Do SSL Certificate Authorities still have a margin generating business model?

Rackshack recently started selling SSL Certificates at $25 per annum. Offering to bundle a certificate with a hosting service would be a completely conventional offer to a SSL site owner, but Rackshack is pushing the model further, by offering subsidised certificates purely as a way of bringing itself to SSL site owners' attention.

Rackshack is offering a sprat to catch a mackerel. Although the cost of SSL Certificates is small, SSL Certificates are used by non-trivial sites which are doing something of value, typically ecommerce, or else serving confidential information that is encrypted as it passes over the internet. In this respect SSL sites precisely match the demographic that dedicated server companies most want to attract.

Rackshack already has in the region 2,000 SSL sites hosted on its network, and it is likely to sell a lot of certificates at this price, gaining a purposeful and attractive prospect base.

When customer knowledge of Rackshack's offer becomes widespread it may significantly impact selling Certificates as a stand alone margin generating business model, as it is more than likely that other hosting locations will follow Rackshack's lead if it appears to be succeeding.

Most certificates are annually renewable, and in the region of 20,000 certificates are renewed or purchased each month. Jacking in to that size of flow of worthwhile customers is a hosting company's dream. It is unlikely to be coincidence that Rackshack has also started offering Windows servers - until this month it concentrated completely on selling Linux based servers - as this gives it access to 50% of the SSL market which its hosting operations could not previously serve.

Commoditisation of SSL Certificates was made possible by Microsoft's decision in late 1999 to open up Explorer to a much wider range of Certifying organisations, which introduced a completely different and much higher level of competitiveness into the market than existed previously. Certificate Authorities would have expected margin erosion as they competed amongst themselves, but may find it difficult to come to terms with what they regard as a token of trust, fundamental to the operation of the internet, becoming a hosting company's promotional trinket.