Tag Archives: hostgator

Endurance International Group 2016 Financials

Endurance International Group (NASDAQ: EIGI) published their 10-K on February 24, 2017.

As one of the biggest players in the space, I like to look through and see what's going on with them.

2016's biggest news for EIG was the acquisition of Constant Contact for 1.1 billion dollars. Their financials have been broken apart now between Web Presence (hosting, domains, etc) and Email (Constant Contact).

It was reinforced early that BlueHost and HostGator are their primary brands and they plan on pushing them with more brand advertising (tv, podcasts, etc). I wonder if we will see a BlueHost superbowl ad to compete with GoDaddy?

In 2015, our total subscriber base increased. In 2016, excluding the effect of acquisitions and adjustments, our total subscriber base was essentially flat, and in our web presence segment, ARPS decreased from $14.18 for 2015 to $13.65 for 2016. We expect that our total subscriber base will decrease in 2017. The factors contributing to our lack of growth in total subscribers and decrease in web presence segment ARPS during 2016 and our expected decrease in total subscribers during 2017 are discussed in “Item 7 -  Management’s Discussion and Analysis of Financial Condition and Results of Operations ”. If we are not successful in addressing these factors, including by improving subscriber satisfaction and retention, we may not be able to return to or maintain positive subscriber or revenue growth in the future, which could have a material adverse effect on our business and financial results.

Year Ended December 31,
2014
2015
2016
Consolidated metrics:
Total subscribers
4,087
4,669
5,371
Average subscribers
3,753
4,358
5,283
Average revenue per subscriber
$
13.98
$
14.18
$
17.53
Adjusted EBITDA
$
171,447
$
219,249
$
288,396
Web presence segment metrics:
Total subscribers
4,827
Average subscribers
4,789
Average revenue per subscriber
$
13.65
Adjusted EBITDA
$
172,135
Email marketing segment metrics:
Total subscribers
544
Average subscribers
494
Average revenue per subscriber
$
55.11
Adjusted EBITDA
$
116,26

 

Overall, it's probably not a good sign to see Average Revenue Per Subscriber going down on their hosting segment which was the core of the business. The Email segment is hiding/offsetting that a lot.

HostGator, iPage, Bluehost, and our site builder brand) showed positive net subscriber adds in the aggregate during 2016, but these positive net adds were outweighed by the negative impact of subscriber losses in non-strategic hosting brands, our cloud storage and backup solution, and discontinued gateway products such as our VPN product. We expect total subscribers to decrease overall and in our web presence segment during 2017, due primarily to the impact of subscriber churn in these non-strategic and discontinued brands. We expect total subscribers to remain flat to slightly down in our email marketing segment.

The future doesn't look good based on these statements. Decreasing ARPS and decreasing subscriber base seem like a recipe for decline. They don't seem to even expect growth in the email marketing segment. I'm really having a hard time seeing any positive outlook on this.

In 2017, we are focused on improving our product, customer support and user experience within our web presence segment in order to improve our levels of customer satisfaction and retention. If this initiative is not successful, and if we are unable to provide subscribers with quality service, this may result in subscriber dissatisfaction, billing disputes and litigation, higher subscriber churn, lower than expected renewal rates and impairments to our efforts to sell additional products and services to our subscribers, and we could face damage to our reputation, claims of loss, negative publicity or social media attention, decreased overall demand for our solutions and loss of revenue, any of which could have a negative effect on our business, financial condition and operating results.
Our planned transfer of our Bluehost customer support operations to our Tempe, Arizona customer support facility presents a risk to our customer satisfaction and retention efforts in 2017. Although we believe that the move to Tempe will ultimately result in better customer support, the transition may have the opposite effect in the short term. We expect that the transition will take place in stages through the fourth quarter of 2017, and until the transition is complete, we may continue to handle some support calls from our current Orem, Utah customer support center. The morale of our customer support agents in Orem may be low due to the pending closure of the Orem office, and agents may decide to leave for other opportunities sooner than their scheduled departure dates. Either or both of these factors could result in a negative impact on Bluehost customer support, which could lead to subscriber cancellations and harm to our reputation, and generally impede our efforts to improve customer satisfaction and retention in the short term. In addition, we are consolidating our Austin, Texas support operation into our Houston, Texas support center, which could also negatively impact customer support provided from those locations during the transition period.

The story about BlueHost getting rid of hundreds of jobs in Orem was widely talked about. It also came up that A Small Orange was getting some of the same treatment. That would be in line with getting rid of Austin where ASO was based. It's interesting to see EIG selling this as a 'long term' move, unless it's entirely a financial one to reduce costs. I've yet to track a single EIG brand substantially increase its rating, but it has destroyed plenty of them (The Rise and Fall of A Small Orange or The Sinking of Site5). These companies they acquired often had much better ratings and knew how to provide customer support.

