. And it certainly won’t break the bank. But, an extra $300 each month in the current economy is nothing to sneeze at, and especially when there’s so little work involved!
The costs associated with hosting 10 websites are minimal. In fact, most of your costs will be focused on marketing (obtaining new customers).
Once you’ve purchased a web server and find a location to store it (you could put it in a back bedroom or in the basement if you want to), the main expense will be maintaining the server(s). Most entrepreneurs who get into this business don’t think about sales and marketing until everything is set up. That’s the wrong strategy in my opinion.
Sales and marketing should be the first thing on your mind! I’m serious. If you learn how to market web hosting services efficiently and as inexpensively as possible the heavens will part for you! I’ll show you how to ramp up your marketing and close sales in this business.
A Do-It-Yourself Business Start-Up Plan
If you want to set up your own web hosting farm, rather than partnering with a company like GoDaddy then you’ll need some tools. Let’s talk about some of the hardware and software to get this business up and running.
1) You’ll need a web server.
A web server is a computer which stores web documents and makes them available to the rest of the world.
A web server may be dedicated (meaning its sole purpose is to be a web server) or non-dedicated (meaning it can be used for other basic computing in addition to acting as a web server).
A new web server generally runs about $1,500 to $4,000, depending on the size, speed, and memory.
But you can grab high-quality used Web Servers on eBay or dozens of other sites at deep discounts. I found a used web server on Kitmondo this morning for $500.
2) You’ll need software
The next step is to configure the web server with software, like Windows, Linux, or Unix. “Hold on Marc. You said nothing technical!”
Well, if configuring a web server is technical. My suggestion would be to let someone else handle it.
3) Find freelancers to help you!
You can find hundreds of eager freelance programmers at Warrior Forum, eLance.com and DICE.com. ScriptLance is another good place for freelancers. But for brave souls who want to do it themselves you’ll find a great tutorial from the folks at LifeHacker.com
No Kidding – No Technical Skills Required!
Don’t throw this business overboard if you’re not a computer genius or tech nerd! If I tossed every business aside because of a lack of technical knowledge, I would have never launched any successful businesses!
Every business requires some special skills or technical expertise. We’ve got to look past this stuff and keep our eyes on the big picture. If you don’t understand technical issues, you can still make this business work for you.
Web hosting farms require very little technical expertise. Simply retain a freelance web administrator if you can’t do it yourself.
Insider Tip: 90 percent of all web hosting farms use the Linux operating system
4) Start Marketing
Once the web server is set up and configured, you can begin marketing your service and accepting Web page files from individuals and businesses.
Insider Tip: Build your business on market demand.
Most startup entrepreneurs spend too much time trying to predict costs, overhead, expenses, obstacles, regulations and all that stuff. After worrying about all of the “busy work”… then they try to figure out how much to charge customers!
Don’t complicate this business. It’s really simple. If you’re going to worry about something worry about marketing and closing sales!
You can find out how much the competition is charging customers with some basic Internet research. Another valuable resource for determining what to charge customers is The Web Host Industry Review or WHIR.
One more thing…forget about buying new servers at this point. You don’t need new web servers when you’re starting out in this business. On top of that, you don’t need employees, complicated business structures, office space, full-page newspaper advertising, or fancy business cards either. In other words, keep it simple and do something to get the ball rolling. You can put a used web server in the back bedroom if you need to!
An operating system like Linux is free so that shouldn’t be a concern, although the commercial application (like Red Hat) is about $250. A new site call the Top 100 Web Hosts is another resource for determining what to charge people or businesses.
Direct Marketing Should Be a Top Priority
Direct marketing strategy focuses on a targeted audience. For example, you could focus on small/medium sized businesses, or online gaming websites, or Fortune 1000 companies, family resorts, or even non-profit organizations. By focusing on targeted audiences you can direct your marketing to the right places.
Insider Tip: Businesses will switch hosting services if the change is “seamless.”
People and businesses will not be excited about switching their web hosting. That’s a fact. Switching web hosting is almost as difficult as getting someone to switch his or her cable TV provider.
