Web hosting companies are continually searching for new hosting plans and services to help differentiate them from the thousands of other web hosts. It is a difficult market to stand out in, with worldwide competition growing at an exponential rate. Hosting companies typically focus on one of the following factors to sell their hosting plans:

Server Size

Speed of the Server

Size of the datapipe

Storage Space

User Friendly Control Panels

Competetive Pricing

Over the past decade, Web Hosting companies have successfully marketed these different plans and features. But with the growth of competition, there is very little a Web Host company can do to stand out from his competitors. Like Computer hardware, Hosting has now evolved into a commodity market, making it difficult for hosting companies to charge a premium for their services. Over the last two years, Host companies have doubled and tripled the size of hosting plans while decreasing prices, in hopes of retaining their client base. This method of marketing works only to a degree, and as every Hosting Company offers larger and cheaper hosting packages to retains one's customer base, reducing prices and increasing plans will work less.

So how can a Web Hosting Provider draw in new customers while retaining the old? Hosted Applications are the next wave of services that will demand a premium, and Web Hosts are just beginning to recognize this potential. Traditionally, web hosts gave the customer space on a server to do with as they pleased. With a hosted application, however, Web Hosts provide the customer with a website as well, at no additional cost! Website builder tools were the first hosted application that Web Hosts used. They are already becoming a commodity service which customers now expect to be included in most low cost hosting plans.

The real estate industry has been a pioneer in this area. There are canned real estate websites with all the functionality a real estate agent would need for his website. All an agent has to do is enter the company name and info, and bingo, they have a great website with email forms, mls listings, school information, etc. Custom building this website would cost an agent thousands of dollars, but instead agents are willing to pay a premium price for the hosting plan that allows them to build their own website. It saves them a large upfront cost in exchange for a slightly higher monthly hosting plan payment. Almost any small business could benefit from Hosted Applications, whether it be mortgage brokers, lawyers, insurance agents, doctors, or restaurants to name a few.

DotNetNuke and Ruby on Rails are two complete development platforms that are being offered as hosted applications. Website programmers now buy DotNetNuke hosting plans to do their web development instead of loading Frontpage on their desktop and building a website. Some of the biggest markets to tap for Hosted Applications are:

-Personal Homepages: Myspace is the largest of these, but it is simply a hosted application for personal websites. Nearly every teenager and college aged person in the USA is building or wants to build their own personal web page to store and share music, pictures, videos, and games. The rapid growth of Myspace can be seen as a model for the new web hosting company. With Hosted Applications, any Web Host Provider can offer a similar package to this high growth market.

-Blogs and Forums: These are another recent example of Hosted Applications. A site like Blogdrive.com can have a team of programmers build a hosted application targeted for a certain industry, blogs in this case, and then capture most of that industry while charging a premium to do so. This certainly seems like a better approach to capturing a larger market share of the Web Hosting industry than the continual doubling and tripling of storage and bandwidth for the same price.

- Storage for digital photos, videos, and mp3 files: Mediamax, Photosite, and Zorpia.com have all tapped this market, providing digital storage for their customer's entertainment needs. There have been online drive applications developed for this area to store all of your files. These are just additional hosted application that any web host provider can offer.

In the larger picture, the software industry as a whole is moving away from applications being run on each individual user's personal computer. This model leads to large support issues and less revenue. With so many users installing their own software copy and running it on their pc, a lot of support issues are generated, because every user's pc has a different setup. If the application is run on a central server, however, and each user is given access to that server, support issues tend to fall dramatically. The software provider can also reduce software pirating, and charge the user a monthly fee instead of a onetime charge. A subscription model is very advantageous to the software industry. As software makers move toward the hosted application and subscription model, Web Hosting companies stand to gain a huge number of customers looking for these Hosted Applications. And Web Hosts can charge a premium for this service! This certainly is better than competing for commodity customers wanting to pay $5 per month for a vanilla slice of a server.