I did find one interesting bit in the contract with Tregaron India Holdings (Operating as GLOWTOUCH or Daya), the line item for "New hire and ongoing training for all support positions." It makes it sound like this third party company is responsible for training all EIG support staff, along with many other things like migrations. Which have been absolutely disastrous and how Arvixe ended up as one of Review Signal's lowest rated brands which was done by this group.

But who are Tregaron?

The Company has contracts with Tregaron India Holdings, LLC and its affiliates, including Diya Systems (Mangalore) Private Limited, Glowtouch Technologies Pvt. Ltd. and Touchweb Designs, LLC, (collectively, “Tregaron”), for outsourced services, including email- and chat-based customer and technical support, network monitoring, engineering and development support, web design and web building services, and an office space lease. These entities are owned directly or indirectly by family members of the Company’s chief executive officer, who is also a director and stockholder of the Company.

In 2016 EIG spent $14,300,000 with Tregaron. And it wasn't the only business connected to the CEO.

The Company also has agreements with Innovative Business Services, LLC (“IBS”), which provides multi-layered third-party security applications that are sold by the Company. IBS is indirectly majority owned by the Company’s chief executive officer and a director of the Company, each of whom are also stockholders of the Company. During the year ended December 31, 2014, the Company’s principal agreement with this entity was amended which resulted in the accounting treatment of expenses being recorded against revenue.

Another $5,100,000 for this particular company.

So how bad were those migrations?

A key purpose of many of our smaller acquisitions, typically acquisitions of small hosting companies, has been to achieve subscriber growth, cost synergies and economies of scale by migrating customers of these companies to our platform. However, for several of our most recent acquisitions of this type, migrations to our platform have taken longer and been more disruptive to subscribers than we anticipated. If we are unable to improve upon our recent migration efforts and continue to experience unanticipated delays and subscriber disruption from migrations, we may not be able to achieve the expected benefits from these types of acquisitions.

Understatement at its finest.

Overall, things look pretty glum at EIG, which was trading at over $9 on the day this came out and is now under $8/share.

I generally try to keep my opinions fairly limited, but some things need to be called out for the good of consumers. EIG has acquired a lot of talented people and managed to squander them repeatedly. I'm not sure why the company seems to be toxic towards retaining good talent. When EIG are writing statements about trying to improve customer service and have acquired some of the highest rated brands (A Small Orange) Review Signal tracks, and then dismantles them it creates a cognitive dissonance.

Perhaps EIG needs to get rid of the top management. The incestuous relationships between the contracted companies and the CEO are create some questionable incentives. Combined with the objectively poor results from those companies on things like migrations, it seems inexcusable. I'm not optimistic about anything EIG are doing and feel bad for some of the exceptional people I know that still work there.

The Sinking of Site5 – Tracking EIG Brands Post Acquisition

"You'll notice their ratings, in general, are not very good with Site5 (their most recent acquisition) being the exception. iPage was acquired before I started tracking data. BlueHost/HostMonster also had a decline, although the data doesn't start pre-acquisition. JustHost collapses post acquisition. NetFirms has remained consistently mediocre. HostGator collapses with a major outage a year after acquisition. Arvixe collapses a year after being acquired. Site5 is still very recent and hasn't shown any signs of decline yet." - The Rise and Fall of A Small Orange, January 2016

Review Signal Rating Calculated Pos/(Pos+Neg), without duplicate filtering

Review Signal Rating Calculated Pos/(Pos+Neg), without duplicate filtering (January 2016)

That's what I wrote at the beginning of 2016 as I watched A Small Orange's rating collapse in a pretty popular post called The Rise and Fall of A Small Orange, which documented ASO's Rise and Fall, but also the fall of many EIG brands. One thing I mentioned was the recent acquisition of Site5 (and Verio) which had a fairly good rating on Review Signal at the time of acquisition. The trend seemed to be roughly a year to see the drop in rating, post acquisition.

Site5 ~ 1 Year Later

The acquisition of Site5 was announced August 2015. Here's the updated EIG brand tracking graph. One thing to note, this now uses the new rating algorithm which has a built in decay function to weight older reviews less. So the new graph uses the new algorithm but calculating each point in time as if it always used it. There will be some differences between it and the original graph (which prompted the change in algorithm). It's minimal for most brands, only when there is a major change in sentiment, it shows a change more quickly. Full details about the change can be read on Review Signal Ranking Algorithm Update.

eig_brand_review_signal_ratings_2016

What you can see is the reputation remained relatively stable until about April 2016 and then started a slow but steady decline where it has dipped below 50% for the first time recently. As with nearly every brand, except A Small Orange, the decline happened within a year.