But people and companies WILL SWITCH if they can save money and it doesn’t incur any “pain”. So…incorporate these two things or obstacles in your marketing message (and deliver on your promises) and you’ll be fine.
Insider Tip: When you acquire new hosting business there’s a good chance they’ll stay with you for life…..like the phone company!
The most important aspect of switching a web host is disruption. People want the transfer to be seamless…without interruption! Your marketing message should illustrate how you’ll guarantee a seamless transfer and NO interruption in service.
Domain transfer is another service you might consider providing. I won’t get into the domain transfer market at this point, but it’s easier than it sounds.
Big Money with First Time Buyers
The first time home buyer in real estate is the only money keeping the industry alive today. This is also true when it comes to web hosting.
The first time web host buyer is typically someone new to the Internet.
The best time to get these buyers is when they secure or purchase a domain name for their website. This is why GoDaddy is so successful.
The downside of first time buyers relates to customer service. First time buyers have a million questions. Therefore…I think the first time buyer market is a much better fit for resellers.
Insider Tip: Price Wars! Price your service below the competition
The largest web hosting market is small- and medium-sized businesses. According to InfoUSA, there are more than 19 million small to medium sized businesses in the U.S. and Canada. 95 percent of these companies have websites!
Insider Tip: The best marketing tools for web hosting companies are 1) targeted e-mail newsletters 2) keyword buys in the top five search engines 3) Advertorials and 4) direct mail
If you host 25 small to medium sized business websites at $35 each this would produce $875 per month in revenue. Granted, this is hardly “the ticket to wealth and happiness”. But it’s certainly a nice supplemental income.
And remember, most business websites don’t require a lot of maintenance or babysitting. Once a company’s website is up and running, there won’t be a lot of time or expense involved.
Stop the Presses!
Don’t Mess with Servers, Programming, Customer Support, Billing and Complaints…Consider THIS Instead
One of the hottest things to hit the web hosting business is the “reseller” approach. As a web hosting reseller your primary focus is marketing. When prospects sign up for web hosting services – you get paid….for as long as they’re active! I’m serious.
Granted, as a reseller you won’t make as much money as you would if you owned the web servers and customer list. But you won’t have any of the headaches either. You won’t have to deal with web servers, customers, billing, collections, complaints, refunds or even technical support! Sweet!
All you have to do is deliver qualified prospects to the parent web hosting company, and they’ll do the rest. I’m serious…reselling web hosting services is the real deal.
Seven Web Hosting Farms Which Offer Legitimate Reseller Programs:
Simply check out each web hosting farm’s reseller program for pay plans and specifics. Web host farms are the new cash crop. It can be a viable side income for most entrepreneurs.
It’s an easy business to start and market, and especially when it comes to reselling! You’ll enjoy consistent monthly revenue without wild fluctuations too.
The downside to this business will be maintaining your Web servers and handling “newbie” customer service issues. A “newbie” is someone new to the Internet, hosting, networking, or the World Wide Web.
The majority of Web farms automate their customer service or questions with frequently-asked-question forums (FAQs) or live online chats. If you’re a reseller you won’t have to mess with this.
Whether you “go it alone” and launch your own web hosting farm, or choose to resell web hosting services of a reputable partner, your focus should be on marketing and securing new clients.
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“The King of Business Opportunities”
(Ed Note: Marc Charles is referred to as “The King of Business Opportunities” ….and for good reason. He should be known as “The King of Legitimate Business Opportunities”…because he’s launched, bought, sold reviewed and advised on hundreds of businesses and money making opportunities. He understands legitimate opportunities. Marc has agreed supply League of Power members with crucial updates regarding legitimate business and money making opportunities.)
*** Action Strategy ***
If you want to get started in this business as quickly as possible without a lot of cash outlay then reselling is the way to go. Check out the resources in this issue.
If you want to kick it up a notch you can buy a web server with the necessary software (Linux is preferred by most). You can lease space from an existing web host. Many times they offer value add services like technical expertise and customer support.
