B10WH

We all know what investment banking is, or at least most of us have learned something about investment banking… thanks to financial crisis. Well today “Investment banker” is probably not the most appreciated job in the world. Sadly most people are tending to think that investment bankers are guilty for the current global economic slowdown. Well I’m not one of them. So when I met Frank from Cheval Capital I was interested of his business. I asked them whether he would talk to B10WH and Daw Blog readers and he said “Yes!”.

Hi Frank, good to talk to you. There is a lot of things anyone would like to ask an investment banker (or at least I think so), during the current crisis. Let me start with this one. Is the financial crisis affecting the web hosting industry? My impression is that web hosting industry looks pretty much as isolated island, that does not need bailouts… It that true?

Hi Dimitar.  Its great to talk with you as well. I think your impression is largely right (at least so far.)  We’ve talked to a lot of hosters and our sense is that while most are doing fine, growth has slowed.  A line from the recent Microsoft conference that rang true was “steady is the new growth.”

After two years of web hosting mergers and acquisitions are the investors still interested of buying hosting companies? Which is the most interesting market niche – data centers and collocation providers, dedicated and managed hosts, VPS providers or Shared hosts?

While we have seen fewer buyers, there are still a number out there.  Keep in mind that the most common type of buyer is another hosting company that is choosing to add customers by purchase versus marketing.  As this type of buyer tends to buy out of cash flow, financing isn’t a problem.

Right now, we’re being most aggressive in buying shared hosting customers at good prices.  Overall, there seems to be demand in all the sectors we work in.

Do you think that once the crisis is over, there will be a growing investor interest in buying cloud computing and cloud hosting technology producers and providers?

I’m not great at predictions.  To me, it comes down to value.  If cloud operators can add customers at cost effective rates and thus create value, then investors will always be there.  Unfortunately, the tech sector is littered with great technologies that no one would buy.  All in all though, cloud computing looks pretty good.

I have seen that Cheval Capital have completed 29 transactions in 2008. Do you think you’ll make more in 2009?

I hope the trend continues but you never know ;-).  We’ve been very fortunate since we got started in the space in the late 1990’s and have completed over 140 hosting and ISP transactions.

How big web hosting company in annual revenue should have someone to be an interesting client for Cheval Capital?

We work with companies of all sizes.  A few years ago we started a small hoster program that is working quite well.  We’ve also been involved with some of the industry’s largest transactions.  So really, all sizes.

Would you tell me which are the most important things anyone should be prepare when selling a web host hosting company?

That is really hard to answer generically.  The key is to have the information that enables you to demonstrate the value of your business and that it has reasonable risk profile.  Typically the larger the business, the great the expectation by Buyers of financial and operating metrics.

As you know, there are two broad types of buyers, “Consolidators” that want to buy customers and move them onto their own infrastructure and “Strategic Buyers” that want to purchase the whole company and operate it largely as is.  Both will want to confirm:

(1) the amount of revenue that your customers generate and the stability of that revenue

(2) your ability to add new customers at reasonable cost and the ability of the buyer to continue doing so.

The Strategic Buyer will also care about the efficiency of your business and its assets and liabilities.

The top three things all hosters must have are:

• An general overview of you, your company, its operations, etc.  (We have a form that we ask sellers to fill out that covers all of these topics.)
• Income statements for the last several months and for the previous year with revenues broken down by the type of business; and
• Backup to confirm those revenues (e.g. paypal, merchant acct stmts, etc.);

What about buyers… what do they want to see when they are looking to invest in web hosting business?

It really varies by buyer and the type of transaction.  Some buyers are creative and flexible and will look at anything that gives them a feel for the two items above.  Others are less so and require the other extreme of audited financial statements, tax returns, etc.  Typically, most Consolidators require less information.  I can’t stress enough that the key is to provide the buyer with confidence in the existence and stability of your customer base.

