Estimating the value of hosting companies by counting computers

Is it possible to estimate the revenue of a hosting company based on its public presence — that is, is the number of websites it hosts directly proportional to its market value? By using the market capitalisation (or acquisition purchase price, where appropriate) as a valuation and examining the number of web-facing computers, a striking patterns emerges.

Valuation of a hosting company against the number of web-facing computers found in August 2013.
Blue = "pure" hosting company; Orange = significant other areas of business. The dashed line is based only on pure hosting companies.
†Go Daddy’s valuation is based on its 2011 buyout offer, adjusted for growth in web-facing computers and for inflation.

Amongst the hosting companies examined, there is a fairly strong correlation between the number of web-facing computers and the valuation of the hosting company: the more computers visible at a hosting company, the higher the valuation. Considering only pure hosting companies (without significant other business, marked in blue), the average value per web-facing computer is circa $43,000.

An average company value per web-facing computer on the order of tens of thousands of dollars may seem surprisingly high, but there is, of course, more to it than the cost of a single computer. The number of web-facing computers does not take into account the potentially large number of computers used behind the scenes, which may vary from hosting company to hosting company depending on business model — there are likely to be fewer hidden computers at a shared hosting provider than at a cloud hosting provider.

Even with the same number of web-facing computers, the valuation of a hosting company can vary due to the quality of the physical hardware, the network infrastructure, and also sales and support staff. Most important is the current and future revenue, and hence profit, that each web-facing computer can generate.

This average value per web-facing computer masks a great deal of variation between hosting companies:

Hosting company Value per web-facing
computer (USD)
DADA $15.3k
Peer 1 $30.0k
SoftLayer $49.7k
iomart $52.3k
United Internet* $66.8k
Internap* $67.3k
Rackspace $68.1k
Go Daddy* $177.2k

Value (USD) per web-facing computer. Companies marked with a * have significant other areas of business.

Comparing two competitors in the managed hosting market, Rackspace and Peer1, highlights a significant difference in the valuation based on web-facing computers. Each web-facing computer at Rackspace is valued at twice as much as one at Peer1; perhaps this reflects the value of Fanatical Support and the flexibility of Rackspace's OpenStack-based cloud.

Go Daddy's valuation of $4.1bn is based on a deal in 2011 (adjusted for both inflation and computer growth), which reportedly amounted to $2.25bn for 65% of the company. This valuation is greater than expected from the number of computers at Go Daddy, but this difference could be explained by its equally prominent role as the largest ICANN-accredited domain name registrar.

SoftLayer is in the process of being acquired by IBM, who say the acquisition will strengthen their leadership position in cloud computing and help speed business adoption of public and private cloud solutions. Financial terms were not disclosed, but the deal is speculated to be worth more than $2bn.

The correlation between computers and market value can be used not only to estimate the value of private companies which have never been sold before, but also to estimate the value of the hosting divisions within much larger companies, such as Amazon.

Amazon's market capital stands at around $131bn today, but the majority of its revenue comes from online retailing. A valuation based on computer counting would suggest that its hosting division, Amazon Web Services, could be worth approximately $7.8bn, around 6% of Amazon's entire market value. Based on its Q2 2013 earnings report, Amazon's AWS division (within the Other category) accounted for 5.7% of its total revenue between 1st April and 30th June 2013.

Netcraft has developed a technique for identifying the number of computers (rather than IP addresses) acting as web servers on the Internet, providing an independent view with a consistent methodology on the number of web-facing computers at each hosting location worldwide. For more information, see our Hosting Provider Server Count.

