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CEOCFO Monthly Analyst |
Have a seat here!
Web-hosting solutions. Technology 1410 - 555 West Hastings Joseph
Kibur, Interview conducted by: Under
Joseph’s leadership, NetNation has grown dramatically and established strategic
direction both in service offerings and quality of service since its inception in 1997.
NetNation now enjoys the coveted distinction of being ranked among the top ten web hosts
in the world and a leader in Internet domain name registration. Joseph has acquired
many skills, as proven by his multi-lingual abilities, computer programming talents and
athletic achievements. Joseph was the 1993
Canadian Champion in cross-country running and has represented Canada in six international
competitions. Born in Ethiopia, he immigrated
to Canada at the age of eleven. Joseph
completed his Bachelor of Science degree at SFU in 1996. CEOCFOinterviews: Please
tell me about NetNation and what it does. Mr. Kibur:
NetNation
is a Vancouver, British Columbia based web-hosting and domain name registration company. Since inception in 1997, our annual revenues have
increased by 100% or higher, and last quarter we announced record revenues and became one
of the first Nasdaq-listed web hosting companies to achieve profitability. In addition, our reputation for quality service
has resulted in loyal clients in over 130 countries. We
provide the technical tools and expertise businesses need to run their web sites, whether
they are managing information or selling products and services on the Internet. As you
know, in order to achieve a presence online, you first have to create and design a site on
your computer. Then, in order to get service from the Internet you must get service from
the web hosting company. NetNation hosts your web site and puts it on the Internet. We are an infrastructure player in that respect.
We also provide related services such as domain name registration for net names such as www.netnation.com.
Our wholly owned subsidiary, DomainPeople (www.domainpeople.com) is also
the eighth accredited domain registrar in the world, along side companies like
Register.com and Network Solutions which is now owned by Verisign. We
provide three main categories of web hosting. The majority of our business comes from
shared web hosting, where you share space on one server and have the capability for
e-commerce storefronts, basic media and database capabilities. We also provide colocation
services. If you have your own server but do not want to invest in your own infrastructure
and technical expertise to support it, NetNation will provide the hi-speed connectivity,
network infrastructure and technical expertise you need.
Furthermore, you will benefit from a secure environment, complete with everything to keep
a server running, like air conditioning and fire suppressant systems. In addition,
NetNation provides enhanced-dedicated services, best if you have high performance, high
volume web sites that may also require special applications or enhancements. Here,
NetNation provides a server dedicated solely to your needs, allowing more flexibility and
control for web site management. As you can see, NetNation offers solutions for any
clients’ stage of growth. Other
services include application services, where we provide applications such as anti virus,
security and back up services for your web site. We will be expanding these service
offerings as we go along. For example, in keeping with market forecasts, the growing needs
of our core clients, and the maturity of our technical expertise, we will be moving into
the custom and managed hosting arena. CEOCFOinterviews: You
also have the OEM services and products… Mr. Kibur: Sure, these are similar to retail services
except that they are provided through OEM and wholesalers. Some larger companies don't
want to get into web hosting or domain name registration on their own and so they will
partner with a company, such as NetNation, to add hosting and domain name registration
services to their existing core offering. Our
list of partners include MasterCard, Group Telecom, Intel, Sympatico-Lycos and so on. CEOCFOinterviews: How
important are these partners as far as the growth of the company goes? Mr. Kibur: Partners provide a very significant
revenue stream. Additionally, they are important from a public relations perspective. A
lot of retail customers feel comfortable dealing with us because we have relationships
with larger companies who have trusted us enough to use our services. CEOCFOinterviews: I
know one of your partners is Microsoft. With
everything that is going on currently with them, would any of this affect your
relationship with Microsoft? Mr. Kibur: I would have to say the relationship we
have with Microsoft is not a very strong one, but we provide the support for front page
software and thus are chosen by Microsoft as a front page website provider. NetNation
is on their web site and clients are referred to us by them. Some of the activities that Microsoft is
undertaking, such as the .net initiative, will definitely increase the interest in our
industry because they are changing the way consumers are using their software. Instead of having it on their home computer it
will be hosted with hosting companies like NetNation.
