B2B/B2C online strategy and enterprise eBusiness blog

Since its inception in 1998 as SuperFord.org (originally as a place for friends to post information about their vehicles) to the transition to a database-driven online community (in May 2001 re-launched as SuperMotors), SuperMotors has been running on commodity hardware built and funded by us three owners of the business. We were fortunate enough to have the expertise of web development, server building, and FreeBSD administration shared between the three of us. When we eventually outgrew our commercial-grade cable internet service in the early 2000’s, we entered the wonderful world of colocation.

In our never-ending quest to drive down operational costs of running a hobby-site-turned-online-business, it was critical for us to find an affordable colocation provider in terms of rack rental fees, bandwidth fees, reliability, and 24/7 data center access.

These reasons for not entering into multi-year hosting contracts are not to do any disservice to our current colocation provider. We have been nothing but happy with the experience. Changes in online business, technology, personal, and professional lives of small business owners are sometimes very unexpected, and it’s these changes that we’ve experienced that I wish to share with you in our 5 reasons to avoid multi-year hosting contracts:

1.) The price of bandwidth continues to drop

This may seem obvious, but it is completely true. Since we began colocating, the competitive landscape has increased many times over. Prices, levels of service, and popularity of colocation and managed hosting have changed significantly. We are nearing the end of a 2-year contract and let me tell you, in March of 2005 when we renewed our contract, it was the best deal at the time. But guess what? It’s very expensive compared to what can be had now. We find ourselves today locked into 2005 pricing.
Lesson learned: It may look like a cost-savings at the time to drive down your immediate monthly costs by a few dollars. The money wasted down the road is considerable.

2.) The price of server hardware continues to drop

What seemed like an “investment in the future” in mid-2004 when we built our server, turned out to be anything but. The simple fact is that a server investment is a considerable expense for a small business, especially for a community-driven site that can grow at exponential rates. At the time, 300 GB SATA drives were the biggest, baddest drive you could buy. Today, just over 1 year later, 750 GB drives are coming into the realm of affordability for the common man. We quickly outgrew our server in the course of just 1 year and found ourselves in need to make another significant investment. While still commodity hardware, it does get more expensive to “do it right.”

Bound and determined to again “invest in the future,” we made a significant investment which would later turn out to be a complete disaster. While not really linked to colocation in any way, this type of situation is a potential risk in any business building their own servers and working with the lowest cost vendor. Hindsight is always 20/20; if I were to do it all over again, we would have purchased a Dell PowerEdge server for considerably more money and just called it a day. However, that would not have saved us from #3.

3.) You WILL outgrow your servers

Unless you have a SAN, which is highly unlikely for a small startup, you will outgrow your storage capacity more and more often. For our business, file storage is a critical component…more so than database performance. We can get away with a fairly light-weight database server due to our database structure and server optimization with FreeBSD and MySQL, but there is no magic to file storage. We just need more. And we need more space ALL THE TIME. This creates a very difficult financial model because it truly is exponential growth. The more users that hop on broadband internet connections, the easier it is for them to post more data. The more digital cameras become affordable, the more pictures they post. The more megapixels digital cameras offer, the larger the file size is that gets posted. Today, with the popularity of video and how easily the average consumer can record video and digitize it on their home computer, this creates an even larger demand for storage.

4.) You WILL outgrow your original bandwidth requirements

When we locked into a 2-year contract in 2005, we were locked into specific Mbps 95th-percentile billing. 95th percentile billing is a great way to control your monthly costs, but is an even better way to choke your growth potential. Community-based sites offering photo, audio, and video hosting like SuperMotors are much better suited for total bandwidth transferred. Furthermore, what we found is that in order to increase our bandwidth, this meant committing to the bandwidth through the end of our contract or signing a new contract (and thus extending the original contract).

Due to the nature of 95th percentile billing, we did cap it. An open 100 mbps connection to the internet on a 95th percentile billing model is a recipe for disaster for a site like ours, financially speaking. A user that posts a link to a video on a popular forum could single-handedly increase monthly hosting costs many times over because of the spike in traffic that their shared video could cause. Under total data transferred, this is a much more manageable billing model for our site.