Most Reliable Hosting Company Sites in July 2013

Rank Performance Graph OS Outage
hh:mm:ss
Failed
Req%
DNS Connect First
byte
Total
1 Swishmail FreeBSD 0:00:00 0.003 0.134 0.076 0.152 0.209
2 ServerStack Linux 0:00:00 0.003 0.096 0.078 0.158 0.158
3 iWeb Linux 0:00:00 0.003 0.146 0.083 0.166 0.166
4 Hyve Managed Hosting Linux 0:00:00 0.006 0.267 0.083 0.166 0.168
5 XILO Communications Linux 0:00:00 0.009 0.230 0.094 0.399 0.561
6 Qube Managed Services Linux 0:00:00 0.012 0.136 0.065 0.132 0.132
7 Virtual Internet Linux 0:00:00 0.015 0.164 0.089 0.383 0.594
8 Datapipe FreeBSD 0:00:00 0.018 0.089 0.031 0.062 0.095
9 New York Internet FreeBSD 0:00:00 0.018 0.142 0.079 0.159 0.491
10 Bigstep Linux 0:00:00 0.018 0.293 0.084 0.174 0.321

See full table

Swishmail had the most reliable hosting company site in July 2013. The New York based company failed to respond to only one of Netcraft's requests during the whole month, and had an average connection time of 0.076s. Swishmail primarily operates as an email hosting provider and uses three different data centers, run by Savvis, Level3 and Globix in New York City. Upstream connectivity is provided by Level3, Savvis, Cogent, AboveNet and Globix.

In second and third place, both also with only one failed request, were ServerStack and iWeb. ServerStack had the most reliable hosting company site during the previous month, and has data centers in New Jersey, San Jose and Amsterdam. iWeb's data centers in Montreal have a total dedicated server capacity of nearly 35,000.

For the second month in a row, none of July's top ten hosting companies were running on Windows operating systems. The most reliable hosting company site, Swishmail, was running on FreeBSD, as were two others sites within the top ten; the remaining seven were running on Linux. In terms of web server software, Apache was used by seven of the top ten sites, while nginx was used by three sites, including Swishmail's.

Netcraft measures and makes available the response times of around forty leading hosting providers' sites. The performance measurements are made at fifteen minute intervals from separate points around the internet, and averages are calculated over the immediately preceding 24 hour period.

From a customer's point of view, the percentage of failed requests is more pertinent than outages on hosting companies' own sites, as this gives a pointer to reliability of routing, and this is why we choose to rank our table by fewest failed requests, rather than shortest periods of outage. In the event the number of failed requests are equal then sites are ranked by average connection times.

Information on the measurement process and current measurements is available.

Most Reliable Hosting Company Sites in June 2013

Rank Performance Graph OS Outage
hh:mm:ss
Failed
Req%
DNS Connect First
byte
Total
1 ServerStack Linux 0:00:00 0.007 0.089 0.073 0.146 0.146
2 Codero Linux 0:00:00 0.010 0.234 0.084 0.266 0.528
3 Swishmail FreeBSD 0:00:00 0.014 0.133 0.070 0.137 0.184
4 Virtual Internet Linux 0:00:00 0.014 0.162 0.074 0.329 0.502
5 Datapipe FreeBSD 0:00:00 0.017 0.083 0.018 0.037 0.057
6 Bigstep Linux 0:00:00 0.017 0.289 0.072 0.147 0.228
7 Midphase Linux 0:00:00 0.017 0.246 0.111 0.225 0.380
8 www.cwcs.co.uk Linux 0:00:00 0.017 0.209 0.129 0.214 0.517
9 Memset Linux 0:00:00 0.021 0.111 0.074 0.146 0.291
10 Iomart Linux 0:00:00 0.021 0.115 0.088 0.181 0.339

See full table

ServerStack had the most reliable hosting company site in June, with only two failed requests. ServerStack provides managed dedicated hosting from data centres in New Jersey, San Jose, and Amsterdam, and counts amongst its clients high-traffic sites such as MTV and academic publisher Elsevier. Over the eight months Netcraft has been monitoring ServerStack's performance, it has appeared in the top 10 five times and been the most reliable hosting company site twice.

Codero and Swishmail took second and third place respectively. Both companies had 100% uptime and just two failed requests separate the top three companies. Both Codero and Swishmail are based in the United States: Codero has a presence in Virginia, Illinois and Arizona, whilst Swishmail operates out of three New York data centres.

Bigstep, which focuses on providing hosting infrastructure for big data companies, started being monitored three months ago and has maintained a 100% uptime record thus far.

For the first time since May 2012, none of the companies in the top 10 Most Reliable Hosting Company Sites were running a version of Windows Server. ServerStack runs Linux, as do seven other hosting companies in the top 10. FreeBSD is used by the remaining two: Datapipe and Swishmail.

