The article answers its own question. It's hard because it's a commodity business. Customer acquisition costs eat up all the margin. Trying to differentiate the product costs money which would result in raising prices, which results in losing customers, most of whom choose on price and then complain about quality. So, it's a race to the bottom - everyone trying to cut costs (other than marketing) to the bare minimum so they can reduce prices as far as possible. All the money goes to marketing, and none goes into improving the quality of the offering.
It's very similar to airlines. We all complain about bag fees and charging for meals or extra legroom, but it's we the customers who have driven them there by making price our primary, if not sole, criteria for vendor selection.
> It's hard because it's a commodity business
...
>All the money goes to marketing, and none goes into improving the quality of the offering.
Personally, i disagree that all commodity businesses need to be that way. Higher quality and lower prices (/especially/ lower prices) are marketing in and of themselves. For most of the time I've been in business, my model has been to take the marketing costs and just apply those to discounts.
Now, this is much easier in the VPS business than in the registrar business, 'cause as far as I can tell, the VPS business is much higher margin. Really, it's pretty easy, in this market, to differentiate yourself on price, just because retail prices are so much higher than the cost of goods sold.
when you sell a .com domain, the lowest your costs can ever be is $6.25 a year (or, at least that's what it was last time I looked) and the retail prices aren't that much higher than that, so without using domains as a loss leader, it's pretty difficult to differentiate yourself through price. Heck, considering the margin there, if you have much by way of customer acquisition costs or /any/ customer support costs, you are either charging an uncompetitive rate or you are losing money (and needing to make it up somewhere else)
I think the problem with the domain registrar business is that instead of costs being dominated by equipment or something else where you can innovate (or that just automatically becomes dramatically cheaper year over year) costs are dominated by administrative fees you have to pay the next guy up the chain.
>Personally, i disagree that all commodity businesses need to be that way. Higher quality and lower prices (/especially/ lower prices) are marketing in and of themselves.
So your argument could have been phrased 'Personally, i disagree that all commodity businesses are really commodity businesses'?
What you were actually challenging was his characterization of domain registration as a commodity business; I don't disagree with you there, I just wanted your point clarified.
>So your argument could have been phrased 'Personally, i disagree that all commodity businesses are really commodity businesses'?
Well, no. It's a continuum, rather than a black and white thing. I wrote a long argument then edited it back to the wikipedia quote, as that mostly sums things up.
My business is more 'commodity' I think, than slicehost, mostly because of the marketing angles we take. Obviously, the market for a certain grade of steel is far more of a commodity, though I suspect that if I knew more about that market, I'd find it was less than an absolute commodity.
I pay $15 / year for no-ip (they're a reseller) because they have good service. I'm glad to pay the difference.
Of course, one way they get away with a higher price is that they primarily sell DNS services. So it may be more expensive to pay with them, but it's also more convenient to have them handle both DNS and registration. (though I currently use their free domain service for some of those domains).
It's very similar to airlines. We all complain about bag fees and charging for meals or extra legroom, but it's we the customers who have driven them there by making price our primary, if not sole, criteria for vendor selection.