Something about Cheval Capital. Why did you decide to form an investment bank that specializes in web hosting industry? I’m curious how an investment banker decided to come to web hosting market.

Luck.  Our specialty has been working with venture capital backed companies that are consolidating industries or markets.  In the late 1990’s we got hired by Verio and the Centennial Funds to do ISP acquisitions and it just went from there.

What is your projections about the hosting industry’s developments? Do you expect growth in 2009, or web hosting will be affected from the global crisis?

I think the industry is fortunate in that it is a recurring revenue business with strong margins and, for most, little to no debt.  It also provides a service that is absolutely core to business.  Those characteristics should protect the industry from major trauma.  However, in bad times new company formation will slow and customers will go out of business.  Whether this causes the overall industry to shrink or just grow more slowly I don’t know.

Finally, is there are any company/brand in web hosting that you’ll love to consult, sale or buy?

We’ve been very lucky to work with a lot of great companies in the web hosting business, both large and small.  My hope is that it will continue.

Russia is a huge web hosting market and one of the countries with developed software market and IT industry. I have always been very curious about Russian web hosting market and its developments. So when I met Alexander Ovchinnikov Of Masterhost.ru I knew I was gonna interview him. And despite that I missed to see him at the Parallels Summit 2009 in Vegas where both us attended (it was my fault), I’ve finally made it. So here he is.

Hi Alexander, Can you please introduce Masterhost.ru to Daw’s readers (The interview was made for Dawhb.com blog, but I decided to published it in B10WH). How long have you been in business? What kind of hosting customers do you target?

Our Company was founded in 1999 and now it belongs to holdings.masterhost the biggest hosting provider in Russia and CIS.
We offer the wide spectrum of hosting services. Our product range includes virtual hosting based on the Unix and Windows platforms and Virtual Dedicated Server (VPS), location and lease of servers, lease of Microsoft applications (Software as a Service – SaaS), registration of domain names in different zones. Besides, we offer services of access Internet for providers of wireless and broadband access to World Wide Web to end users.

For years .Masterhost services were provided to more than 150 thousand people. Among the Corporate Clients are both private users from all regions of Russia and CIS countries and legal entities, comprising of big public and commercial companies, communication operators, Internet providers and others.

One of our foreground tasks in developing services within our hosting is integration of web-statistics from the SpyLOG Company (belonging to our Holding) with the .Masterhost hosting platform. Today all .Masterhost clients have access to free statistics services. They include reports with detailed visiting statistics by different parameters.

In 2008 the .Masterhost Company became a laureate of the RUnet Prize in nomination “Technology and Innovation”. This RUnet Prize was created in 2004 and is a national award in the sphere of high technologies stimulating companies operating in high technologies and Internet and rewarding for distinguished services in information technology and electronic communications.

Your starter shared hosting plan costs around $4/month. Is it one of the cheapest ones on the Russian Market and it offer “unlimited transfer”. How do you deal with this? Do your customer use their data transfer quotes and d you impose any restrictions on monthly traffic?

Competition among hosting providers motivates them to launch new tariffs with high functionality and minimum possible price on the market. Nevertheless, the today user choosing among hosting providers makes a reasonable decision and relies both on low price of services and stability and professionalism of the provider. These qualities help our company to be among the leading ones on the hosting market for many years.

Virtual hosting is used here not only by persons and small-size private companies but also by large enterprises if their business is not inseparably associated with Internet, i.e. the site does not generate a lot of traffic. In the hosting tariff plans traffic is offered to clients free of charge provided the following conditions are met:

• Incoming/ outgoing traffic ratio is over 1:4;
• Summary foreign incoming traffic does not exceed summary Russian incoming traffic and summary foreign outgoing traffic does not exceed summary Russian outgoing traffic.
• There are a few restrictions for virtual hosting, i.e. specific list of used software (applications, libraries and the like) and its settings which are determined by the provider administrators.