Since the original post there also hasn't been much movement in any other brands beyond Site5 crashing and A Small Orange continuing to slide downward. Verio didn't see a dip post-acquisition, but it had a pretty low rating to start with that put it in the bottom half of EIG brand ratings already.

Why Do EIG Brands Go Down Post Acquisition?

The longer I am in this industry, the more stories I hear. A Small Orange was such an interesting exception and I've heard a lot about it from a lot of people. It's relative independence and keeping the staff seemed to be the key to maintaining a good brand even within the EIG conglomerate.

Site5 offers what I imagine is more business-as-usual in the EIG world. Cut staff, migrate to EIG  and maximize profit (in the short term). Site5's founder, Ben, reached out to a competitor, SiteGround, and arranged for them to hire a large number of Site5 staff that EIG had no plans on keeping according to SiteGround's blog. A very classy move from the former CEO and a seeming win for SiteGround, one of EIG's larger hosting competitors. I also saw similar behavior of long time staff all leaving when A Small Orange started to go downhill and staff from other EIG brands showed up.

Beyond simply trying to cut costs, you have to wonder why would you spend all that money acquiring these brands that have lots of customers, good reputations and talented staff that obviously are keeping the operation running successfully only to get rid of nearly all of that except the customers. But once you gut the staff, it seems like the customers notice, because it certainly shows up in the data I track.

Conveniently, EIG just published their Q3 2016 10-Q.

We have certain hosting and other brands to which we no longer allocate significant marketing or other funds. These brands generally have healthy free cash flow, but we do not consider them strategic or growth priorities. Subscriber counts for these non-strategic brands are decreasing. While our more strategic brands, in the aggregate, showed net subscriber adds during the quarter ended September 30, 2016, the net subscriber losses in non-strategic brands and certain gateway brands contributed to a decrease in our total subscribers of approximately 42,000 during the quarter. We expect that total subscribers will continue to decrease in the near term.

Overall, our core hosting and web presence business showed relatively slow revenue and subscriber growth during the first nine months of 2016. We believe that this is due to flat marketing expenditures relative to 2015 levels on this business in the first half of 2016 as a result of our focus on gateway products during that period, and to trends in the competitive landscape, including greater competition for referral sources and an increasing trend among consumers to search for web presence and marketing solutions using brand-related search terms rather than generic search terms such as “shared hosting” or “website builder”. We believe this trend assists competitors who have focused more heavily than we have on building consumer awareness of their brand, and that it has made it more challenging and more expensive for us to attract new subscribers. In order to address this trend, during the third quarter of 2016, we began to allocate additional marketing investment to a subset of our hosting brands, including our largest brands, Bluehost.com, HostGator and iPage. We plan to continue this increased level of marketing investment in the near term, and are evaluating different marketing strategies aimed at increasing brand awareness.

So the result of their current strategy this past quarter has been a net loss of 42,000 customers. They say their strategic brands on aggregate had a net subscriber increase and named the largest ones (BlueHost, HostGator, iPage) and they are going to focus on a subset of brands going forward. But the phrasing would seem to imply that some of the strategic brands experienced losses as well. It also means that the non-strategic brands lost more than 42,000 customers and pulled down the net subscribers to -42,000 customers last quarter.

The cap it all off, I got one of the most surprising emails from Site5 a couple days ago.

We wanted to let you know that we’ve decided to terminate the Site5 Affiliate program as of November 30th, 2016.

We want to thank you for your support of Site5, especially during our most recent move into Impact Radius, and we hope that you’ll consider promoting another one of Endurance’s other programs.

I guess Site5 isn't being considered a strategic brand if they are killing off the affiliate channel on it entirely, right after a big migration from Site5's custom affiliate program to Impact Radius. They also asked that affiliates promote HostGator now, which certainly fits in the strategic brand category.

It's extremely disappointing to see this trend continue of brands collapsing after a year in EIG's hands. What will be interesting going forward is that EIG hasn't acquired any new hosting brands for a while. They seem to be focused on their existing brands for now. I wonder if that will mean we will see any noticeable positive change or improvements in existing brands (or at least some of the strategic brands).

Dirty, Slimy, Shady Secrets of the Web Hosting Review (Under)World – Episode 1

It's been approximately three and a half years since Review Signal launched.

