Archive for July, 2006

ARPU And the life of a web hosting company…

Thursday, July 27th, 2006

Sometimes I wonder what the heck I am doing in the web hosting business. It is about the most competitive industry that I know of. Prices are being driven so low, and features sets are growing so quickly that many hosts can’t make ends meet. Many hosts cut costs so much to compete that in many instances even the customer loses out because support suffers in the name of profit or cheap pricing structures.

What is a web host to do in this situation? You really only have a couple of choices. First you can cut costs in an effort to better compete, which is the road that many hosts take. This ultimately hurts the company that does this because “costs” usually mean service and other necessary functions of your business that customers rely on. The second option and one that Bluehost subscribes to is to provide “premium” services that customers need and are willing to pay for to drive up revenues and ultimately profits. In the title of this blog I mention “ARPU” which stands for average revenue per user. All web hosting companies should have plans in place to drive further revenues from their loyal customer base.

Driving revenues can be a slippery slope for many hosts. Many hosting companies don’t have new or innovative products to offer their customers so they use hidden fees, and basic upgrades to charge customers for. An example of this might be charging a customer to “activate” their addon domains (Like many of our competitors do), or charging a cancellation fee if a customer decides to leave. Both of these will drive revenues up, but will also drive your customers away.

We have thought long and hard of additional features that we can add that would both allow us to increase are ARPU numbers and give value and services that our customers need and deserve from us. A good example of this is our web design group that should be up and ready in a couple of weeks. Many of our customers need design work and coding work for their sites and don’t have thousands to pay to get a site up and going. We have always been a hosting company only and don’t do any design work. This type of service is a great addition for Bluehost and will add revenue at the same time.

Learn to give value for your customers dollar. They work hard for their money and when they choose to spend it with you they are trusting your company. That trust is easily lost, but hard to earn. If you do right by your customers they will continue to spend with you and help your company to go right along with their own.

Thanks,

Matt Heaton / President Bluehost.com

Dedicated vs Virtual Private Servers

Saturday, July 22nd, 2006

Hostingcon brought out many vendors talking about the virtues of hosting and for many in particular the benefits of dedicated hosting. It really got me thinking about what Bluehost might offer in the future. A higher end offering is definately in our future, but do we choose dedicated servers (A single physical server dedicated to a specific client), or VPS (Virtual private server)?

In our case dedicated servers will NEVER happen. I think their time has come and is quickly going into the sunset. Let me tell you why. Virtual private servers are great, but the marketing behind them has given them a bad name as well. VPS can be lumped into two different categories as far as hosting and bluehost is concerned.

1) Shared kernel, shared memory, but seperate environment VPS implementations – This is the first category of VPS that many hosts offer. It has many advantages to it, but in my opinion is geared toward a lower end client in the VPS market. There is nothing wrong with this type of VPS, but it simply doesn’t have the control of the other type that I will talk about in a moment. VPS that fit into this category are usually using Virtuozzo (A VPS Product sold to web hosting companies). The big advantage of this type of VPS is that you can fit between 50-100 VPS clients on a single highend server. All customers have their own “virtual instance” of linux running, their own dedicated CPU resources, and minimum levels of memory that can come and go to other customers as the need arises. You still use a single kernel to run all these VPS customers, but it is ideal for a certain segment of the VPS market. Customers that would be interested in a VPS in the $15-$39 price range usually fall into the Virtuozzo VPS category. For those looking to avoid CPU quotas with your shared host, and want an environment to run your own servers (require open ports) and have dedicated IP(s) for your system this is what you are looking for.

2) The second type of VPS does full OS Virtualization – These type of products include VMWare, Xen, and others. Using Intels Vanderpool (VT) technology, or AMD’s Pacifica technology these type of VPS products can run at 90-95% of the speed of the physical machine. This type of VPS product allows each client to run whatever operating system they want. One customer can have a windows install, while another has Redhat Linux, while a different customer has Novell Entrerprise Linux. To go above and beyond what is offered by Virtuozzo’s product I would suggest putting on 5-15 the these types of VPS on a physical high end machine. In the case of Bluehost we would use 4-8 core multi-processors with a minimum of 16 gig of memory, and in many cases 32 gigs of memory, and would choose the Xen virtualization product. These type of VPS products have every benefit of a full dedicated server without the drawbacks that make dedicated servers undesireable for most web hosting companies. These benefits include a GREATLY reduced power draw by your clients (15 users on a single highend server), far smaller data center, and many less rack cabinets. A typcial 2U (About 4″) server can hold 15 clients easily, whereas 15 dedicated clients would require at least 15U of rack space. The primary advantage of highend VPS comes in the form of on demand increases in resources that simply can’t be done in an effective manner on traditional dedicated servers. I can increase disk space, and memory for a client with the click of a button. I can also migrate a VPS customer from a server that is having problems to another server in a matter of seconds. High resource customers that need complete control of a system down to the kernel and want complete separation from other users on the server should consider this type of VPS.