Do you offer Plesk only and if “Yes” can you please tell me what are the advantages of Plesk from your point of view?

To manage (administer) virtual or physical server we suggest our clients using a specialized program – the Plesk server control panel from Parallels. Thanks to simplicity of use the Plesk control panel server control functions can be performed by unskilled administrators. Using the control panel the administrator controls subsystems, applications, domains, users, and he or she can locate any site, create mail boxes for his or her colleagues and administer server parameters by analogy with virtual hosting services.

You are one of the very few web hosts that I know, who offer free web hosting for students? This is something people always appreciate, but does it pays… I mean  Why do you do this to support them and to increase brand’s awareness?

Education is the most important sphere of human activities providing forming and building-up of intellectual potential the need in which is growing by hyperbola. Internet must be a part of the program developing innovative education, a network for updating educational process.

Today we offer two free tariff plans within the educational program named “Student” in cooperation with Microsoft based on the Windows platform and “Education” based on the Unix platform. The “Student” tariff plan of .Masterhost offers free hosting services to students of institutions of higher professional education for educational and research purposes.

The “Education” tariff plan services are offered to both educational institutions and natural persons creating and supporting non-commercial projects associated with development and education subjects. Free platforms use conditions do not differ from the paid tariffs: professional equipment, 25 hour support, back-up copying and full range of services which the company offers to its clients under its motto “professional hosting”.

Do Russian site owners prefer .RU domains for primary web address for their sites? Can you rank the most popular TLD’s in Russia, or at least the ones your customers use?

In fact the users of Russian Internet prefer to register their sites on domains in the RU zones. Today the total number of registered domains in this zone amounts to 2 millions of domains.  The .Masterhost clients registered 85 000 domains in the Russian zone for the period the Company has been operating (since 1999).

The second most popular domain zone for our corporate clients is the international zone .com. Today .Masterhost  registered 10 000 domains in this zone.

Is .EU gaining popularity in Russia?

There are geographic restrictions in registering domains in the EU zone. The company must have its office or the main place of business in the territory of the European Union and the natural person must reside in EU. Russia does not belong to the European Union yet, that’s why domestic companies and citizens of our country can not register their sites in the EU zone for the time being.

I saw on your website you had at least 8 different seminars in 2008. Did they helped participants to better understand the topics you discussed and do you think that conferences help web companies to attract new customers?

Under present-day conditions of strong competition any telecommunication company must not only provide its clients with services but also show how to use these services most efficiently. At seminars held by our company our clients not only obtain theoretical knowledge but also get practical recommendations on service management, answers to questions on technical problems occurred in their business and unique methodical materials extracted from reports. Participation at seminars gives opportunity to exchange experience and make more balanced and sound decisions in choosing services of our company.

You have nice priced VPS hosting plans. I saw you use Virtuozzo Containers as virtualization technology? Why did you choose Parallel’s virtualization technology?

To realize VPS services we focused on reliable and regularly updated software which is easy to use and optimal in distributing resources of physical server among users of virtual dedicated servers. All virtualization systems have their advantages and disadvantages. Among virtual dedicated server support environments which we considered the Virtuozzo technology is the universally recognized leader.

This technology allows setting dynamic division of resources, creation of functionalities like parameters of physical server and combines flexibility in setting and control. Besides, use of this technology allows to minimize costs of the company spent on hosting services (compared to lease of physical server).

A few percents of resources of physical server are spent on virtualization using this technology, the others are to users. The used percents of resources are taken into account in filling physical server with VPS. These few percents include reserve for losses in virtualization and server control system.

Do you think that OS virtualization offers more advantages to consumers than WMware’s Virtual machines, which are based on full virtualization techniques?

These are different technologies and each has its drawbacks and advantages.

What kind of web hosting Russian site owners want much – Shared, VPS or Dedicated. Which one of these do grow faster?