Netcraft measures and makes available the response times of around forty leading hosting providers' sites. The performance measurements are made at fifteen minute intervals from separate points around the internet, and averages are calculated over the immediately preceding 24 hour period.

From a customer's point of view, the percentage of failed requests is more pertinent than outages on hosting companies' own sites, as this gives a pointer to reliability of routing, and this is why we choose to rank our table by fewest failed requests, rather than shortest periods of outage. In the event the number of failed requests are equal then sites are ranked by average connection times.

Information on the measurement process and current measurements is available.

The Meteoric Rise of DigitalOcean

[November 2013: Click to view updated graphs and statistics for DigitalOcean]

Cloud hosting startup DigitalOcean has grown extraordinarily over the past six months. In December 2012, DigitalOcean had just over 100 web-facing computers; in June 2013, Netcraft found more than 7,000. DigitalOcean provides SSD-backed virtual computers which are available by the hour. The cheapest droplet, as it refers to virtual computers, costs less than a cent per hour, about a third of the price of Amazon's cheapest option. DigitalOcean claims to be able to provision a new droplet within 55 seconds in one of three locations: New York, Amsterdam (available since January 2012), and San Francisco (April 2013).

Hosting provider December 2012 June 2013 Growth Growth (%)
Amazon 134,117 165,438 +31,321 +23.35%
Alibaba6,64917,347+10,699+160.91%
Hetzner75,88084,896+9,016+11.88%
DigitalOcean1387,134+6,996+5084.64%
OVH90,30596,558+6,253+6.92%
Shore Network Tech (Linode)54,05157,701+3,650+6.75%

Fastest growing hosting providers by web-facing computers, December 2012 to June 2013.

Over the last six months DigitalOcean had the fourth largest growth in web-facing computers with only Amazon, Alibaba, and Hetzner ahead of it. DigitalOcean's more than 50-fold growth makes it the 72nd largest hosting provider in the world by web-facing computers, up from 549th in December and 102nd last month. DigitalOcean had the second largest growth of web-facing computers last month — it was one of only five hosting providers to grow by more than 1,000 web-facing computers — and it contributed 10% of the total growth worldwide.

Previous hosting provider Net movement to DigitalOcean
New sites+6,211
Rackspace+1,475
Shore Network Tech (Linode)+1,028
Amazon+626
Softlayer+263

Sites (hostnames) switching to DigitalOcean from notable providers, May 2013 to June 2013

As shown in the table above, websites are migrating to DigitalOcean from its better known competitors; last month almost 1,500 websites moved from Rackspace and 1,000 from Shore Network Tech (Linode). NewsBlur, a news aggregation website, is one of the busiest sites hosted at DigitalOcean. Several websites belonging to the Ruby on Rails project including guides.rubyonrails.org and api.rubyonrails.org are now hosted at DigitalOcean after recently moving from Linode.

Operating System share by web-facing computer at DigitalOcean in June 2013

DigitalOcean provide a number of template images in order to create a droplet, including five Linux distributions: Ubuntu, CentOS, Debian, Arch Linux and Fedora. Of the web-facing computers presenting a distribution-specific server banner, Ubuntu is by far the most popular: over 70% of web-facing computers with an identifiable distribution are using the Debian-derived distribution. Microsoft Windows is conspicuous by its absence; DigitalOcean has postponed plans to support Windows citing complexities including licensing and security concerns.

DigitalOcean — 2012 graduate of the Tech Stars startup accelerator — has had difficulty getting access to a sufficient quantity of IPv4 addresses in Amsterdam which meant that it was uneconomic to provide smaller droplet sizes. In May 2013, DigitalOcean announced the availability of further IP addresses for smaller droplet sizes in Europe, re-enabling the creation of 512MB and 1GB droplets.

Netcraft provides information on the Internet infrastructure, including the hosting industry, and web content technologies. For information on the cloud computing industry visit www.netcraft.com.