But back to the bandwidth requirements — your requirements will surely increase over time. It’s better to start low and gradually increase your monthly costs than to commit to where you think you’ll be in 2 years just to get the better monthly deal now. You’ll spend more money in the long-run by committing early. While there is no guarantee, the trend definitely says bandwidth will continue to drop — which is another reason to ramp up your bandwidth needs.

5.) These days, managed hosting is completely affordable

Thanks to increased competition, more affordable server hardware, and bandwidth prices dropping, viable companies like Peer1, Rackspace, and INetU have made a business out of providing managed hosting. Through Peer1 managed hosting, we will get 40% more storage space, 4 times the bandwidth (based on our monthly average data transferred), 24×7 managed hosting, a 1-hour hardware replacement Service Level Agreement (SLA), and a 100% network uptime guarantee on the core Peer1 network all for 5% LESS than what we pay for colocation today. This is an incredible change in landscape compared to where we were nearly 2 years ago when we were “planning for the future” with buying and managing our own server hardware and locking into the “affordable” 2-year colocation contract.

Best of all, we no longer have to manage or own any hardware. There are no more sleepless nights wondering if the servers will crash or repairing the servers when they do crash. We can focus 100% on building our online community and sleep peacefully at night knowing we have a solid service level agreement and 24×7 tech support.

We will be committing to a 1-year contract (minimum commitment). At any point in time we can upgrade our servers to support additional storage or processing needs as well as add additional bandwidth on an as-needed basis. This model keeps our operational costs at an all-time low while giving us the flexibility to scale without signficant financial risk (like our CCSI vendor fiasco) and without significant financial/time investment (like purchasing, building, and setting up a server). At the end of 1 year, we can always re-evaluate the competitive landscape to see if it makes sense to move our business elsewhere. Moving an online business from ISP to ISP is certainly no joy-ride, but knowing we have the option puts us in a position of power come time to renegotiate a contract.

In a recent post on Jeremiah’s Web Strategy Blog, he says that Apple must get into this space by accepting that mp3 playback will be a commodity. I guess I agree and disagree with this. mp3 playback on a computer is a commodity, but iTunes holds a huge share, and the iPod dominates the market for consumers’ mp3 playback device choice. I’m not sure that cell phones will be any different because there’s no clear market leader right now.

I’m in the market for a new cell phone, and although I love my BlackBerry, it doesn’t have video playback or mp3 playback…plus I don’t have cell service with my plan (it’s provided by the day-job…sorry, data plan only!). So, I carry a separate cell phone, my Nokia 8862. The qwerty keyboard was great when I first purchased it (I e-mail, text message, and IM a lot), but I never use it anymore due to having the blackberry. I really would like a cell phone and mp3 player combination. In looking at my options, there really aren’t any phones that dominate this category. Yes, there are many that can play music, but will they play my downloaded music from iTunes? No. Will they have the same familiar interface as the iPod? No. Will they have integration with my iTunes playlists? No.

For the millions of iTunes users, Apple’s iPhone could potentailly fill a void in the market…even if Japanese phones referenced in the article make their way over to the states. Without knowing what or when the iPhone will be announced, it’s hard to say much else about it…I can’t wait to check it out. Will it offer purchasing of music directly from iTunes? Will it have large storage capacity? Can I use it to replace my dated (gen1) iPod Shuffle? How will it sync with my computer…usb, firewire, or both? I hope I’m not disappointed.

Bonus Points for Omniture
Unbeknownst to me, last week as I was testing out this new installation of WordPress blogging software, a post I made which referenced Omniture would make its way into a few blog feeds and someone from Omniture would actually take notice — and better yet, take action. In the post, I indicated some frustration with the UI and setting up reporting and that I was considering giving Clickshift.com a try at SEM needs. Today I received a call from our SearchCenter contact and we talked through some of the details of the post and he showed me how to create some business rules to solve a problem I was having.