According to statistics of our company more than 50% of clients choose virtual hosting being the cheapest and most popular. To administer its site the client does not need any specific knowledge, all support is given by the hosting provider.
Among our corporate clients the next most popular is lease and location of server (collocation and dedicated hosting).

The users of collocation administer their servers by themselves. The reasons are availability of a technical specialist in a company and sometimes a corporate procedure according to which access to internal resources is given only to insiders.
The most active users of dedicated and collocation services, as we think, are our operators, advertisement agencies, internet shops and suppliers of goods (dealers and distributors), game servers and the like. Ti sum up, they are representatives of the corporate market (mainly medium and big size business).

The “Virtual Dedicated Server” service is rather promising from the point of view of its functionality. The companies which “outgrew” usual virtual hosting but are still not ready to switch to “dedicated” server involving more financial expenses  for lease of equipment, support and administration, choose VPS. VPS in its essence is the intermediate option between virtual hosting and dedicated physical server.

We can point out that about 25% of users of “Virtual Dedicated Server” service of.masterhost “overgrew” virtual hosting.
VPS service is given to our clients on the Unix and Windows platforms. This technology is based on virtualization from the Parallels Company.

What is your projection for Russian hosting market and for web hosting market in general?

The main development trends of hosting market today are that conventional methods of hosting when advantages of a hosting provider are in tariff parameters (disc or mail space, number of mail boxes, address to data bases and the like) “fade” into the background.

At present potential clients choose tariffs to solve specific tasks including business ones in choosing among hosting providers.
Thus, hosting is often being considered in combination with suggested software or preset services by this or that tariff. First, we speak about ready decisions integrated into the hosting platform: professional scripts , modules, and systems.  They range from guest books, chats, forums to contents control systems for creation of online projects, for example, internet shops.
Thus, users of our company can install favorite CMS directly from the control panel by one key. And this option is active both for tariffs of virtual Unix hosting and for a new specially developed CMS Profi tariff.

The list of CMS for automated installation includes CMS systems being most popular among Russian users and is constantly being enlarged. Installation of CMS by certain tariff depends on technical characteristics of the tariff plan and software.

B10WH.com is part of Business Address, a publishing network that serves  Web Hosting, Web Design and Development, SEO industries. We offer you an opportunity to feature your graphic and text ads in a group of websites that publish quality content. Please note that non of our media sites and directories claim to be “Best”, “Top” or extraordinary.

You will not see us to claim anyone’s business as “best one” only because we got one as advertiser. If you want your company to be described with superlatives, B10WH is not the right place to advertise.

However B10WH.com is the write place for you if you want to be honest and to open your business and to show the consumers how you do web hosting. If you believe that your web hosting business has a certain advantages which makes it different, we will speak to you and to promote your company. See the advertising opportunities we offer!

Banner Advertising

468×60 (All pages): This banner appears on the top right side of the web hosting media. We rotate up to 3 banners on this position. The price to feature your banner there is $85/month.

468×60 (Article pages): You can feature your ad below each article in B10WH. We display 2 banners on this position. The price is $55/month.

650×120 (Home page): This is our featured position. It give you 100% visibility and attracts the attention of any of our website visitors. It costs $350/month to get featured there (3 banners on rotation).

125×125 (All pages): This a square banner that displays on the right side of each page at B10WH. Its is priced at $110/month.

Text Links Advertising

Text Link (All pages): Some people still buy link for SEO purposes. If you are one of them, you can get an excellent results, when featuring your text listing at the right side bar of B10WH. the text link will display in all pages. The price is $150/month. Sign up for B10WH Text Link.

Contextual Advertising

PR Articles: Sure we publish Press releases and promotional articles, BUT we mark them as promotional and say this very clear to our readers. You can place a 300x 300 pixels image in your PR article, that will cost $155 one time fee!

“There is a little difference between how large companies and small businesses will utilize Cloud computing”, this is one of the conclusions which was made from lates survey conducted by Hosting.com. The web hosting provider with one of the most targeted names in web hosting industry has released a research paper titled – “2009 Cloud Computing Trends Report”.