The mission was simple: provide honest web hosting reviews.

(Almost) Everyone wants that. Consumers would love to not get screwed over by fake reviews/recommendations. Tech savvy consumers have all but given up on honest web hosting reviews even existing.

So why has it been so difficult to spread the word about what Review Signal does and why it's different? How come nobody else is really making a strong effort to do the same?

The easiest explanation is money. Money corrupts everything is a pretty common belief and in the web hosting world it's practically the law of the land.

Many web hosting companies are willing to pay hundreds of dollars for you to sign up new customers with them. And it's generally not the ones you would in good faith recommend to a friend. And these companies hire many people with the sole goal of convincing reviewers, bloggers, anyone with a voice that they should sell out.

And it's worked.

From some of the largest players like Drupal and WordPress down to the small, anonymous review sites that plague Google's search results for web hosting reviews. They have sold consumers out; for millions of dollars into their pocket.

How Are Web Hosting Companies Paying Hundreds of Dollars for a $5/month plan?

Let's look at underlying numbers that make this whole business possible before we continue. It seems crazy that companies could offer hundreds of dollars per sale for such small purchases.

The basic goal is Lifetime Value of Customer (LTV) > Customer Acquisition Cost (CAC)

CAC is the hundreds of dollars they pay someone to send them a new customer. So the value they are getting from a referred sale must be greater than the X hundred dollars they pay.

So how are they getting hundreds of dollars per customer? Lockins and cross/up-sells are the primary ones. They generally only give the super discounted rates for customers who commit to long-term contracts (1-3 years generally) and often require you to pay for it entirely up-front. So that $5/month hosting deal, may cost $180 up front ( $5/month * 36 months = $180). That's before they have attempted to sell you any extra services such as backups, domains, security, premium features, etc. They don't have to make more on any specific customer, but they know in aggregate how much extras they are going to sell.

If you're really curious, I dug into the financials of some of the publicly traded companies (EIG, GoDaddy, Web.com) to see what some of those numbers looked like. They were getting between $100-180 per subscriber per year. I'm also fairly sure that most customers stay for longer than a year.

So if companies are extracting $180/year/subscriber, paying a $200 commission for a new subscriber is a no brainer if the new subscriber stays over 14 months. Suddenly, the economics of these incredibly high payouts should make sense.

Back to the Corruption

Corruption doesn't happen in a bubble. Someone has to be corrupted. In many cases, it would seem the pure motivation of making a lot of money is enough. Most people create a site dedicated to pimping their visitors to the highest paying companies.

In other cases, there is blatant astro-turfing going on.

hostgator self promo on TC

Perfect example from the techcrunch article about reviews being a cesspool, now deleted of course.

But the most hidden corruption happens behind the scenes. It's the people with titles like Affiliate Program Manager and Partner Marketing Specialist. For many of these companies, their job is to try to convince people to use their brand/authority to sell the company's product for a commission.

What Happens Behind The Scenes of Operating a Web Hosting Review Site?

I'm going to show you exactly what kind of offers I get regularly here at Review Signal.

rs_sample_review

 

 

rs_top5

 

rs_rankings_for_salers_affiliate_no_thanks

This is just a tiny sample of the 'offers' I get regularly. Most look like the email from dedicatedsolutions, trying to convince me to sign up for their affiliate program. Some, like Eli Saad from domain.com straight up tell me that my rankings are for sale (really classy). Alec from tdwebservices won't stop spamming me and refuses to remove me from his list, while literally offering to provide reviews of his own company for me to publish (vomit). Scroll to the bottom for bonus Alec Mwali material. And I've redacted someone from InMotionHosting's name because they were extremely apologetic, but they asked to be placed in the top 5 (sorry, they are based on actual reviews, not paid for).

A lot of companies just ask to be listed and mention their affiliate program as the reason why it should happen. They don't even think twice about what they are implying, it's become so ingrained in the culture of web hosting reviews that they are all for sale that nobody even takes a moment to realize how f***ed up that is.

Consider this me putting up notice, I will be periodically publishing the slimy emails and offers I get here at Review Signal. You may be named and shamed. So don't do it.

BONUS ALEC MWALI MATERIAL

Alec has contacted me on behalf of TDWebServices, Unihost and Codeguard. He has sent me full word docs with fake reviews to publish. He repeatedly uses the fake 'Re:' topic to get people to open and read his emails. When called out about it, he claims it 'was not meant to happen' and it 'keyboard error' or an 'issue with my email platform'. I think you better invest in a better keyboard and email platform, because your current one seems to be stuck in spam mode.

alec_mwali_2 alec_mwali_1alec_mwali_email_1 alec_mwali_email_2

 

Update: CodeGuard no longer works with Alec. (Source)

The Rise and Fall of A Small Orange

If you're an unhappy A Small Orange customer looking to find a better web host and don't want to read why the quality went down, simply head over to our Web Hosting Reviews and find a better hosting company. 