Dedicated servers aren’t going anywhere anytime soon, but I think you will see that for 90% of the market out there VPS solutions exist that are less expensive and in every way better than dedicated servers. Whether or not VPS wins out in the end will be determined more by marketing than by the technology. Bluehost is going to do its best to promote both types of VPS environments. We are considering doing both types now and will probably start with the basic version first and then move on to the Xen version next. We have no plans to do dedicated servers in the future, and for those that are doing dedicated servers I wish you luck :)

Thanks,

Matt Heaton / Bluehost.com

It’s a girl!!!

Saturday, July 22nd, 2006

Well the newest member of the Heaton family is here. Her name is as yet still undetermined. When I got the first look at her the name we had chosen didn’t seem to fit. We will have it chosen by tomorrow for sure. Here are all the vital stats.

Baby Girl, born July 21st at 11:46 am, 21″ Long, 7 lbs 14 ounces, a little bit of hair, and VERY VERY cute (Of course – look at her Dad!)

Mom is doing well! Well thats 5 kids now (Ouch!). I don’t think I will be thinking too much about web hosting for the next week, but luckily we have about 55 other people that will be.

Thanks,

Matt

Hostingcon (Part 2)

Wednesday, July 19th, 2006

Hostingcon was great! It was fantastic to meet up with many of the individuals that I do business with as well as meet competitors and friends in the industry. All in all, it was just what I wanted it to be. For those wondering about Hostingcon itself it is a conference that has an open floor of vendors and exhibitors with different specialized conferences going on all day from the marketing side of things to the very technical. There was something for everyone.

If there is one thing that I learned at Hostingcon it is that I am viewed by my peers as something different than what I think of myself. I approach hosting differently than most that I talked to. I met with an advertising partner that wondered if I was “ruthless” when it came to hosting. Basically he asked if I would do “anything” to further our growth and obtain new customers. The answer is yes and no. No I am not ruthless (I am a nice fluffy teddybear), and yes I WILL do everything in the my power to get signups. It means I will step on toes, I will infuriate our competitors, and I will take business any way I can. We are in business to grow and make money. Does this mean I don’t like and respect my competitors? Of course not. In fact, meeting everyone at Hostingcon has given me an oppurtunity to see and meet these people up front, and in every case it was a great and positive experience.

Another interesting experience was a marketing panel that I sat on that presented information on growing your hosting company that was given on Tuesday morning. Chad from Tophosts.com, Derek Vaughn from Techpad Agency, and Dave Murphy from Hostopia participated as well. They all did a superb job. The discussion went well although I didn’t feel we had enough time to delve deep into the subject matter. I kind of felt like the deliverer of bad news when I answered the questions. Most people in attendence didn’t like what I had to say when it came to marketing (In my opinion). I think they wanted the silver bullet to success in marketing. I WISH there was one. Webhosts have to live with less profit then ever before, and pay more for each signup. It takes a multiyear commitment on the part of the web host, and has to be executed with exactness to succeed. For any that attended the conference but wanted more detailed information on anything presented I would be happy to follow up with any more information that you might require.

All in all, it was great. I am sure I will go again next year (Unless I have a ping pong tournament :) )

Thanks,

Matt Heaton / President Bluehost.com

Hostingcon (The human side of hosting!)

Sunday, July 16th, 2006

Well, its Sunday afternoon (July 16th) and I am sitting in my “suite” at the Mirage in Las Vegas in preparation for Hostingcon (An annual hosting conference in its second year). I am excited to meet many of my “competitors” in the industry as well as those who I have a business relationship with. I like the human side of the hosting industry. There are many people that I talk with on a weekly basis that offer insight and an outside perspective on Bluehost that is invaluable to me. I also try and help where I can for those that seek my opinion.