The driving factors for adopting cloud services are nearly the same for all company sizes, shows the poll. It laso shows that business sizes does not play a big role in the process of adoption of cloud technologies.

Another result of the survey is that leaders of smaller companies list Cloud Computing as a priority at the same rate as executives in larger companies. Small businesses are likely to receive a greater amount of IT services from a cloud platform. The survey also says that an increased education on cloud benefits, solutions and design is very important to be mastered from businesses of all sizes.

Small businesses require an immediate and measurable results from cloud-based solutions. This includes reduced costs, increased scalability, improved service level agreements for customers, and higher availability.

2009 is slated to be a banner year for cloud computing providers and solutions. Until now the expected primary source for increased revenues was large corporations, specifically for test and development environments. However, over the past several months decreased revenues and operating budgets have driven small businesses to explore and implement production cloud environments.

Services Businesses Use from Hosting Providers

As show on the graphic above 72% of the businesses said that they use web hosting, 54% use email hosting, 32% use database hosting, 30 use application hosting and 21% use hosting providers for online storage.

What “Cloud Computing” Means For Respondents?

47% of the survey respondents say that cloud computing refers to a “fundamental change in how technology services are provided”. 19% said that it was a “tool that if delivered properly, can provide instant value for my company”, while 9% told researchers that cloud computing was “a tool that might work for another company”. 13% of the respondents define cloud hosting as “another buzzword – all hype” and 12% are unsure what cloud computing means.

The Hosting.com’s document is based on data collected over a 5-week period by conducting an open survey that has 644 respondents. All of them are C-level executives and business decision makers. More that 40% of them are holding CXOs, president, vice president titles or are owner on the companies.

All major industries such as financial services, retail, social networking, health care, manufacturing, IT service providers, marketing and advertising, non-profit sector and city governments are represented in the survey.

69% of the respondents work for companies that have less than 100 employees. 11% have more than 1000 employees. 64% of survey’s participants work fr companies with annual revenue less than $10 million, while 13% of them manage businesses with more than $100 million annual revenue.

Two thirds of the survey participants believe that Cloud computing will have a moajor impact on the IT industry. Contrastingly, 22% were familiar with the term but did not thing that it would provide value to their company.

Three Most important Factors To Invest In Cloud Computing

Cost savings, uptime and high availability, and performance are the key factors that make companies to start using Cloud Hosting technologies.

Obstacles Cloud Computing Providers Must Overcome

As you can see on the above graphic, the security is a top priority for businesses. Companies spend countless hours and investments to protects their data assets.

IT Services To Be Delivered From Cloud Platform (Next Year)

More than 75% of the survey respondents said that only 6% of It service they will use within the next 12 months will be delivered form a cloud platform. For 51% – 75% of the respondents the percentage of IT services from the cloud is 8%. 26% – 50% of executives responded that expects 12% of IT services to be delivered from the cloud within the next year, 10% – 25% of the respondents said that 23% of their IT services will be coming cloud computing.

Solutions Best-Suited For Cloud Computing Environment

70% of the survey participants answered that web applications are the service which is best suited for cloud hosting environment. 41% of the respondents think that their database servers should be hosted on cloud computing systems, and 37% said that they would host application server in cloud environment.

How Customers Prefer To Pay For Cloud Hosting Services?

32% of potential users of services delivered from Cloud Computing prefer to pay on monthly basis. 18% say that would go for annual contract based on their resource needs and bursting.

The results from the survey illustrates the need of additional education of the uses and benefits of the Cloud Computing. There are still a large number of people that consider Cloud Computing as a Buzzword or are just unfamiliar with the term. 36% are unsure when cloud Computing will impact their business. 12% have no intention to use Cloud Computing and Cloud Hosting services. 39% think that 1% to 10% of the IT services they use will come from a Cloud Computing platform.