Web Hosting Industry Overview Published: Oct 28, 2003

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How large can the industry get and can it sustain its current growth rate?

The Yankee Group, a leading technology market research firm, projects that by 2003, the market for web hosting services will grow to $14.4B, at a compound annual growth rate of 48%.

A Rapidly Growing Market The growth in the popularity, size and use of the Internet has been staggering. It has changed the way people communicate, learn, and most of all do business. Consequently, the need for enhanced web services, like web hosting, has exploded in recent years, and it represents the fastest growing segment of the Internet services market.

IDC predicts that the United States market for web hosting will grow from $806 million in 1998 to $18.9 billion in 2003, representing a compounded annual growth rate of 85.4%. IDC also estimates that the international market for web hosting services will grow at a faster rate, from $16.5 million in 1998 to $1.3 billion in 2003, a compound annual growth rate of 138.7%.

According to IDC, small businesses, those with less than 100 employees, accounted for 46% of the total web hosting market in 1998 in the U.S., and IDC predicts this percentage will grow to 61% by 2003, at which time small businesses are projected to account for $10.7 billion of the total $18.9 billion U.S. web hosting market. In addition, IDC predicts that the small business segment of the market will grow at a compounded annual growth rate of approximately 96% between 1998 and 2003, versus 73% for medium and 78% for the large business segments. According to IDC, at the end of 1998 only 17% of an estimated 7.4 million small businesses in the U.S. had web sites. IDC predicts that by the end of 2003, the number of small businesses in the U.S. will grow to 8.2 million, 62% of which are estimated to have web sites.