Interview: Affinity Internet CEO Peter Chambers

Affinity Internet is the world's 10th-largest host, based on its 216K active sites. Based in Ft. Lauderdale, Fla., Affinity is best recognized for ValueWeb, the largest of its six hosting brands. Affinity CEO Peter Chambers guides the company's strategic direction and day-to-day operations. In our interview, Chambers discussed Affinity's approach to customizing its brands to target segments of the hosting market.

Q. You've structured your offerings as multiple hosting brands, with separate identities for ValueWeb, SkyNetWeb, Bigstep, HostSave and WinSave. What have been the benefits and challenges of this approach, as opposed to a unified brand?

A. Quite simply, we have different brands because they target different audiences. Offering multiple brands enables us to speak directly to that audience. What a tech-savvy customer needs from a hosting company is different from what a small business owner with zero technology background may need. Multiple brands allow us to communicate to that audience in a vernacular they understand. Providing the six elements of our value proposition means different things to different kinds of customers - having multiple brands helps us achieve this.

Q. Did maintaining multiple hosting units complicate the task of integrating Affinity's acquisitions and capturing the cost savings and efficiencies available through these deals?

A.To be totally honest, complications were kept to a minimum. A big plus for us was our unified billing system. This allowed us to focus on the seamless integration of all our customers on to a single platform - which we have successfully completed. We understood the complexity involved in the integration and approached it in very calculated, methodical way. The migration went well and I am very pleased to say we hit all our milestones.

One of the challenges, and our main focus, was to maintain integrity as it pertained to customer offerings, especially customer service. In the rare instances where customers had less features or a slightly higher price, we upgraded them so they ended up with more than they had previously.

Q. How about marketing? Is it more complex or costly to help users differentiate between the different Affinity brands, compared to competitors?

A. Offering multiple brands is a definitely a marketing challenge. It requires excellent resources to execute but the benefits are enormous - we are seeing this through our customer uptake, up selling and a reduction in churn. It is imperative brand consistency remain intact and we pay great attention to this. There's also complexity in executing the brand proposition; the various brands offer the ability to focus messages to a direct demographic and relate specifically to the customer.

Q. Affinity has been a significant acquirer of hosting companies. Is the industry consolidation nearing an end? At this point, which segments of the hosting market do you see offering the best opportunities for growth and profitability?

A. The web hosting market is a very competitive, constantly evolving market, and based on that I do not see market consolidation ending in the near future. On the contrary, web solution providers will continue to enhance their customer base and revenue capabilities. One way to do this is through acquisitions. Customers require and deserve a product offering that enables maximized communication and business activities via the Internet. Affinity is a company focused on this model, hence we see the best opportunities through the expansion of services to existing and new customers, the ability to migrate customers from low capacity solutions to robust solutions through both shared and dedicated services and, in addition, to expand hosting services through strategic and value added partnerships.

Q. In recent months there have been a number of refinements to the service offerings at ValueWeb, Affinity's largest hosting property. What's driving the changes?

A. At Affinity, there are six key elements we focus on with our product offerings; they are our value proposition - communication, operation/security, trading, marketing, business applications and life style. The bottom line is - it is not enough just to be a basic web hosting provider anymore, you must be a solutions and service provider. ValueWeb is our flagship brand, it serves small and medium sized businesses as well as web developer communities. This brand was the obvious place for us to fulfill the value proposition through enhanced service offerings and we will continue to refine those services as customer needs grow.

Q. Blogging has enjoyed lots of growth and attention. But since many blogs having started life on free hosting services, bloggers tend to be a price-sensitive crowd. Last June you introduced a blogging tool for users of the HostSave service. What kind of results have you seen, and how would you evaluate the business opportunities blogging presents for hosting companies?

A. (This) goes back to our value proposition, which is a key component. One of those propositions is lifestyle and this most definitely includes bloggers. About 10% of our HostSave customers use the blogging tool. Customers like to document events and blogging is a great tool for this - the opportunities are positive and the application for blogging technology continues to proliferate.

Q. You recently announced enhanced spam filtering at no extra cost to customers, and indicated that additional spam-related services are in the pipeline. Can the cost of spam-fighting investments be passed on to end-users, or does the current competitive environment in hosting make that unlikely?

A. We are very serious about operating as a responsible hosting company so we provide our customers with spam-related services at no additional cost. Those spam services include a spam filter and security. Protection against spam/virus/security invasion cannot be compromised. There are various levels of protection requirements. Businesses have different security needs - our approach is to provide the customer with excellent spam and virus protection and provide the opportunity to purchase advanced solutions relating specifically to their business needs.

Q. One of the big questions faced by hosting companies that grow through acquisitions is whether they can successfully transition to organic growth. In September, Affinity completed its integration process. Since then, our data show Affinity's total active sites growing from 207.5K to 216.5K, or about 4.4 percent. How would you assess the transition and the company's performance? What's gone well, and what have been the challenges?

A. We are very pleased with our growth - there has been excellent uptake from both, new and existing customers. We have been very successful in providing expanded feature upgrades and have signed a number of significant partnerships, for example with AOL and Macromedia.

A challenge, as indicated in the previous questions, has been communicating package benefits in such a way customers understand how to utilize a plan to its best affect given a specific business model. Maintaining effective price points has also been a challenge, especially given the rapid pace of the industry. We have spent a great deal of time ensuring a strong value offering and a 'real' solution set - the implementation, although challenging, has been beneficial to both the customer and Affinity.

Q. Last May Affinity was hit with a denial of service attack. Have you had any success discovering who was behind the attacks? What did you learn from the experience?

A. We did experience a DoS attack in May. To date, we do not know who was behind the attacks. Unfortunately, it is a hard topic to talk about in too much depth. It is circumstance treated seriously, but in a covert fashion. This said, for obvious reason we do not address our security activities openly.

Q. The MyDoom virus was a headache for many Internet companies. How did Affinity's mail systems and IT staff manage the event?

A. We actually felt very little impact from the MyDoom virus. Our network operations center was aware of the virus before it hit the general Internet and our virus filtering system had been updated prior to the distribution on our network - the solutions were highly successful.