Hence, the net initiative will definitely receive a higher profile and as well, the
adoption rate will be increased. CEOCFOinterviews: As
you expand and grow internally, this takes qualified personnel to handle all that is
happening. I know here in the states, the
technology industry was a little tight for a while. How
is it in Canada? Mr. Kibur: It is also
tight here, but not as competitive of course. The
living standard is also lower, so the costs are not as high. In fact, one of NetNation’s advantages is the
fact that we are located in Canada. One
reason for this advantage is that our costs are in Canadian dollars, yet we receive the
bulk of our payments in US dollars (over half of our clients are from the US, double the
number of clients from Canada). In terms of
skilled workers, most management and employees have been with NetNation since the very
beginning. We didn't have a lot of turnover, especially in our customer service and
technical support teams. CEOCFOinterviews: Now,
do you do this on a global basis? Mr. Kibur: Yes, we have clients in over 130 countries. A benefit of the web hosting industry is that it
really doesn't matter where the hosting originates. As long as it has a good pipe and is
quick, the customer will not know or care where the web site is hosted. The nature of this industry allows NetNation to
service clients all over the world from one facility. In the early days, the US market
certainly held a large position in our clientele. Now, the US market is maturing while the
international market is growing. CEOCFOinterviews: You
are in 130 countries and obviously you are attracting other countries all of the time. People look at you and think, you are in Canada,
what are you doing to actually get them attracted to your services? Mr. Kibur: Our main tool is targeted international
marketing efforts, for instance, advertising on the Internet or in international
magazines. Services offered by NetNation have numerous benefits, which we convey in a
frank and straightforward manner. As I
mentioned before, the fact that we’re hosting a client’s site from Canada has
little significance, and this is what we convey in advertising. Let's say a client is from California. It really
doesn't matter if they are dealing with a company in Florida, Canada or another part of
the world, as long as the host speaks their language, understands their needs, sets
reasonable prices, and are accessible. This is an example of how the Internet is breaking
barriers for a lot of people. Obviously,
for some clients, psychological barriers will be an issue.
Such clients will call us, stating their intention to request NetNation services,
yet pause when they realize we are located (far away) in Canada. Then we respond by
explaining that this is irrelevant to the quality of the hosting services. As a result, there is a bit of explaining to do,
once in a while. CEOCFOinterviews: Some
of the products are Web Starter, Web Starter NT. Some
have different platforms. What do you have
that can make this compatible with all of them? Mr. Kibur: From the web hosting aspect, these products
are compatible with all platforms. It really
doesn't matter what computer the customer has, since the web site is the platform. The only difference it can make is if you are
hosting it on an antique platform so that you can use a certain data application or ASP-
allowing you to use it mostly in Windows NT platform.
This is transparent for the client. NetNation
offers a whole range of services for whatever one’s needs and platforms. Thus, if you choose to have a certain platform,
it will also be made compatible. CEOCFOinterviews: Security
is a bigger concern than it has ever been. How
are you dealing with the constant new viruses and the ability for people to access
information from other computers? Mr. Kibur: It is a huge challenge. It is probably one of those challenges where no
one will ever overcome completely. We are trying and not giving up. NetNation has
responded with a number of unique services that will let our clients find out when there
is some sort of network attack, virus or any other unwanted activities. We will soon be offering the full range of these
services to our clients. One can
never be guaranteed that one’s web site will be completely safe. Even the US Pentagon and US Navy have not been
able to protect themselves. It is an ongoing war and very difficult to battle. However, we are definitely aware of and working on
security issues, not only for our clients but for our own company as well. CEOCFOinterviews: Do
you see acquisitions for this company in the future? Mr. Kibur: A strategy of acquisitions is