How did a small web hosting company have such a huge impact on Review Signal?

The Early Days

This story begins in October 2011, a year before Review Signal launched. Review Signal had been collecting data for months and early ratings data was starting to become meaningful. A tiny company was at the top of the rankings. A Small Orange.

The most worrisome part of this revelation was that A Small Orange did not have an affiliate program. Which isn't a requirement at all for a listing on Review Signal.

However, after investing years of work, if the top rated company ended up not having an affiliate program, the business was likely sunk before it even started. So I inquired early and heard back from the CEO at the time, “we don't have an affiliate program and at the moment, we have no plans for one.” This was a potential death knell because the entire business model relies on making at least some money, even though I assumed it would be much lower than my competitors who simply sell their rankings to the highest bidder. But as any entrepreneur knows, almost everything is negotiable if you understand what the other person really wants and why. After talking further with the CEO, he explained his issue with web hosting review websites, “they typically have a pay for ranking sort of model and do it either through set rates or affiliate payouts. It varies. The economics at ASO don't really work out for a standard affiliate program.” A Small Orange didn't want to play the game that every other review site out there did. Pay to play, quality be damned.

This CEO hated the games being played as much as I did.

That was all the opportunity I needed. Review Signal's mission has been to fight against that very same model and I knew I had an early ally who could make this work. We ended up working out a deal to pay three months of whatever plan someone purchased and he put a cap on my potential earnings at $250 before he would review the performance. Considering the most popular plans were $25/year and $5/month, this wasn't going to earn a lot, but at least it might start covering some of the very basic costs. The first month I earned $52.38 on 6 sales for an average of $8.73 per sale with A Small Orange.
At least it was something. And a foot in the door was all I needed to prove this crazy idea called Review Signal might have some legs. A Small Orange opened that door and for that our histories will forever be intertwined.

The Good Times

The next few years were very good. I was their first affiliate. I was their biggest affiliate for many years, bringing in over a thousand new customers. I got to know many of the staff and would consider some of them friends. And A Small Orange continued to be the best rated shared hosting company through 2014. Everyone was happy - their customers, the company and Review Signal. I was happy to recommend them based on the data showing they had incredibly satisfied customers. I had people tell me personally they were very happy with them after signing up because of the data I publish here at Review Signal.

2014-01-20 13.34.07

Free Swag and Annual Thank You Card from ASO

The EIG Acquisition

A Small Orange was quietly acquired in 2012. They were acquired by a behemoth in the hosting industry called Endurance International Group (NASDAQ: EIGI) which owns dozens of brands including some of the largest and most well known hosting companies: Blue Host, Host Gator, Host Monster, Just Host, Site5, iPage, Arvixe and more.

EIG has a very bad reputation in the web hosting world. If you ask most industry veterans they will tell you to run to the hills when it comes to EIG. The oft-repeated story is EIG acquires a hosting company, migrates them to their platform and the quality of service falls off a cliff. The best example of this is perhaps their migration to their Provo, UT data-center which had a catastrophic outage in 2013. This outage was huge. The impact dropped four of EIG's largest brands many percentage points in the Review Signal rankings in a single day.  But these major outages continue to happen as recently as November 2015.

In a recent earnings call with share holders, EIG CEO Hari Ravichandran talked about two recent acquisitions and their plans for them. “We expect to manage these businesses at breakeven to marginally profitable for the rest of the year as we migrate their subscriber bases onto our back-end platform. Once on platform, we expect to reach favorable economics and adjusted EBITDA contribution consistent with our previous framework for realizing synergies from acquisitions.”

The EIG Playbook

EIG's playbook has been to acquire web hosting brands, migrate them to their platform and 'reach favorable economics.' They've been doing it for years and it seems to be working well enough for investors to continue to put money into the company. M&A to grow subscriber bases and economies of scale to lower costs. It's a very simple and straightforward business plan. It doesn't speak to anything beyond spreadsheet math though, such as brand value and customer loyalty. And those are certainly lowered and lost post-EIG acquisition according to all the data we've collected over years and multiple acquired brands. It's calloused business accounting, but it makes perfect sense in the race to the bottom industry that is commodity shared hosting.