In the business of tracking: clicks -> conversions to free samples -> offline sales
I explained that my goal right now, since we do not sell products via our website, was to maximize the conversions from visitor to free sample ordering. From the sample ordering data we collect, we can determine the percentage of sample orders that convert into offline purchasers. Fortunately for our business model, we sell custom products, which means orders are placed directly with us, regardless of retailer. The manufactured blind makes its way to the consumer, so we can simply match the shipping address of a product order against our database of addresses we collect for free sample ordering. (All of this is obviously done under our privacy policy and consumer data is kept under lock & key.)

Ahhh…the cost/conversion metric I had been looking for
Anyway, since we do not sell products online, we thus have no online revenue to track, which makes some of the default reporting within Omniture’s SearchCenter product useless to us — in particular ROAS (Return on Ad Spend). What I am looking to do is reduce our cost per conversion (cost per swatch order). This metric did require our account rep to setup a custom setting on his end to enable us to better report against it, but at the end of the call, I had cost/conversion reporting setup and was on my way to creating business rules for our search engine bids.

FWIW, cost/conversion is a default metric available in Google’s free web analytics. It seems like somewhat of an oversight to omit this metric from the default reporting, but I guess that Omniture’s clients typically are e-commerce businesses that rely on ROAS metrics since they have online revenue to also inject into reporting (at which point cost/conversion is less critical).

Herein lies the delimma: OPTIMIZING keyword campaigns on cost per conversion
Clickshift.com’s model automatically optimizes entire campaigns based on keywords that drive the best cost per conversion. Additionally, Clickshift.com also optimizes based on landing page.

Omniture’s system is not so automated or all-encompassing (yet). Omniture’s reporting is able to TELL me what keywords are driving for cost/conversion, but only through arbitrary automated increments (that I specify based on no data/research) can I enforce increases or decreases in bid spending. Furthermore, Omniture’s support for A/B(/C/D/E…n) landing pages is a little more involved that Clickshift. Technically, it can be done, but requires tagging pages specifically, and doesn’t really offer the complete solution that Clickshift.com is selling businesses on. I would have to separately test landing pages and keyword campaigns and assemble my own findings between the two. I can’t just automatically disable landing pages or move my bids to another style of landing page automatically. Omniture’s business rules currently allow one action to be taken at a time…and landing pages can only be manually changed.

Net/Net: I’ll make further attempts at creating additional business rules (within Omniture) for bid automation based on average ad position, cost/conversion, and other criteria I deem necessary. We’ll see how much further I can drive down cost/conversion. And I’m very pleased at the level of customer service from Omniture.

For some time now I’ve been looking for a way to share a central list of RSS feed bookmarks between my home computer (iMac G5) and my work laptop (Powerbook G4). I keep track of several RSS feeds each day in my quest of staying in the loop with open source development, web marketing, and internet news. What I was finding is that I was reading more RSS feeds during the evenings on my home computer in addition to catching up on feeds over lunch while at the office. The problem was that I was adding new feeds to each computer without any way of conveniently sharing feeds.

Enter Google Reader. I now can manage a central source of RSS feeds no matter where I’m at, all through my Google account. I no longer have to use another app (I was using Vienna for Mac OS X) to keep up with my feeds. This too was always a gripe for me because I would forget to leave Vienna open and would go a day or two without reading feeds. Now I have web-based access to a central RSS feed list for everything I want to keep on top of.

Furthermore, I can also log into my RSS feeds in Google with my BlackBerry. And, if I read a feed at work on one machine, it’s automatically marked as “read” on any other machine I view feeds on, including my BlackBerry. I no longer have to worry about re-reading feeds I’ve already looked at due to the shared feed list I can now use through Google Reader.

I often visit CNN.com for news updates. LowerMyBills.com runs ads on CNN.com and I just have to ask, how does an animated tattoo needle that draws a picture of a silhouette of a dancing couple sell mortgages? Clearly, they are using these ads to grab your attention because the animation is eye-catching, but seriously…is it driving click-throughs AND conversions?