Most Reliable Hosting Company Sites in May 2013

Rank Performance Graph OS Outage
hh:mm:ss
Failed
Req%
DNS Connect First
byte
Total
1 Qube Managed Services Linux 0:00:00 0.006 0.099 0.045 0.091 0.091
2 Datapipe FreeBSD 0:00:00 0.009 0.073 0.016 0.033 0.051
3 ServerStack Linux 0:00:00 0.009 0.077 0.066 0.134 0.134
4 Bigstep Linux 0:00:00 0.009 0.269 0.071 0.143 0.143
5 iWeb Linux 0:00:00 0.009 0.121 0.073 0.144 0.144
6 www.dinahosting.com Linux 0:00:00 0.012 0.178 0.098 0.198 0.198
7 XILO Communications Ltd. Linux 0:00:00 0.015 0.218 0.076 0.361 0.517
8 Swishmail FreeBSD 0:00:00 0.018 0.110 0.062 0.124 0.226
9 INetU Windows Server 2008 0:00:00 0.018 0.130 0.072 0.236 0.456
10 Virtual Internet Linux 0:00:00 0.018 0.165 0.074 0.324 0.453

See full table

Qube Managed Services had the most reliable hosting company site in May, with only 2 failed requests. Qube specialises in providing managed hosting from three data centres in London, New York and Zurich. Qube was founded in 2001 and provides services to a number of notable clients, including Betfair (a large betting exchange) and blinkbox (a video streaming service from Tesco in the UK). Qube has appeared in the top 10 over twenty times since Netcraft began monitoring it in March 2010 and has now ranked in 1st place four times.

Datapipe and ServerStack placed 2nd and 3rd, both narrowly missing the top spot by a single failed request. Datapipe had the lowest average connection time out of all the top 10 sites, which breaks the tie with ServerStack in its favour. Datapipe has continued to maintain its 100% uptime record having recently passed the 100% uptime over 7 years milestone despite some of its nine data centres being in the path of hurricanes, typhoons, and a snowstorm. Serverstack has now been monitored by Netcraft for seven months and has already appeared in the top 10 four times. The company's 100% uptime SLA offers 5% credit for every half hour of sustained unscheduled downtime.

All but three of May's top 10 most reliable hosting companies hosted their own sites on Linux, including Qube in 1st place, ServerStack in 3rd place and Bigstep in 4th place, which made its debut entry in the table last month. FreeBSD is used by 2nd place Datapipe and last month's winner Swishmail (this month in 8th place). INetU was the only hosting company in the top 10 to host its site on Windows Server 2008.

Netcraft measures and makes available the response times of around forty leading hosting providers' sites. The performance measurements are made at fifteen minute intervals from separate points around the internet, and averages are calculated over the immediately preceding 24 hour period.

From a customer's point of view, the percentage of failed requests is more pertinent than outages on hosting companies' own sites, as this gives a pointer to reliability of routing, and this is why we choose to rank our table by fewest failed requests, rather than shortest periods of outage. In the event the number of failed requests are equal then sites are ranked by average connection times.

Information on the measurement process and current measurements is available.

Amazon Web Services’ growth unrelenting

In September 2012 Netcraft reported that Amazon had become the largest hosting company in the world based on the number of web-facing computers. In the last eight months, the e-commerce company's tally of web-facing computers has grown by more than a third, reaching 158k. The number of websites hosted on these computers has also increased, from 6.8M in September 2012 to 11.6M in May 2013, a 71% increase.

Although Amazon’s main business is still online retail, Amazon Web Services (AWS), its cloud computing division, has been growing in significance. In Amazon's first quarter of 2013 the Other category (which still includes AWS along with other non-retail activity) was just under 5.0% of its revenue, up from 3.2% at the same point in 2011. The first publicly available AWS service was launched in 2004, but it was not until 2006 that Amazon launched its two core services S3 (data storage) and EC2 (per-hour rental of virtual computer instances). Since then, Amazon has been increasing the number of services provided: in 2012 alone, 159 new services and features were released.

