The hosting industry is very competitive. There are thousands upon thousands of companies are fighting for a share of the market.
This can lead to a cut throat environment where many large hosting companies use aggressive techniques in order to consolidate their market position.
For example, many large hosting companies offer high paying commissions to affiliates who bring them customers. Smaller companies find it difficult to match those kinds of commissions, but the large hosting companies can afford to take a loss if it means they grab the customer.
Large companies are also known to buy smaller companies and then absorb their customer base into their own. Sometimes those customers are transferred to the parent company's services and advised about the buyout e.g. “Dear Customer, we have been bought by Company X. You will receive the same high quality of service. etc etc”. Other times the hosting company will continue to operate as its own brand and the vast majority of customers are unaware of any change in ownership or are not bothered by it.
Buyouts are so common place that many smaller hosting companies welcome a buyout from a larger hosting company as it allows them to take time off or start another hosting company. A buyout may even have been in the founder's mind since they launched their company.
From a website owner's point of view, the question is not why larger hosting companies buy smaller hosting companies. The question we need to ask is “Can large hosting companies deliver a good service?”.
Hosting with Large Hosting Companies
I spoke to a lot of hosting companies during the development of my hosting guide to clarify what services they did and did not offer.
Many smaller hosting companies said to me that their service was much better than the competition. It is normal for a business to have faith in the service they deliver, but what surprised me was the number of hosting companies that emphasised that they could offer better service than companies owned by EIG. They all appeared to have the same opinion that larger hosting companies cannot deliver a good service.
Endurance International Group, more commonly referred to as EIG, are a billion dollar company that own huge hosting companies such as HostGator, BlueHost, iPage, StartLogic, and A Small Orange. They also own properties such as Mojo Themes and the blogging platform TypePad.
EIG have a pretty poor reputation within hosting communities such as WebHostingTalk. Other large hosting companies, such as Web.com who own Network Solutions and Register.com, are branded with the same brush. This is perhaps due to the way that larger hosting and domain businesses operate.
Companies such as EIG are very profitable as they reduce costs wherever they can. Whenever they buy a company, they look to restructure the way they do business so that expenses are reduced. One area in which they cut costs is support. Their companies tend to outsource support to countries in Asia instead of using in-house support.
It is not surprising that they do this as EIG mainly target the shared hosting market. This is a market in which plans are sold cheaply and customers ask a lot of questions because they are new to building websites and hosting them online. The high volume of support means that costs would spiral if hosting companies used employees from the United States or United Kingdom.
Outsourcing support in this way does not mean a hosting company cannot deliver a good service.
Years ago I purchased a basic shared hosting plan from BlueHost for a small website I needed hosted on a separate domain. I decided to host elsewhere after signing up, but I was very happy with the service they provided during the few days I used them. Their support was good and they processed a refund quickly. I also know of fellow website owners who have hosted with EIG brands such as HostGator for years and they swear by them.
I therefore do not subscribe to the idea that you will automatically receive poor service if you host with a large hosting company. Additionally, if you look on hosting forums you will see good and bad reviews about every single hosting company on the internet. Smaller hosting companies can deliver bad service just as large hosting companies can deliver good service.
Within the hosting industry, you do however sometimes get what you pay for. I personally never have high expectations for any hosting company that only charges me a few dollars per month for a hosting plan. I do not expect terrible service either, but I do think that website owners need to be realistic about what kind of level of service they will receive if they are only paying $5 per month for hosting.
If I need a cheap hosting plan for a side project, I would not hesitate to host with a company owned by someone like EIG.
Would I host with them for a more serious project? It is not something I have given serious consideration to because there are many better alternatives out there for dedicated hosting. Most large shared hosting companies do not put much of their energy into providing good dedicated hosting plans; perhaps because they want to focus entirely on the shared hosting market.
I truly believe you can receive good service from a large hosting company. It really comes down to the company in question and whether they meet your requirements.
Whatever hosting company you decide to use, be sure to do your research beforehand and check reviews of the company from hosting communities to give you a good idea of the service you will receive.