Review Signal Rating Calculated Pos/(Pos+Neg), without duplicate filtering

Review Signal Rating Calculated Pos/(Pos+Neg), without duplicate filtering

You can see all the EIG brands tracked here on Review Signal in the chart above and their acquisition dates below:

iPage - 2009. BlueHost/HostMonster - 2010. JustHost - Feb 2011. NetFirms - March 2011. HostGator - June 2012. A Small Orange  - July 2012. Arvixe - November 2014. Site5 - August 2015.

You'll notice their ratings, in general, are not very good with Site5 (their most recent acquisition) being the exception. iPage was acquired before I started tracking data. BlueHost/HostMonster also had a decline, although the data doesn't start pre-acquisition. JustHost collapses post acquisition. NetFirms has remained consistently mediocre. HostGator collapses with a major outage a year after acquisition. Arvixe collapses a year after being acquired. Site5 is still very recent and hasn't shown any signs of decline yet.

The Expected Decline of A Small Orange

So nearly every industry veteran I talked to expected A Small Orange to collapse. Immediately after acquisition. Except me. I was, am and will continue to be willing to give the benefit of the doubt to a company until I am shown evidence.

For years, post acquisition people were saying ASO's demise was right around the corner. For years, I still waited for that evidence and the prophecy to become true. But it didn't happen.

It often took EIG less than a year to ruin a brand. We don't have to look further than Arvixe for an example of this, which was acquired in November 2014. Today, Arvixe has one of the lowest ratings of any company on Review Signal at a shockingly low 27%.

But A Small Orange continued to chug along. It didn't hear the naysayers or believe itself to be a victim of the EIG curse. Instead, ASO was the best shared host for years post-acquisition. It seemed to have a fair level of autonomy from the EIG conglomerate. The staff I knew there, remained there, and all indications showed they were still the same company.

Until it wasn't.

The Fall of A Small Orange

A Small Orange Historical Rating

A Small Orange Historical Rating

The chart above shows Review Signal's rating of A Small Orange. The Blue line is the rating as calculated by [Positive Reviews / (Positive Reviews + Negative Reviews)]. The Red line only calculates the rating from the past 12 months of data. It's slightly different than Review Signal's actual calculation because I am not filtering out duplicates for quick analysis. The difference for A Small Orange is that when you remove the duplicates, the year 2015 had a 43% rating indicating there was quite a few people writing multiple negative things about A Small Orange.

Sometime in 2015, the A Small Orange that thousands of people trusted and raved about became another EIG brand. I tried to get the inside story. I reached out to the former CEO who sold the company to EIG and became an executive there for a couple years post acquisition. He reached out on my behalf to EIG's PR team to see if they would participate in this story. Both declined to participate.

So, I'm left to speculate on what happened at A Small Orange based on what's been publicly stated by their CEO and watching their strategy unfold for years across many companies/brands. My best guess is EIG finally got involved with A Small Orange. They used to be a distributed/remote team, now all positions they are hiring for are listed as in Texas (their headquarters). I saw a HostGator representative get moved over to ASO's team, so the internal staff was changing and people were being moved from brands with less than stellar reputations to ASO. The former CEO left mid-2014, which likely left a leadership and responsibility gap. ASO could probably run on auto pilot through the end of 2014, but over time having no champion for your brand in upper management eventually will come back to hurt the brand when decisions get made based on simple economics.

Once 2015 rolled around, the service had noticeably declined. The overall rating for A Small Orange in 2015 was 43% (only using 2015 data). For years, they had been in the 70's. It also ended the year with a massive outage for most, if not all, of their VPS customers which has been going on since Christmas. I personally received multiple messages from users of this site asking about what was happening and alerting me to this decline in service quality.

ASO was also responsible for the Arvixe migration that went very poorly and caused the Arvixe brand to tank. I'm not sure why EIG doesn't have a dedicated migration team to handle these type of moves considering how many acquisitions they go through and how large a role it plays in their growth strategy. But that's a whole separate issue.
It's with great disappointment that I have to admit, the A Small Orange that played such a huge role in the founding and success of Review Signal and provided a great service to many thousands of customers is dead. It's become another hollow EIG brand where the quality has gone down to mediocre levels. And that seems perfectly ok to them, because it's probably more profitable for their bottom line.

Going Forward

This story has had a profound impact on Review Signal. One thing that it made painfully obvious is that the ranking algorithm needs its first update since inception. The current ranking treats every review equally. Which was great when this site launched, because time didn't have any opportunity to be a factor yet. But as this site continues to move forward, I need to acknowledge that a significant amount of time has passed since launch and today. A review from the beginning of Review Signal isn't as relevant as one from this past week in determining the current quality of a web hosting company. A Small Orange right now shows up around 64% which is artificially high because of their long history of good service and it hasn't been brought down yet by the marginally small (by time scale) decline of the past year. But it's painfully clear that it's not a 64% rating company anymore.