Including its retail infrastructure, the number of web-facing computers at Amazon has grown more than thirty-fold in four years: in May 2009, Netcraft found 4,600 Amazon-controlled web-facing computers; in May 2013, Netcraft found 158k web-facing computers on 164k IP addresses. Netcraft estimates the number of computers behind a group of IP addresses by using a variety of heuristics based on the TCP/IP characteristics seen in the HTTP responses gathered. Hosted on those computers, there are more than 11.6M websites (or hostnames) which corresponds to 2.1M websites with unique content (active sites). Despite being the largest hosting provider by number of web-facing computers, it is dwarfed by Go Daddy, the largest hosting provider when considering the number of websites hosted. Go Daddy has 37M websites on just 23k web-facing computers: the high ratio of websites to web-facing computers may be indicative of Go Daddy's role as a registrar, for which it has a large network of holding pages, and its inexpensive shared hosting platform.

EC2 - Elastic Compute Cloud

EC2, provides on-demand virtual-computer instances billed per hour and is currently available from all nine AWS regions. Each region may correspond to multiple physical data centres which are structured into "Availability Zones". The two largest regions, US East (Northern Virginia) and EU West (Ireland), account for more than three-quarters of all EC2 usage as measured by Netcraft. Sydney, the newest AWS region, now accounts for just under 1% of all measured web-facing computers using AWS, having almost tripled in size in the past four months. In total, more than 156k instances power at least one hostname on 3M domains across the internet.

Launched in 2011, the GovCloud (US) region is specifically intended for more sensitive applications that require additional security and compliance with US regulations. As of May 2013, Netcraft found just 27 web-facing computers within the government cloud, some of which power www.grdregistry.org and www.govdashboard.com. Given its intended role, it would not be surprising if a large proportion of the computers used in the region are not web-facing.

Notable EC2 users include Netflix, a DVD rental and video streaming service, Instagram, a photo sharing application now owned by Facebook, and DuckDuckGo, a search engine.

Metric (EC2 Total) February 2013 March 2013 April 2013 May 2013 Growth (4 month)
Web-facing Computers/Instances 141,960 145,648 152,041 156,225 10%
IP Addresses 144,625 148,837 155,712 160,884 11.2%
Domains 2,788,685 2,810,906 2,996,147 3,061,178 9.8%
Hostnames 9,489,496 9,938,480 10,649,545 10,925,661 15.1%

Many uses of EC2 such as batch data-processing will not be directly measurably over the internet: Netcraft measures publicly visible computers with corresponding DNS entries and which respond to HTTP requests. Netcraft's Web Server Survey is run at Amazon from the Northern Virginia region, so the region may be over-reported due to services like latency based multi region routing which provide differing responses depending on topological location.

Geographic distribution of computers per EC2 region in May 2013

Data Centre (EC2 - Web Facing Computers) February 2013 March 2013 April 2013 May 2013 Growth (4 month)
Asia Pacific (Singapore) 6,576 6,805 6,998 7,290 10.9%
Asia Pacific (Sydney) 499 739 1,129 1,427 186%
Asia Pacific (Tokyo) 7,342 7,595 8,065 8,601 17.1%
EU West (Ireland) 23,778 24,635 25,326 25,942 9.1%
South America (Sao Paulo) 2,115 2,263 2,396 2,655 25.6%
US East (Northern Virginia) 87,094 88,543 92,426 93,537 7.4%
US West (Northern California) 9,325 9,478 9,715 9,695 4%
US West (Oregon) 5,217 5,573 5,965 7,051 35.2%
GovCloud (Oregon) 14 17 21 27 92.9%

S3 - Simple Storage Service

S3 provides an online file storage service which can be managed programmatically via Amazon's API. Files are logically grouped into containers called buckets which can be made public and accessible over HTTP but default to being private. As with EC2, Netcraft cannot track private use of S3 but is able to survey websites using S3 publicly to serve static files and even entire websites.

Metric (S3 Total) February 2013 March 2013 April 2013 May 2013 Growth (4 month)
Domains 41,782 42,561 45,721 48,636 16.4%
Hostnames 124,454 127,370 132,962 138,588 11.4%

In May 2013, a total of 139k hostnames were found to be hosted directly on S3, either using a subdomain of s3.amazonaws.com or using a custom CNAME pointing to S3. Of these, 24.7k hostnames, or over 18.5k domains, point to an S3 bucket configured to serve an entire website, as does mediahackers.org. Many more websites are not hosted entirely on S3, but make use of the service to serve static files such as images, stylesheets, or file downloads.