Come Monday morning I get to put on my Bluehost CEO hat and run around and pretend that I am a business person, when I all I really want to do is go to the Olympic Table Tennis training center in Vegas and play ping pong. Yes, I know! Ping pong isn’t a real sport and all that, but I am pretty good (Forest Gump good!). Regardless, I will be on the prowl for the newest innovative offerings to add to Bluehost and hopefully can get some info on the newest Cpanel for Windows that is supposed to be announced tomorrow.
I will do a quick writeup on Monday or Tuesday and let you know what I think about the whole Hostingcon idea and IF I think it was worthwhile or not. I was born and raised in Las Vegas, and so the whole downtime/strip thing in Vegas doesn’t interest me all that much, but I still think it will be an entertaining experience. I really came to meet the people that I do business with and to firm up relationships I have with others. As long as those things come to fruition it will be a valid and successful trip.

More details in a couple of day…

Thanks,

Matt Heaton / President Bluehost.com

Live Chat Finally Coming…

Sunday, July 2nd, 2006

Well, I have resisted to the end! I have made up every excuse in the book to not implement live chat, but I have finally broken down and “mostly” implemented it. It should be 100% by the next Friday or sooner (Before July 7th 2006) . We will have sales chat, support chat, and when they are available “escalated level 2 and level 3″ chat support.

Why have I dragged my feet on live chat? We actually had it implemented the 1st day that Bluehost launched, but I quickly turned it off because it seemed to only have limited benefits and took three times longer to answer the question than just helping the customer over the phone.

Things have changed in the industry in the last 2-3 years. Live chat is expected in this industry, and we do have many thousands of international customers that don’t have the benefit of our toll free customer support. So, I guess I am saying that I was wrong to not have it up until this point. I will send out a site wide email later this week when it is all ready and the sales and support teams are trained on the system.

Now, we think of ourselves as a cutting edge hosting company so we will be “trying” to implement a Skype system into our phone system. IF (And this is a big IF) we can make it work then we will have Skype support for worldwide use in a month or two. I know this would help many customers worldwide that simply can’t afford to call us from their home country. We will even try and implement a “CLICK TO CALL” button that will automatically call us from your PC.

PLEASE remember this is a blog and everything I say here isn’t set in stone, but I do want you to know what we are working on in the future for our customers. Thanks again for all of you that keep us in business. My 6 and 8 year old wish to thank you for letting Dad (Me) leave for a week to take them to Alaska fishing. Yes, we did catch a lot of fish, and No you can’t have any :)

Thanks,

Matt Heaton / President Bluehost.com

GoDaddy! (Not anymore…)

Sunday, July 2nd, 2006

When companies grow from the mid size range to a “large” company things usually change. I don’t mean this in a positve way! Managing growth is a difficult thing. You MUST keep the customers needs as the #1 priority and work from there. Success in a certain market usually means a poor customer experience. Need some proof? When was the last time you called your cell phone provider and had a “good” customer experience. I rest my point.

I normally don’t complain about specific companies on this blog (Except Delta Airlines who’s level of service is so bad that I simply can’t restrain myself), but I find I must mention a company who I used to respect a lot and who we do a LOT of business with. This company is GoDaddy.

GoDaddy is an interesting company. They did the right thing at the right time. They decided to give great value for domain names when everyone else was sticking it to the consumer. Consequently they grew very fast until they now rest comfortably at the top of domain registrars. Unfortunately their service and support has gone down as their numbers went up. We spend about $70,000 a month with GoDaddy (Actually Wild West Domains – GoDaddy’s reseller arm of the company). In fact, we account for about 22% of the TOTAL monthly domain sales for their Wild West Domain division. We are either their #1 or #2 affiliate for all of GoDaddy. Sweet! We must get a little extra attention because we are a valued customer. I WISH! Our level of service that we have received from GoDaddy is the WORST that I have ever had. We give 10X the service levels for a $7 a month customer than GoDaddy gives us for $70,000 a month.

Yesterday they decided to charge us $2 for each domain name that we “returned” if a customer decided to cancel or a fraudulent transaction takes place. They called us and let us know 8 hours before they turned it on. 8 HOURS!??! We have a high fraud rate on our site. We catch 95% of it the first day, but we have at least 25 fraudulent orders a day. In my book GoDaddy is simply stealing $1500 a month from us. That amount isn’t significant enough to do any damage to our company, but I simply won’t put up with it. This is just the latest in GoDaddys arsenal to disgruntle the customer.

We will be moving 125,000 domains off of GoDaddy in the next 3 months. I can’t wait to do it. The best part will be when they call and ask why we are moving. We have told them 10 times already, but they just don’t get it.

We are launching our own domain registrar in the next 3 months that will be less expensive than GoDaddy with more features and better service. I encourage EVERYONE to move your domains to our new service when it launches. It will save you time and money. When enough people move maybe GoDaddy will finally get it. It won’t matter, by that time it will be too late.

Thanks,
Matt Heaton / President Bluehost.com