Web hosting groups
Remember Netscape Navigator, traffic counters on websites and web hosting companies? They all came of age during the 1990s dotcom boom, but only the last still play an important role in the modern internet.
Web hosting.
Now web hosting companies are facing pressure to reinvent themselves, as falling hardware costs and fierce competition threaten to commoditise their business. Many try to stand out and boost their margins by offering services such as web publishing and application development, says Al Hilwa, an app development software analyst at research company IDC.
Trying to piggyback on this trend is BaseKit, a London-based website creation company that partners with web hosting groups to reach small and medium-sized businesses.
“The hosting industry is moving from a situation where they are just infrastructure?.?.?.?to where they have to sell a service,” says Juan Lobato, BaseKit’s chief executive.
BaseKit pits itself against the likes of San Francisco’s Weebly and Israel’s Wix, which also provide web design and publishing tools. Wix listed on Nasdaq in November with a valuation of approximately $750m, and broke the billion-dollar market capitalisation barrier in mid-December.
BaseKit’s business model shows how entrepreneurs might work around some of the challenges facing European start-ups, including a shortage of venture capital compared with the US and a culturally and linguistically fragmented market.
The company pursued partnerships with web hosting companies, rather than go directly to users as Wix and Weebly did, because in Europe it would not be able to raise the money early enough for a big marketing push to sell directly to web publishers, according to Mr Lobato.
BaseKit just completed a ?3m funding round, with contributions from the UK government-backed British Business Bank, as well as existing investors Nauta Capital and Eden Ventures. It has raised ?11m since it was first backed by Seedcamp, an accelerator and early-stage fund founded by Saul Klein.
BaseKit has signed partnerships with 100 hosting companies, most of which are exclusive agreements, and includes four of the top five in the UK by number of domains deployed, according to Mr Lobato. The company’s revenues are in the single-digit millions of pounds and are more than doubling year on year, it says, although it is not yet profitable.
It is a symbiotic relationship with the hosting companies, which hope that by bundling BaseKit’s services into their offering they can target businesses that want a professional site, but might not pay a designer to make it. Weebly and Wix are also recruiting entrepreneurs and small businesses, but have focused on a direct-to-creators approach.
“Those who will win big will have one of two strategies: they will land big hosters or go to market directly where there’s a premium dollar paid,” says Mr Hilwa of IDC.
The gambit is that “small business owners will buy more to allow their online presence to grow,” says Mr Lobato. “It’s a little bit of a Trojan horse; you’re embedded with the hosting business and then you control the upselling.”
Of Wix’s 37m registered users at the end of August 2013, it had just under 680,000 paying subscribers, according to documents filed for the initial public offering. BaseKit has 600,000 users, says Mr Lobato, all of which provide some revenue.
But by partnering with web hosting companies, BaseKit does not make as much under its licensing and revenue sharing model as Wix does with per-customer subscriptions.