definitely one avenue for our growth. However,
there are currently no acquisitions occurring for two reasons. One is that the markets are not in the proper
state to raise money for acquisition purposes. The
second is many companies are going out of business and resulted in chaos in the industry. Everyone is really waiting for the aftermath
before making his or her decision. We are
looking at acquisitions for the future. CEOCFOinterviews: With
technology stocks being the way they are everyone has stepped back from the technology
stock. Mr. Kibur: Yes, everyone has stepped back and
everyone is anxiously waiting to see what is going to shake out. So it's like playing chicken to see who will stick
it out the longest. CEOCFOinterviews: Do
you have enough cash and capital stored where you can withstand the flood for right now? Mr. Kibur: Yes,
absolutely. We are actually one of the very few self-sustaining Nasdaq-listed hosting
companies. We don't need any external money
to fund our operation and can make it on our own. NetNation
has been able to achieve this due to our disciplined approach to fiscal management from
day one. We learned to deal with growth on a
step-by-step basis. We have been very careful
with how we spend our money. We didn't get excited and hire over 100 people all at the
same time. We didn't buy any expensive cars
and data centers. Hence, we have been able to
be self-sustaining. If we need money, it will
be for expansion purposes only. CEOCFOinterviews: Do
you have long-term contracts? Mr. Kibur: In terms of legal contracts with clients,
these are usually month-to-month contracts. As long as they are happy and business is
going well, most clients don’t have good reasons to change web hosts. However, some companies will eventually discover
that the web is not going to make them rich and it wasn't right to just jump on the
Internet. These clients decide either to
scale back web site operations or abandon their web site all together. Our contract allows clients flexibility and
decreases the chances of companies moving to competitors. CEOCFOinterviews: What
happens when a company abandons its website? Mr. Kibur: Not much…they just shut down their
accounts. However, we do offer flexibility,
for people who cancel, to hold a certain level of services such as email. CEOCFOinterviews: With
the pull back that is happening today, is this affecting your company financially? Mr. Kibur: We didn't feel the pull back significantly. It
seems, now, that only serious businesses want to get involved with web sites. We benefited from the fact that we are one of the
survivors and profit-makers of the dot-com fallout, and the fact that we have a legacy,
based on over five years of experience in the industry.
That definitely helps. We can show our
customers our lasting ability. They are
definitely happier to deal with us rather than a company who has only been around for a
year or so, is still losing money, and is not properly funded. CEOCFOinterviews: What
are your companys’ strongest qualities? Mr. Kibur: Our highest quality is service. Our employees, because they have been around for
four or five years, have accumulated a tremendous amount of expertise and experience that
is, in turn, provided to our clients. Our clients continue to express delight in our live
toll-free and email 24/7 support, high quality service and quick resolution turn-around
time. Furthermore, clients commend us on our expertise and genuine concern with which we
deal with issues that average web hosts would not even bother with. In addition,
NetNation’s prices are very reasonable. Clients
don't have any reasons to go anywhere else. As
a result, our customer retention rate is significantly higher than the industry average. Our second best quality is the fact that we are
very quick at adapting new technology. When
customers require a new type of service, like wireless email or streaming capabilities,
they don't have to go anywhere else or look for a different technology in order to take
advantage of it. NetNation is quite proactive
in always updating our service levels and offerings.
In fact, we can do this without increasing our prices, so that clients receive
access to the new service immediately and efficiently.
Once again, they are happy and have no reason to go elsewhere. When clients realize our ‘strong
qualities’, they are loyal and refer new business to us. CEOCFOinterviews: You
are the Co-Founder of this company; did you ever think that this company would come so far
and to the stage that you are in? Mr. Kibur: When we started five years ago, only our
imagination could see where this company was going to be.
