"I see (hosting prices) getting more competitive," said Parsons. "Hosting is getting to be a commodity. It truly is."
As European providers and domain registrars expand into the US hosting market, low-priced hosting plans are a potent tool to gain attention and market share. Go Daddy, the fastest-growing domain registrar with more than 3.6 million registrations, recently introduced shared hosting accounts ranging in price from $3.95 to $9.95.
"We develop our own technology and our own software," said Parsons. "That's one of the reasons we can have a low-cost model. It's a formula that works, and once you hit critical mass, there are certain cost economies you can realize. We pass those savings along to our customers, and keep our prices about as skinny as we can."
Thirty five of Go Daddy Group's 317 employees are developers with Starfield Technologies, which was spun off as a separate company earlier this year. "When you're using someone else's software, you're beholden to someone else's schedule (on upgrades and improvements)," said Parsons. "We're the masters of our own destiny, and we can turn on a dime. If you own the technology, you don't have to pay licensing fees, and you have greater flexibility on pricing because you own all the margin."
Low pricing is a bedrock business value for Parsons, who got his start in technology in 1984 when he founded Parsons Technology in his basement. The company, whose breakout product was the Logos Bible study software, grew to more than 1,000 employees and $90 million in annual sales before Parsons sold it to Intuit in 1996. He founded Go Daddy the following year in Scottsdale, Arizona.
A former Marine who received the Purple Heart in Vietnam, Parsons doesn't seem to do anything halfway. He's run with the bulls in Pamplona, completed two 26.2-mile marathons and gone bungee jumping in New Zealand. But Parsons' appetite for adventure is balanced by the discipline of a CPA - which he is, having earned an accounting degree from the University of Baltimore.
From the outset, Go Daddy was engineered to manage high volume and tight margins, allowing it to undercut the $35 domain fees at Network Solutions and Register.com. That low overhead positions Go Daddy to be more flexible on hosting pricing than providers using vendor control panels and other third-party software. But in some cases, hosting plans are being used as loss leaders to build market share. Last month Germany's huge 1&1 Internet launched its US hosting push with a shared hosting plan that is free for the first three years.
The price-cutting continued last week, as domain registrar eNom launched $9.75-a-month plans offering 250 MB of web space, 20 gigs of monthly bandwidth and 100 email boxes, while Superb Internet introduced accounts featuring 1 gigabyte of disk space and 50 gigs of traffic and 250 POP boxes for $7.95 a month.
Parsons believes this kind of pricing will resonate in the marketplace. "Right now the hosting market is very fragmented," he said. "It's not like the registrar market, where the barrier to entry for becoming an ICANN registrar is about $1.5 million. The cost of entry is low, and just about anyone with a server can start a hosting company.
"I think it will become less fragmented as people become more savvy about which companies deliver the value," he concluded. "Certain competitors will become predominant and others will probably leave the market."
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