Another thing to note is the graphs here all used a simpler calculation [Pos / (Pos + Neg)] to calculate rating without duplicate filtering. What this means is the difference between the rating here and the actual rating on the live site is a measure of the degree people are being positive or negative about a company. If the rating here is higher than the published, it means people are saying on average, more than one good thing about the same company. If the rating is below (as is in most if not all cases here), it means people are are saying more than one negative thing about the company. I'm not sure if this will factor into a new algorithm, but it is something to consider. My intuition says you would see it hinge around 50%, those companies above would likely have more positive supporters, and those below would have detractors.

In the coming months I will try to figure out a better way to generate the ranking number that more fairly represents the current state of a company. My initial thought is to use some sort of time discounting, so that the older the review, the less weight it would carry in the rankings. If anyone has experience working with this or wants to propose/discuss ideas, please reach out - comment here, email me, or tweet @ReviewSignal.

BlueHost, HostMonster, and JustHost Down (11/25/2015)

We are seeing a lot of people complaining about BlueHost, HostMonster, and JustHost being down right now. It doesn't seem to affecting other brands I checked (HostGator, iPage, A Small Orange, Arvixe, Site5).

It is very strange that HostGator isn't down this time. Their last major outage in 2013 affected all four of those brands (source: mashable). I am wondering if their infrastructure has been separated meaningfully between HostGator and the other three.

I've heard rumors of a DDoS attack from people saying that's what support told them. No official confirmation.

If you're considering changing web hosts, we track and publish what people think of most major webhosting companies here.

It's gotten to the point people are making memes. Not good.

Site 5 Web Hosting Logo

Site5 Acquired by Endurance International Group (EIG)

Endurance International Group yesterday announced in their second quarter results that they acquired Site5 and Verio.

During the quarter, the company acquired assets of Verio and Site5. The total cash consideration for these acquisitions is expected to be approximately $36 million.

Via MarketWatch.

EIG continues to acquire hosting companies as a growth strategy and doesn't seem to plan on stopping any time soon. The hope is that Site5, which is rated as one of the better companies on Review Signal, operates more like A Small Orange which was acquired in 2012 and continues to be rated very highly. Time will tell how it plays out, I will certainly be watching the data and trends.

That brings the list of EIG companies here on Review Signal to:

 

Endurance International Group – Profitable?

Endurance International Group is one of the largest web hosting companies who own many of the brands you see in the consumer space. EIG owns A Small Orange, BlueHost, HostGator, HostMonster and JustHost to name a few of their most well known brands.

What caught my eye was an article on Nasdaq, where EIGI (EIG's Stock Ticker) is up and at an all time high. A lot of analysts are rating it as a buy and the price surge seems to indicate people are listening. But I'm not a financial adviser, nor am I interested in making stock recommendations.

What does interest me is web hosting and considering that is the core of EIG's business, the underlying numbers are quite fascinating.

EIG had its first year with a positive operating income with $629.85 million in revenue and $617.37 million in total operating expense leaving $12.48 million in operating income. However, they weren't profitable because they have a lot of debt they are paying off. EIG's net income was a loss of $42.82 million.

"Total subscribers increased by 91,000 in the fourth quarter. Average monthly revenue per subscriber rose 12% year over year to $14.78. For all of 2014, the number of subscribers rose 17% to 4.087 million and the average monthly revenue per subscriber increased 11% to $14.48." - according to the article on Nasdaq

$14.48 per month, per subscriber. $173.76 per year per subscriber. It's easy to understand how they are paying such high commissions with those numbers. That number also seems to be trending up which is a good sign for the financial direction the company is going.

How does that compare to other companies?

I dug up an old GoDaddy S1 from 2014 [Godaddy Reviews] which states their average revenue per user for the trailing 12 months is $105 (it's fluctuated between $93-$105 over the past few years).

I also found Web.com's latest 10K filing which stated monthly ARPU of $14.62. which is $175.44 annually.

EIG and Web.com look very similar just reaching positive operating income this year and very similar revenue per subscribers. It states pretty clearly in Web.com's filing "The growth in average revenue per subscriber continues to be driven principally by our up-sell and cross-sell campaigns focused on selling higher revenue products to our existing customers as well as the introduction of new product offerings and sales channels oriented toward acquiring higher value customers."