I normally would post helpful links like this to my del.icious.us bookmarks, but I felt the need to post about it as well. The site is called Amberjack, and it helps you create online tutorials for your webiste by walking the user through real pages of your site. It deactivates the pages and visually “dims” them so your guided text/photos/videos are laid over the top of your site allowing the visitor to focus on the tutorial. With an online wizard, you can have a guided tour in minutes built right into your website.

I’m excited! The Photosimilie just arrived. It’s HUGE. Going to set it up in my office for a few days while I play around with it and get it setup on my Dell laptop. We’ll be using it for photography of parts, brackets, color swatches, and various other products (that fit inside it).

I also ordered it complete with a digital camera and 360-degree turntable. The website makes it look very much like an all-in-one solution for product photography. I really hope it is.

On 11/16/06 Edit: This really works nicely. A new version of software just came out which allows square-cropping and masking on-the-fly. The only thing remaining is the ability to custom-name your files as you save them in auto-export mode. Currently, it names them in sequential number, but this isn’t ideal if the products you’re shooting don’t have SKU numbers in sequential orders. All-in-all, a very well thought out product.

Today I was given a demo of Clickshift.com’s services. They seem to be in startup phase and have a sales force cold-calling around in the industry. I’m not sure how they got my number at the office (they started with the main number, poor sales guys), but eventually were directed to me. Having the entrepreneurial spirit that I do, I’m always willing to check something out that’s new and at the very least proprietary (which they claim their service is) or interesting within the first 20 seconds of the cold call. Having done cold-calling myself for SuperMotors, I know what an up-hill battle it is, so I keep an open ear to anyone that happens to catch me at my desk.

Clickshift.com Model:

The presentation was interesting. I gathered most of what they offered from their site, so the call was a little bit of a regurgitation of what’s on their site, but I did get to see a demo of the software. The software application looks very user friendly (major bonus points for me) and easy to get around. These are two very important things when dealing with reporting on search engine marketing simply due to the sheer volume of data that you will collect with a search engine marketing budget over the course of several months. I manage a few hundred keywords at this time but will plan on expanding on this as we invest more money into SEM. Fortunately, I have a baseline for performance based on what I’ve done so far this year.

UI goes a long ways
While on the “a good UI is good” rant, the simple, straight-forward UI of Clickshift is another reason why it looks interesting. Omniture’s SearchCenter is somehwat of a cumbersome application. Omniture, while it has the bells and whistles a marketer needs, lacks the clarity in an intuitive UI. It’s the reason why I run Google Analytics and Omniture Analytics in tandem. Google just makes it easy to navigate the basics.

However, there is a limit to what Google can do, thus the requirement for Omniture (more sophisticated tracking capability). I really hope Omniture considers a usability study with its “average user.” I’m very technically inclined, but fail to quickly grasp the entire offering of the application due to the many nested layers of navigation, reporting, and custom reporting.

I will admit, they have tutorials availble online and I haven’t spent the time to watch through them all. But then again, I didn’t have to watch videos for Google Analytics to get it to do what I wanted. It (Google Analytics) just made sense.

More than just bid management
What I like about Clickshift is that it takes into considering landing pages, too, and optimizes your campaigns with different landing pages included in the mix. It manages day-parting, geo-targetting, keyword bidding, landing pages, etc. all in a central location. Currently, I use Omniture SearchCenter and am not pleased with their UI (overly complex) and the fact that you have to anticipate what to do with it. Clickshift is more about self-discovery whereas Omniture’s SearchCenter is about maximizing your keywords based on just a single landing page.

I will post more results if I go through with it.

Ah yes, the Nokia e62.

Looks like I know what my phone upgrade will be in March ‘07 when Cingular will supposedly “let” me upgrade. I have the Nokia 8862 (with the fold-out qwerty keyboard, which many people are surprised to see when I use it) and I’m due for an upgrade. I’m spoiled with my 8700 BlackBerry (on the T-Mobile network) which is great, but still does not fully satisfy my all-in-one device needs. mp3 playback? video playback? Guess the Blackberry isn’t modern enough, yet. I’ll demo the Nokia e62 and see if it’s worthy. At the very least, it’s a Nokia, which I’ve always had since day one of owning a cell phone. I love their UI and navigation, very simple and well thought out.

