Major shake-up in Nigerian web hosting industry

The news broke in the early hours of Sunday, December 5th that a major acquisition in the African web industry had just taken place. Web4Africa Ltd, a leading web hosting company headquartered in Accra, Ghana has just acquired 100% control of Nairahost, a top web-hosting firm based in Lagos, Nigeria for an undisclosed fee.

According to the official press release,

The acquisition boosts Web4Africa’s current client base of over 8 400 to about 11 500 after an expected overlap of clients has been considered. It also pushes Web4Africa’s domain portfolio to well over 8 000 and number of domains hosted to well over 4 000.

Market Share

This acquisition not only enlarges Web4Africa’s market share, but also promises “lower pricing and a larger choice of domain extensions to Nairahost customers as well as world-class technical support for its web hosting services.”

Web4Africa claims to have about 30% of the web hosting market share in Nigeria in terms of customer base.

According to Oluniyi Ajao, MD of Web4Africa, the web hosting company has yearly revenues in excess of N20 million (approximately US$132 000).

With this acquisition, Web4Africa’s revenues in 2011 could double as its client base is expected to soar in the coming months.

Nairahost would be managed as an independent entity before fully merging the two operations in early 2011.

Market Valuation

Nairahost was founded in 2004 by Kayode Muyibi and Emmanuel Oluwatosin. Though it is difficult to ascertain how much the company was worth before the acquisition, we can assume that the it would be valued at about N10 million, given its client base and estimated revenues before acquisition.

If these figures are correct, Web4Africa may have acquired Nairahost for between N15-million and N20-million (between US$90 000 and US$130 000).

In 2009, Nairahost claimed to have received external funding of US$500 000 (about N85 million at that time), and appointed a new CEO whose role was supposedly to oversee the company’s goals and visions.

Disgruntled Customers

Before then, the owners of Nairahost had faced a whole host of problems running the company smoothly and managing “disgruntled customers”.

I asked Ajao how Web4Africa plans to revitalise Nairahost’s image and retain customer loyalty.

His response was that, “Web4Africa’s growth is not by accident. It is through a consistent and high quality service offered. Nairahost clients would experience the exciting features that make Web4Africa a formidable force in the web hosting industry. We have plans and strategies to win back their confidence.”

Competition

With many domain names (.com, .ng, etc) being registered on a monthly basis in Nigeria, there’s stiff competition developing within the web hosting industry. Major players include Syskay, Nairahost, Alireta, McReal and Abimco.

In November 2008, Nairahost was the leading web hosting company in Nigeria.

Reacting to the recent acquisition, Ahmad Mukoshy, CEO of Aimtech, a growing web hosting company based in Sokoto, Nigeria said, “This is really big to see two Nigerian giants merging as one. The industry will experience really huge competition. However, Aimtech has been trying to compete and will continue to do so by preparing well for the upcoming huge blow.”

When asked how Aimtech will compete in this difficult space, he said, “Aimtech will stand and focus on per customer base”.

Aimtech started operations in 2007, five years after Web4Africa (started in 2002) and Nairahost (started in 2004) began offering hosting services to Nigerians.

Looking into the future, Aimtech hopes to sign a huge investment in Q1 2011.

Final Thoughts

The web hosting industry in Nigeria is not as profitable and/or lucrative as people may think.

Despite the fact that most web hosting companies in Nigeria offer interesting features and packages, none of them offer unlimited disk space and bandwidth like the world’s most popular web hosting companies.

My guess is that with enough broadband access to cater for the over 44-million internet users in Nigeria, we could soon witness more competitive web hosting offers that may include unlimited disk space and bandwidth.

Perhaps Web4Africa could pioneer this in the coming months.