Wednesday, January 23, 2008

DreamHost Got the Apology Wrong This Time

By : Liam Eagle


By now you've probably read a thing or two about the typing error at DreamHost that caused the company to accidentally bill customers for roughly $7.5 million earlier this week.

DreamHost, characteristically, was quick to own up to the mistake, and let customers know what happened, through its blog. Of course, with a mistake of this magnitude there's really no alternative to the honest-apology approach. I can only imagine that trying to keep something like this from getting out would at best cost the company its customers' trust, and at worst make the whole incident indistinguishable from credit card fraud.

But I wonder how much damage DreamHost might have done to its reputation with this particular gaffe, and more specifically with the form and tone of its apology.

This is particularly interesting to me because of DreamHost's successful past work in the areas of apologies and their tones. I've held up DreamHost in the past as an example of how to go about apologizing for mistakes. After a 2005 outage, it was precisely the way the company blogged about the outage that earned it, in many cases, the appreciation and respect of its customers.

(We ran a story about that situation and its outcome here)

This time, though, the company might have taken the wrong tone in its apology.

It's a tricky thing, being glib. Particularly in the context of an apology. And there's a world of difference between informal/forthright, and jokey and (as I've seen it described in several places) condescending.

Specifically (and I'll keep this brief, since this point has already been made elsewhere) the offenses here are: the title "Um, Whoops" and tone ("Ha, the joke is on you! I guess. Um, okay, no, not really, I'm sorry."), as well as the picture of Homer Simpson accompanying the post seem destined to be taken badly by customers who are understandably upset to find their bank accounts missing considerable sums of money.

This time, it seems, DreamHost's personal and transparent mode of interacting with customers appears to have misfired.

Customer reaction, even the reaction revealed in the blog's comment section, served to illustrate the affection DreamHost's customers had for the company and its methods following its previous problems. The more than 600 comments on Monday's apology post paint a different picture. While not every comment is negative, and certainly some are supportive and appreciative, the usual DreamHost feel-good atmosphere is decidedly absent. And a good portion of the posts are of the "Jokes are NOT APPROPRIATE in this situation" variety.

It remains to be seen just how significant the impact of this error is on DreamHost's business, and how many of its customers actually set off in search of another service provider. But it's certainly a change for me to be pointing out DreamHost as an example of a company doing a bad job of handling a volatile situation.

I can't even think, off the top of my head, of who I'm going to use next time I need an example of "here's how you should have done it" from a customer service standpoint. Will I really have to look outside the Web hosting business.

I hate to be glib myself, given the subject matter, but is it really that hard to get this right? Customers appreciate your candor. But they're not your buddies. Especially when you're messing with their money.

[Note: and here we're just talking about the effectiveness of the apology. Of course, there's the entirely separate issue of just how many major catastrophes necessitating large-scale public apologies are acceptable from a single service provider, and in what span of time.]

BUY BUY BUY - Web Hosts Firms On Sale

by Tom Millitzer


I was struggling writing a blog about web host valuations - you know the measurements, metrics and other forms of long division (A blog which I will write sometime.) when I was saved by news on the radio....and confirmed on Fox...

Web Hosting Companies on sale...it was all over my news.

At noon this date (January 22, 2008) web hosts firms are on sale. Companies had the ability to purchase web host firms today for a price less than yesterday.

This is 100% the truth - and will act as a short primer on valuations, the long division stuff I keep harping on.

About 11AM today the Fed lowered the benchmark overnight lending rate to 3.5 percent from 4.25 percent, the Fed wasn't even going to have a meeting for a week - took everyone for a surprise.

Earthshaking stuff, a 750 basis points (3/4%) cut is massive...check out your cc bill or mortgage in a couple of months and multiply by 100 million.

How does this web host savings work Tom? Thought you would never ask.

You see a lot of people (FOR EXAMPLE PURPOSES ONLY ---- I DON'T BELIEVE THIS VALUATION) throw around a value of 1X annual revenues (12 months) as a value for shared hosting companies --- they have for quite a while --- they will tomorrow.

Now a buyer, borrowing money to buy the web hosting company, has around an 8% savings in juice today over yesterday - money that could be used to pay for the acquisition. For the buyer this is a bargain as he/she is still buying at the 12X tomorrow (Because someone believed value metrics are static) just like they did yesterday -- talk about a discount -- the web host company is on sale.

There is a lot involved in valuations -- valuations are largely a factor of the ability to use cash (Cash before DAIT, EBITDA etc.) If you need cash to pay debt you can't spend as much up front -- lowering valuations.

But what will the buyer do with that extra money? What will you do with your cc or mortgage savings? You buy more stuff - the host company buyer buys more hosting companies - supply side economics.

Oh yes, in my opinion web host values will go up due to this.

