Talking Shop with Tera-Byte

With more than a million clients worldwide, Tera-Byte remains one of the country's prominent Web hosts. CEO Steve Keyser is constantly trying to stay ahead of the competition, and plans to include managed hosting into the next phase of the company's growth strategy.

TH: Tera-Byte started in 1997. Can you give us a brief historical sketch?

SK: That's not quite correct. I've been in business a little bit longer than that. I actually started this particular on-line business eight years ago now. So that would be 1993 when I first started - although it was really only on a part-time basis.1997 is when I actually took it full time and thus became my only job.

TH: Tell us about the building blocks.

SK: I basically I set up a server, I hosted a single site - mrcx.com - and we ran an IRC (Internet Relay Chat) server to start with. That was about it. And we basically just started building the back end and making everything work the way it needed to work. At that time I only offered dedicated and co-located hosting. I had no shared Web hosting at all. I just got too busy working and doing this at the same time. I had to make it a full time concern just because I had no more time left.

TH: Well given that you've had several years in Web hosting, what does Tera-Byte do better that anyone else in the business?

SK: Customer service. But, I have a few precepts regarding customer service. Do you know the old adage "the customer is always right?" We don't actually believe in that.

I believe that the customer should always be treated with respect and the customer service representative should understand what the customer is trying to do. And if they take those concepts and apply them to everyday use, then our customers are quite happy - because we're trying to understand what they're doing, what their problems are, and how to correct them.

TH: I also read that you participate in online discussion groups on Web hosting to obtain more information about what customer requirements are. Is that a valuable means to promote good customer service?

SK: Well, I don't know. I believe that it's a valuable tool to help me assess my business and make it better for the customers but as far as my actual participation in there, I don't know if it's a real boon to my customer service or my marketing, as I don't really talk about my services in those Web hosting forums. If somebody has an issue whether it be on my services or something else, I'll try to give them an answer if I have it.

TH: What types of things would you learn in a medium like that, that you wouldn't normally have access to?

SK: Actually, I would have access, it would just be harder to find. Those mediums just basically put everybody's problems in the same spot. And I can learn just by going through them on a daily basis. I learn exactly what the issues are that are facing the customers and we try to make sure that they don't have to deal with those same issues with us.

TH: Tell me about Spaceports. Can you give me an explanation of what that is and how it originated and how successful it's been?

SK: Sure. Spaceports originated about four years ago. It was actually first set up on an NT system-- which failed miserably after about three months. We resurrected it just about two years later on a FreeBSD platform and with the help of a very good friend, we instituted a whole bunch of automated processes to make Spaceports that much better. When I first got interested in hosting, I went on to a free host and I saw a whole pile of problems with it. And I basically wanted to create a free host for people without those problems that existed at the time. So I think I accomplished that for quite some time. Spaceports is a pretty successful enterprise. It currently has about 800,000 users and grows at about 1,000 thousand a day. Unfortunately, the advertising market has gone south so there is not a lot of income being generated from it at this time. It's had to go through some changes because of that.

TH: Has it been the vehicle that you intended it to be in terms of driving revenues to the company?

SK: No. Not at all.

TH: So, what is the overall benefit to Tera-Byte then?

SK: There is no benefit overall to Tera-Byte (Laughter)

TH: So why don't you dump it?

SK: Because for the same reason that I started it, I can't dump it. I created a better hosting solution for those people and I can't throw 800,000 people out on the street. I have to give it every possible opportunity to bring something back to the company. It isn't losing so much money now that I can't handle it. So it's still got a few kicks in it.

TH: Are there any kinds of initiatives you can implement to speed up the process of getting something back?

SK: Actually yes, I'm working on that now. Unfortunately, I can't give you too many details on that.

TH: Fill us in on the deal with Ensim you made two months ago.

SK: That's working out quite successfully so far. I'm using my own servers that I build with their front end and we're actually currently migrating all of our shared Web hosting customers from Cobalt RaQ over to the Ensim product - which is working well. Secondly, it's actually cheaper to use the Ensim-based product than it is to use the Cobalt RaQ-based product.

TH: How have customers responded so far to Ensim's Virtual Private Server program?

SK: I mean it's growing in leaps and bounds. I've only had the new operation for about a month and I've already got a little bit over a hundred customers on there which I think is a pretty substantial for a brand new offering. There have been a few people who've been upset with it because it didn't perform exactly as they expected however it did perform exactly as advertised. But it still is a shared hosting environment. You are sharing resources with other people so it's not a whole dedicated server.

TH: Well given that you've only tried it for a month do you think a lot of your existing customers are going to participate?

SK: About twenty-five percent of those hundred sales that we've had so far are from existing customers on the shared hosting platform. So yes, they are a little bit excited about it and they are going to move on from it. I am also excited about what they are planning on coming out with their next release. It should be quite an advantage.

TH: A recent Forrester report indicated markets such as application hosting and managed infrastructure will grow by leaps and bounds where as the shared market will taper off - the market opportunity was $167 million for 2001 and that might grow in 2006 to $306 million. When you're executing your business plan do you look at numbers like this and does it influence what you do?

SK: If it's going to flatten out I'm wondering when that is going to happen because I haven't seen any signs of it. My sales continually increase in the shared hosting market and as well my dedicated market and I don't really see that as being one hundred percent accurate at this point. But you know, it may happen. Regardless, we're not just a shared host, we're basically everything for hosting so whether it's shared right up to dedicated, ASP solutions, backend solutions, we can do it all. So it really doesn't matter a whole lot.

TH: How much of the company's revenue comes from shared?

SK: It's about a third.

TH: And dedicated?

SK: Dedicated accounts for the remaining two thirds. I believe that everybody should have a dedicated sever. I don't really like shared hosting except the fact that people have to start somewhere. And starting at an inexpensive shared hosting solution--that's somewhere to start.

TH: You've been in this for eight years now; obviously you're looking towards the future. What kinds of things would you like to accomplish?

SK: Well over the next year, I want to move my marketplace a little bit sideways if you will. I want to get into the advertising marketplace as well because I think I could do a little bit better job than what I currently see happening. And I want to show Webmasters who use advertising for their revenue stream for their Web sites how they can actually do it a little bit better. And in doing so I believe that I can increase my dedicated business even more just by making those people a little bit more money.

TH: Are there any risks getting involved with that?

SK: Yes, there's always a risk. In order to get involved with something like that I have to assume that the advertising market will come back somewhat. Currently it's pretty flat, but I believe it has a lot to do with the dot com dive that happened last March, and that the mainstream advertisers have not come on line yet to any great extent. I believe that if they do come on line, there will be value added back to advertising on the Internet probably not in the format that it is today, but it will be there.

TH: What new plans are in store for Web hosting?

SK: We are starting on managed hosting. I've just got a few dedicated servers that I've had pilots for, just to see how it worked out, and how much more extra manpower I need in order to do it - the costs, things like that. And I think that it'll be something that we're going to pursue pretty heavily probably in the next three months.

The key is customer service. That is the only key that you need to be successful in this business. If you can give the best customer service, you will grow. It doesn't matter what Forrester or anybody else says about what's happening to Web hosting, individual Web hosts will grow based on customer service.