Or you can go it alone and build a web hosting farm. You’ll need space to store the web servers, and it’ll need to be secure. You’ll also need technical expertise and/or someone to help manage multiple websites.
For all of these options direct response marketing is a vital component. I’ve given you several strategies in this issue. But Google AdWords, Facebook Ads and Twitter sponsored Tweets can be very effective.
Believe it or not, E.R., and entrepreneur in Phoenix AZ resells web hosting services by using direct mail and postcards! You said snail mail was dead?
Down on the Server Farm (Funny YouTube video about working on a server farm!)
***Action Strategy BONUS***
Here are some more great ways to generate web hosting sales:
• Targeted e-mail newsletters, websites and blogs. For example, if you want to reach online gamers, advertise in e-mail newsletters, websites, blogs, and forums with a high density of active online gamers.
• Keyword Advertising: Google, Yahoo! and Bing are the most popular. Most of the keyword advertising in the top search engines today is offered on the pay per click (PPC) model. This means every time someone “clicks” your keyword ad (featured on the right hand side of search result pages) you are charged a fee – which can range for 2 cents and $100 per click!
• Targeted websites, Facebook Fan Pages andTwitter Targeted websites are sites focused on a particular topic or niche, like gaming, financial news, and real estate, etc. Facebook Ads are gaining popularity over Google AdWords because they are so damn targeted!
• Direct mail. The Old Dog! Direct mail (and postcards) can be a great way to reach “A” Prospects. “A” prospects are people who have previously purchased what you’re selling! There are thousands of targeted mailing lists available for rent. You could reach 5,000 qualified prospects for about $2,400 (postage, paper, envelopes and printing). If 2 percent of the prospects respond you’ll have 100 new hosting customers!
• Word of mouth. Everyone touts this approach (mainly because it’s free). But HOW do you get people talking?! Simple. Give people more than their money’s worth and significant discounts for referring new customers to your web hosting farm. Consider starting your own affiliate program! You can launch a web hosting affiliate program in just a few hours. Check out Commission Junction or LinkShare for details.
Hyper-Optimized Websites Generate Massive Free Targeted Traffic
The effectiveness of a “hyper-optimized” search engine friendly website is amazing.
“Hyper-optimized” is simply search engine optimization (SEO) with one search engine in mind, such as Google.
In other words, most SEO experts can hyper-optimize your website for Google, or for Yahoo!, instead of trying to optimize it for all of the search engines.
In my experience, when a website is optimized for Google (the master of the searching universe)….it will be suitable for all engines.
Millions of people are searching web hosting companies (and deals) every week on Google, Yahoo!, and the hundreds of other engines.
If you have a “hyper-optimized” search engine-friendly website (or dozens of them!), you can attract a boatload of customers absolutely free.
You should enjoy a steady stream of qualified prospects, for almost no cost.
For example, I just searched Google for “web hosting deal.”
The second search result is a “hyper-optimized” search engine-friendly site called WebHostingDeal.com .
Hyper-optimized Insider Tip:
Make sure your domain and title page name match. You’ll be amazed how this will improve a website’s predominance in search result page results.
WebHostingDeal.com lists the top or “best” web hosting deals on the Internet. The person who owns this website is most likely a reseller for the web hosts featured on his or her site….it’s a great approach.
You could do the same thing.
You can review other web hosting promotions on Who’s Mailing What.
Interland (a large web hosting farm which targets small and medium sized businesses) recently completed a direct mail promotion to more than 350,000 people. I was told the promotion generated a 0.2 percent response. That’s 700 people.
That doesn’t mean 700 purchased hosting services. It means 700 people responded to the promotion or requested more information. The postage alone for a promotion to 350,000 prospects is about $122,000!
However, you could send a dedicated e-mail promotion to about 200,000 small Business website owners for about $2,500 (SEO-News).
Or you could place an ad (515 x 165 pixels) in an e-mail newsletter like SEO-News for about $500.
Once you’ve secured hosting clients, you’ll be thrilled by how easy this business is.
On top of that, I really like the recurring income aspect of this business too!