Domain registrars' expansion into web hosting has yielded strong results, as large registrars have been among the best performers thus far in 2005, according to our Hosting Provider Switching Analysis. The strong growth for registrars reinforces the importance of domain names as a gateway to other web services, and has prompted hosting companies to feature domains more prominently in their business models.

Faced with tightening margins on new domain sales, registrars began pushing into the web hosting market in 2003, offering low-priced shared hosting accounts. While domains are renewed just once a year, hosting accounts provide recurring monthly revenue. Registrars can market their hosting products to domain purchasers during the signup process, and have also bundled free domains with hosting accounts.

The largest registrars have experienced explosive growth. An example is Go Daddy, which had just 21,000 active sites when it entered the shared hosting market in July 2003, but now has more than 678,000, making it the third-largest hoster in the world by that measure. More than half of those sites have been gained since January. After less than two years, Go Daddy now hosts more than twice as many active sites as industry pioneers NTT/Verio and Interland.

eNom and Dotster followed Go Daddy's lead, and have each grown more than 70 percent thus far in 2005. Late to the party but showing strong growth on a percentage basis is Network Solutions, which has nearly tripled the size of its hosting operation this year.

Hosting companies have responded by slashing their prices on domain names, with Yahoo and Interland seeing solid gains after lowering their prices on a one-year .com domain. More recently, large hosts have been gaining accreditation as ICANN registrars rather than serving as resellers for domain wholesalers.