The question remains: will I seriously carry two PDAs (Blackberry AND the e62)? Ugh, hopefully not. If I can’t get cell phone service on my Blackberry with my personal number (the Blackberry is paid for by the day job), I’ll need to continue using two phones. We’ll see.

In Q4 of 2005, we (SuperMotors) were looking to expand our servers as we were experiencing growing pains and needed a solution that would last us for several years. Previously, we had built really cheap tower-based servers using server-grade components supplied by General Nanosystems of St. Paul, MN. General Nano was great in that is was local to us, we did not need to keep spare computer parts on hand (which meant no need to buy extra hardware we would not immediately use) because they were within a few miles drive of our colocation facility and were open all the time. If a drive failed, a motherboard died, a stick of memory went south, we had replacement parts basically “down the street.” It was a great scenario during our startup phase.

As we began to outgrow the basic tower offerings and were looking for more serious “server grade” components, I began looking online for solutions. Dell was very well-respected in this regard, the hardware replacement policies were outstanding, but they also had the pricetag to go along with them. For 3 guys trying to juggle day jobs and a startup company on the side, we had to be as efficient as possible. So, after much searching online, we felt we had found a reputable source for a custom server at a reasonable price: CCSI (aka Opertonics aka RackMountEquipment.com).

In hindsight, what a horrible, horrible decision it was.

The sales support process was very disappointing. We made the mistake of paying in FULL before ever receiving a thing. Granted, this is how most companies work, but considering they were unknown, we should have negotiated some other terms. With that said, all I can really do is post the timeline of events that would transpire over 8 months until we demanded a refund for a server that never worked (these are my notes to CCSI in an e-mail to help explain the position they had put us in):

1. 11/2/05 check mailed for original purchase of machine for $XXXX.XX (cost hidden to protect us ). 3 drives purchased separately by SuperMotors.
2. 11/9/05 (check received), told after Thanksgiving, possibly first week of December to ship
3. 12/6/05, system built, but issues with motherboard
4. 12/14/05, changing out motherboard, but no bench space to do it. Expect to ship on 12/16, NLT 12/19
5. 1/9/06, Server ships, tracking number provided 60 days after check received.
6. Due to my moving across country on 1/3/06, I could not setup machine. This would be delayed and we would incur setup charges by our ISP to configure the server due to me no longer being in the same city/state as our colocation facility. We incur 3 hours of setup time @ $120/hr only to find that there is a hardware issue. Purchased a new 3WARE 9550SX card. Still will not run reliably.
7. Shipped to CCSI for delivery on Wed, 6/21. You said you would get right on it upon receiving.
8. 6/21, server arrives. Repairs not started as promised via e-mail.
9. 6/28, no update yet.
10. 7/5, Bad memory. Replaced.
11. 7/13, hard drive drops offline. Don’t know why. More troubleshooting necessary.
12. 7/20/06, lost a drive. Looks like the controller is making contact with the heat sink on the southbridge chip on the motherboard. We’re making adjustments (trimming the heat sink) and maybe an insulating shield and will try again. Hopefully more results tomorrow.

We did end up getting a refund for about 17% of what our initial investment was. After much hemming and hawing, they gave into our demands after repeated e-mails from me. It was a morbidly hilarious chain of events, I must say. I can’t imagine treating a customer like we were treated. Incompetence and unwillingness to work with us on all sides of the sale, but thankfully we got some cash back, albeit 17%.

So, here we sit with a pile of hardware that doesn’t amount to a complete server and 17% of our investment back in our hands. They claimed to have never issued a refund before, so I’m happy to say we were the first. I am posting this because I did not find any other reviews on the company, nor do they have a Better Business Bureau record, and I want others who are researching CCSI to be aware of their tactics. At the time, we were a small firm looking to maximize our limited budget, and we ended up losing out rather significantly on the deal. If you would like any other information on this company, do not hesitate to contact me. I have a complete chain of e-mails that documents the entire ordeal.