I think I have always been creative and very imaginative, so there were a lot of
possibilities. But when things happen in
reality, that’s a different story. Certainly
I am very pleased to see NetNation come this far. CEOCFOinterviews: I'm
sure that in the beginning it was very hard, what kept your motivation up? Mr. Kibur: It's not just the first couple of days that
was hard. Actually, it was the first few
years. Customers used to call me at home and
during the night, it was quite a struggle. Part
of the struggle was, being a pioneer with few companies to reference, we would have to
invent everything ourselves and work on our own. Now,
when you want to form a company, you can buy a ready-made billing system, a customer
relations software, hardware platforms, just about anything. In the days when I began NetNation, we had to
create everything. My
motivation came from looking at other successful entrepreneurs, like Bill Gates and
others, and seeing how they achieved their goals by working late nights for years and
years. Therefore, I knew that I too would
have to do the same. This was at the
beginning and there was still a chance that I would not go anywhere with NetNation, so I
was very motivated. Also, since I am an
athlete, I knew the value of hard work and I was able to apply that value in the business
world as well. CEOCFOinterviews: How
would you address a potential investor? Mr. Kibur: It’s very simple. I would tell them that
risk is a factor when a company comes to you and gives you a story that sounds typically
like this, "We have exciting technology
and within a year or so, we will achieve this… this is my projected cash flow income,
etc. and based on that, you will have ten times turnover on your invested money.” Ok,
that story sounds very nice, however, you are taking a risk because that story may not be
true in the end. With our
story, the NetNation story, that is not the case. We
are not asking you to take a leap of faith in our services or our company. All we are telling you is that we have 18,000
customers, who pay x amount per month and will each pay x amount this month and next year. As long as the Internet is not going to disappear,
we are getting an annuity from this customer. So I'm not asking you to buy in on a story,
I am showing you exactly how much money I am making today.
Based on those facts, you can choose an investment with a very clear risk model. Thus, it is the same as investing in a utility
company that has a certain customer base and certain cash flow. That is really the same idea, the potential for
growth is big because hosting is a new industry. You don't have to believe me or take a
leap of faith to see the turn on your investment. You
see exactly what you are going to get. And there
are bonuses. First, this company is going to
grow tremendously as per research firms such as International Data and the Yankee Group. They have estimated that the web hosting industry
will increase explosively in the next few years. NetNation is ideally
positioned to enter the custom and managed hosting era and poised for the next rush of
Internet domain names. Web hosting services
offered from state-of-the-art infrastructure continue to evolve to meet client needs and
keep a step ahead of market demand. New Top
Level Domain (TLD) name registration from wholly owned subsidiary DomainPeople, Inc., is
set to capture the biggest land grab of domain names since the “.com” rush of
the 1990’s. Moreover,
NetNation is one of the first Nasdaq-listed hosting companies to achieve profitability. CEOCFOinterviews: It's
true, technology is here to stay and it's only going to get better and more complicated. People are going to continue to need help. Mr. Kibur: If you are going to say that web
hosting is not going to continue to exist, then in reality you are saying that the
Internet is not going to continue to exist. As
long as people have web sites, NetNation is going to keep the revenue streams coming our
way. CEOCFOinterviews: What
can you tell us about your strategy for employee retention? Mr. Kibur: Our company has a sound strategy for
employee retention because we know that our employees are our company. Apart from our dynamic technology, it’s our
employees that set us apart from competitors. When
a customer calls, it's important for them to know that they are speaking to someone they
have spoken to before, and not always someone fresh and new coming into the company. We understand that clients value this, and
therefore we have employee incentives like stock options, or shares from before we became
public. We have employee pension and bonus
plans, and opportunities for growth no matter what level an employee is at. For instance, some employees who have started at
the frontline customer service level have now become managers and network engineers and so
on. I feel that this strategy will help us
keep our assets and help us succeed. CEOCFOinterviews: Do
you have the same difficulties in hiring qualified individuals as we have had in the
United States? Mr. Kibur: The employee turnover here is not as bad as in
the United States. For example, in
California, people are just looking for money and don't care much about loyalty. People
are a lot more loyal here. They feel that if
the company has been good to them, they should be good to the company. That's why a lot of the people stick around and go
through the good and bad times with the company. If
the stock sells well, we will all be able to sell our shares and it will work out well for
all of us, including the investors. CEOCFOinterviews: How
often do you try to come out with a new product or new service or a new enhancement to
something that already exists? Mr. Kibur: We evaluate our services on a monthly
basis. Every month we evaluate the sales of
each service offering and decide to either get rid of it, enhance it, or design a new
product. This is an ongoing initiative
overseen by a full-time product manager that looks at our offerings, competitors’
offerings, and the market demand, to ensure that we are always on the forefront of the
industry.
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