Suggested additional reading in this tutorial: The Ultimate EBITDA

Are domain names real property? Thoughts from Domainfest 2008

By : David Snead

The second day of domainfest 2008 concluded with a two hour live auction of domain names. At the start of today’s auction “sex.la” had the highest minimum required bid (surprise surprise). This auction in particular, and domainfest in general, got me to thinking about whether domain names should be considered to be real property, similar to real estate, or intellectual property, similar to trademarks and copyrights. Based on the chats I’ve had in the exhibit hall, and at other conferences, it seems that domainers like the idea of giving domain names some, if not all, of the attributes of real property. On the other hand, Big IP has been firm in its assertion that domain names should be considered to be intellectual property only. While using either of these analytical frameworks would add a certain amount of legal certainty, I think that using either framework, exclusive of the other would be a missed opportunity to create law that reflects the particular place that the Internet occupies in society.

Why do I hold this opinion? Based on my experience, and that of other lawyers active in the domain space, the law applied to domain name disputes has diverged significantly from the reality of domains today. While typosquatters and cybersquatters still exist, the era of “nikke.com” has long passed. Ignoring this, Big IP still treats the domain name space as their own province based on the cybersquatting era.

To illustrate this, one needs no better than the questions posed to my legal panel this morning. The vast majority of them dealt with how to deal with requests from the general public to buy a domain name. Why is this such a pressing legal issue that no fewer than three different permutations of this question were posed to the panelists? The short answer is that the ACPA, and panel decisions under the UDRP, have given great weight to “excessive” requests for compensation for domain names, particularly when a domain name isn’t being put to “productive” use. As a result, domain name owners have had to develop elaborate ways of answering questions about the value of their domains without triggering a presumption that they are in violation of the law. This presumption, and other presumptions, like a parked domain is not being put to productive use, illustrate for me the application of a tortured interpretation of intellectual property law to domain names.

I can’t think of another area of the law where similar presumptions operate. Using the real estate analogy, do we force a sale for a “reasonable price” on a person who has purchased a parcel of land in anticipation that it might be a good place for a shopping mall?

Other than as a simple rubric for legal analysis, however, real estate doesn’t work very well for domain names. The Internet isn’t Oklahoma in the 1880s. The Internet is more of a public/private partnership in which societal concerns, and facilitation of commerce may need to be given priority over private gain and speculation limited to provide opportunities for more robust use.

As the linchpin of Internet functionality, the law needs to recognize that domain names cannot be subject to one legal theory exclusive of others. Rather creative judges and legislators must recognize the importance of domain names both as a cradle of Internet innovation, and a natural extension of current trademarks.

A Beginner's Adventures in Web Hosting

By : Zvi Grauer


In this blog I will review the lessons, dilemmas and occasional miseries associated with hosting a server. I will describe in detail my hosting journey, from conception, through planning and implementation, to (I hope) triumph.

The importance of the web as a tool of self expression is quite obvious. Blogs, social networking and collaboration sites are hugely popular. These sites provide tools to facilitate creativity, and make it easy to contribute without knowledge of programming or design. Yet, the great majority of these sites are run by companies and media organizations, and users are tenants, not landlords. For owning and controlling web pages, one has to use a web hosting provider or use a co-location facility one's own server.


Let's consider the available hosting solutions. Most residential Internet providers, be they dial-up, cable or DSL, provide space for personal web pages at no extra cost. Shared hosting costs a few dollars monthly. Dedicated servers are available for lease at well under a hundred dollars a month. For this amount, one gets (or at least should get) quality hardware, fast and reliable backbone connectivity, server administration tools, site monitoring, technical support, and additional paid services. All these hosting options keep the noise, the heat, and the reboots far away from the user.

So, you must be asking, with so many cheap and easy alternatives around, why do I want to host my own server, rather than lease one? For quite a few reasons, actually. Because hosting my own server is a challenge and a learning experience, because it lets one have things exactly the way I like them, and because it gives me the freedom to mess things up, repeatedly, without serious consequences.

By hosting my own server, I can use any hardware I choose, run any OS I like, upgrade, downgrade, or replace hardware, operating systems and applications as I see fit, as often as I desire, without driving my ISP's technical staff up the wall. I can use any program and every available port, without the risk of violating my service agreement. No one (except the guards who admits me to the co-location facility) will ever know how many times I had to re-install the system . And with all the fidgeting, I will become a better server administrator, learn about the business and technology of hosting, and, last but not least, be able to write about it and learn from the experience of people with a similar interest.

If, like me, you enjoy tinkering, trying out different software packages until you find the one with the right combination of features, stability and usability, then hosting your own server is the best way. Provided, of course, that you can find a colocation facility that is not too far and let's you in 24x7.


I hope you keep up with my progress on this blog, and help me along with comments, suggestions and advice. My web site will be up soon - the URL is www.words2u.net. Feel free to visit the site, and tell me how I am doing. I would love to hear from you.