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Businesses that lack their own domain name are often regarded as disreputable or even illegitimate, and tend to be avoided by web-savvy customers. This distrust is accentuated by a lack of website security features, pop-up adverts (placed by the free hosting providers) and the absence of designated company email addresses.

Fasthosts' 'How Free Is Hosting?' research analysed 100 free hosting providers and found that, on average, the space offered is 338 MB, and that bandwidth allowances are often heavily restricted. These limits are quickly reached should the SMEs website be a success. Furthermore, if the owner decides to finally register a specific domain name, they will need a new web site address and will in effect have to start all over again - which could result in businesses losing customers they had attracted through their original website.

Additionally, small businesses using free hosting are often unable to offer their customers the use of a secure shopping cart or secure ordering system, making the set-up of an online store very complex.

SMEs may even need to add outside tools and buy in separate security solutions to get the facilities they need - which could end up costing more than comparable "inclusive" e-commerce hosting solutions from paid-for providers.

"There is no such thing as a free lunch, and in an attempt to save costs online, UK SMEs are shooting themselves in the foot." said Andrew Michael, CEO, Fasthosts Internet. "With so many online scams being reported, it's no wonder internet users are getting increasingly wary about buying from companies through websites. Yet it amazes me that so many businesses don't have their own domain name or web space -they are inadvertently helping their competitors!"

Businesses that use free web hosting are often vulnerable to the following factors, all of which are provided by a paid-for host:

• Unreliable servers with frequent down time.
• Low-priority bandwidth giving slow site performance
• Small bandwidth allowances causing payment to be required or worse still, the website being shut down.
• No secure server space for enabling online product orders.
• No backups for user files.
• No scripting support for features such as drop down menus, dynamic text, etc.
• No out of hours support
• Difficulty being identified by search engines.
• Adverts - the site owner often has no control over the volume or content of these adverts.
• Complicated and difficult to remember website addresses.