One of the most widely referenced S3 hostnames is used for twitter badges bucket, which was once a common method to display twitter icons on a third-party website. Tumblr, a popular blogging platform recently acquired by Yahoo!, also makes use of S3 to host static media.

CloudFront

CloudFront is a Content Delivery Network which can be used to serve both dynamic and static content from 28 edge locations which are topologically closer to a site's visitors. Caching content reduces the bandwidth and performance requirements on the website's own servers and, by being topologically close to visitors, the latency associated with each HTTP request can be improved.

In the May 2013 survey, more than 63k hostnames were served via CloudFront, more than 60% of which point to an S3 bucket. Amazon uses CloudFront on its own websites, including imdb.com, and also uses it for serving images on Amazon.com. Other than Amazon itself, CloudFront users include: the Toronto Star, a Canadian newspaper, and Pirifrom, the makers of utility program CCleaner, are two of the most visited sites using CloudFront amongst users of the Netcraft Toolbar.

Metric (CloudFront Total) February 2013 March 2013 April 2013 May 2013 Growth (4 month)
Domains 22,920 24,079 25,264 26,221 14.4%
Hostnames 55,578 57,817 60,475 63,203 13.7%

The number of CloudFront-dedicated IP addresses and computers cannot be easily measured as different results are obtained depending on the location of the request.

Route 53

Route 53, is a managed Domain Name System (DNS) hosting service. Route 53, named for the TCP and UDP port used for the protocol, hosts DNS records which map from human-readable hostnames to IP addresses. Integrated with the rest of AWS, it allows programmatic access to change DNS records in response to changes elsewhere in a customer's infrastructure. As with CloudFront, Amazon have servers providing this service in edge locations outside of its 9 EC2 regions; Route 53 is available from 28 separate locations.


Metric (Route 53 Total) February 2013 March 2013 April 2013 May 2013 Growth (4 month)
Domains 136,698 146,635 161,619 169,111 23.7%
Hostnames 3,493,986 3,662,195 3,831,910 4,068,053 16.4%

Over the past four months there has been a steady growth in the number of websites using Route 53 to host their DNS records: it now serves DNS records for 169k domains. Busy sites making use of this service include pinterest.com, a social photo-sharing website which is a heavy user of Amazon's infrastructure; MediaFire, a file uploading and sharing service; and ow.ly a URL shortener.

Heroku

Heroku is Platform as a Service (PaaS) provider owned by Salesforce. Whilst not operated by Amazon, it makes heavy use of AWS services, especially EC2. Heroku provides an abstracted managed environment for web developers to deploy applications in a number of different languages. In May 2013, Heroku was serving 70K domains directly (not behind a CDN) across 4,786 computers.

Popular sites using Heroku include www.upworthy.com, a curated news website; help.github.com, a knowledge base for the popular git-based project hosting service; and Absolventa, a German job market.


Metric (Heroku total) April 2013 May 2013 Growth (2 month)
Computers 4,293 4,786 11.5%
IP Addresses 4,408 4,972 12.8%
Domains 65,821 69,781 6%
Hostnames 1,094,578 1,102,663 0.7%

Heroku, as demonstrated in the results from Netcraft's survey, has been available almost exclusively from the Northern Virginia EC2 region. In April, Heroku announced availability of its service in Europe from the AWS EU West region based in Ireland. Only a limited number of Heroku customers have had access to this region during a private beta phase which explains the currently low uptake: only 1% of the computers attributed to Heroku were in the region.


IP Addresses April 2013 May 2013
US East (Northern Virginia) 4,374 4,915
EU West (Ireland) 33 56

Summary

The launch of the new AWS region, hundreds of new services, new partnerships, and multiple price reductions, are a clear indicator of the relentless growth of Amazon Web Services.

Netcraft provides information on the Internet infrastructure, including the hosting industry, and web content technologies. For information on the cloud computing industry including Microsoft Azure, Rackspace Cloud, and Google App Engine, please contact sales@netcraft.com.