Web and App Hosting Trends: Is M&A Right for You?

Posted by Mary McCoy on May 20, 2016 6:00:00 AM

Web and App Hosting Trends: Is M&A Right for You?

Money is the root of all – no, no, we weren’t going to say that! We were going to say profitability. Yes. You need to make a profit to grow your business, and vice versa. So what does that have to do with trends in web and app hosting? Or potential mergers and acquisitions?

It’s pretty simple, really. In order to make the smartest investments in your business future, you need a well-honed strategic marketing plan. Otherwise, you’ll misdirect funds, wasting not only money but time and energy. But the world of web and app hosting is shifting. Since you need to make money, you’ll need to refine your business model to account for marketplace shifts. 

What changes do you need to make to strengthen loyalty of current customers and increase their lifetime value to you? What changes do you need to make to draw new customers into your fold? In a previous article, we talked about partnering with vendors or complementary firms as one tactic to increase your company’s value to customers and prospects.

 

M&A – the Most Formalized Form of Working Partnership

Mergers and acquisitions are nothing new in the business world. Tech firms have been using these financial options for years, primarily to enlarge their businesses. But as marketplace segmentation has become the new norm, companies are now looking to M&A as a means of adding specialized products or services aimed at certain target segments:

  • Types of customers or prospects
  • New technologies
  • Adjacent technologies
  • New geographic service areas 

While we generally think of mergers and acquisitions as something only the Big Boys can do, it behooves even small web and app hosting providers to keep your eyes open. We've talked previously about the growing importance of developing partnerships with related firms so you can cross-promote and sell your products and services. It’s not impossible that one of these relationships could develop into a permanent melding of your two companies in the future. 

What if your new marketing strategy includes adding a line of products or services you don’t offer now? That might involve considerable ramp-up effort and cost. Or you’ve decided to pare down your desired customer niche? In order to grow, you will have to widen your geographic outreach. Acquiring or merging with a competitor to achieve your new strategy could be a smarter business move than working against one another. 

Or maybe not. Just keep an open mind.

 

Lessons to be Learned

Meanwhile, let’s see how the large global providers are using mergers and acquisitions to grow and adapt to the changing marketplace. You don’t have to follow directly in their footsteps to emulate them. Many of the moves they are making on a regional or global scale are quite adaptable to small web and app hosting providers like you. It’s simply a matter of scale.

451 Research notes that acquisition is a common practice now for large providers that want to enter specific new markets. By grafting on an existing firm in their target area, they can be up and running with few barriers, including potential language or cultural barriers. Acquisition also retains “local provider” identity, which is often a significant selling point.

In their 2014-2019 Market Forecast, they noted, “Historically, there has been an emphasis on consolidation in the mergers and acquisitions activity that has taken place in the hosting space. The larger providers, particularly in the shared hosting space, have made acquisitions with the goal of acquiring customer bases, with the objective of driving up ARPU through the sale of additional services, and applying the operational advantages of increased scale.” 

Now, these largest companies are using M&A to achieve a wider range of corporate goals:

  • Adding expertise in providing managed services
  • Adding expertise in working with specific types of users
  • Picking up proprietary adjacent hosting technologies to boost average revenue per unit by offering more value-added options
  • Entering desired geographic markets in a way that overcomes local challenges such as those already mentioned

 

Big global providers are making big global moves. But their strategic goals are really the same as yours. Their execution tactic is to purchase what they need. You don’t have tens or hundreds of millions of dollars to get what you want. So be more creative.

Re-read our last article about how small web and app hosting providers can refine your marketing strategy. Then stay tuned for our next article, in which we’ll talk about specific marketing methods you can use to transform your new strategy into more leads, conversions and sales.

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Meet Mary! Mary McCoy is Continuum’s resident Inbound Marketing Specialist and social media enthusiast. She recently graduated from the University of Virginia (Wahoowa!) with a BA in Economics and served as digital marketing intern for Citi Performing Arts Center (Citi Center), spearheading the nonprofit’s #GivingTuesday social media campaign. Like her school’s founder, Thomas Jefferson, Mary believes learning never ends. She considers herself a passionate, lifelong student of content creation and inbound marketing.

Topics: Webhosting, hosting industry, Industry News

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