It seems like common knowledge to anyone in the web hosting industry that these companies are getting users in cheap. Those ~$5/month hosting plans are obviously not the only thing being sold. It would seem they are able to on average roughly triple that monthly figure by selling other services.

So the question in my mind becomes what do those new products look like? We're seeing a jump into the managed WordPress hosting space. Is there actual innovation that's going to happen or are these big companies simply going to carve out some of the high margin services provided by niche providers? Is that going to be a win for consumers?

I don't have the answers, but I'm certainly interested to see how it plays out.

Black Friday – Cyber Monday Web Hosting Deals

These are all the deals from companies we track here at Review Signal that are having Black Friday - Cyber Monday specials.

When? Deals
A Small Orange [Reviews]  Midnight Friday to 11:59pm Monday All Shared & Business Hosting plans: 75% off any billing cycle. (Coupon code: GIVETHANKS)
All Cloud plans: More resources and free addons! 2x HD & RAM, FREE VIP Boost Addon, FREE Softaculous Addon (No code needed)
Semi-Dedicated Hosting Plans - 25% off any billing cycle. (Coupon code: SEMI14)
Use Code DEDITHX for 45% off Starter Servers (Dedicated Annual Plan)
Use code STANDARDTHX for 47% off Standard Servers (Dedicated Annual Plan)
Use code PROTHX for 49% off Professional Servers (Dedicated Annual Plan)
Use code ULTIMATETHX for 42% off Ultimate Servers (Dedicated Annual Plan)
BlueHost [Reviews] Friday 12:01am EST to Sunday 11:59pm Pricing as low as $3.49
Monday 12:01am EST to 11:59PM Pricing as low as $2.95
FlyWheel [Reviews] Midnight Friday to 11:59pm Monday 50% off annual hosting plans
Host Gator [Reviews] 12am CST to 1am CST 75% off
1am CST-11:59pm Monday 55% off
Randomly 75% off for 1 hour 9 times from Black Friday-Cyber Monday
Kinsta Friday 0:00 GMT to Monday 23:59 PST 50% off first month
3 months free with annual plan
SiteGround [Reviews] Friday through Monday Up to 70% off
WPEngine [Reviews] Ends 12/2/14 4 months free with annual plan with coupon code 'CyberHosting14'

 

Did I miss any? Leave a comment below.

Bias, Negativity, Sentiment and Review Signal

Photo Credit: _Abhi_

People are more likely to express negative sentiments or give negative reviews than they are positive ones.

I hear this in almost every discussion about Review Signal and how it works. There is certainly lots of studies to back this up. One major study concluded that bad is a stronger than good. One company found people were 26% more likely to share bad experiences. There is plenty of research in the area of Negativity Bias for the curious readers.

Doesn't that create problems for review sites?

The general response I have to this question is no. It doesn't matter if there is a negativity bias when comparing between companies because it's a relative comparison. No company, at least not at the start, has an unfair advantage in terms of what their customers will say about them.

Negativity bias may kick in later when customers have had bad experiences and want to continually share that information with everyone and anyone despite changes in the company. Negative inertia or the stickiness of negative opinion is a real thing. Overcoming that is something that Review Signal doesn't have any mechanism to deal with beyond simply counting every person's opinion once. This controls it on an individual level, but not on a systemic level if a company has really strong negative brand associations.

What if a company experiences a disaster, e.g. a major outage, does that make it hard to recover in the ratings?

This was a nuanced question that I hadn't heard before and credit goes to Reddit user PlaviVal for asking.

Luckily, major outages are a rare event. They are fascinating to observe from a data perspective. The most recent and largest outage was the EIG (BlueHost, HostGator, JustHost, HostMonster) outage in August 2013. If we look at the actual impact of the event, I have a chart available here.

When I looked at the EIG hosts' post-outage, there really hasn't been a marked improvement in their ratings. Review Signal's company profiles have Trends tabs on every company which graph on a per month basis to see how a company is done over the past 12 months.

BlueHost-May2014 HostGator-May2014

There is definitely some variance, but poor ratings post-outage seem quite common. It's hard to make an argument that these companies have recovered to their previous status and are simply being held back by major outcries that occurred during the outage.

The only other company with a major outage I can track in the data is GoDaddy. GoDaddy have had numerous negative events in their timeline since we started tracking them. There has been the elephant killing scandal, SOPA, DNS outages and multiple super bowl events.

godaddy_chart

August 2012 - July 2013

Godaddy-May2014

June 2013 - May 2014

There are clear dips for events such as the September 2012 DNS Outage, the Superbowl in February. Their overall rating is 46% right now and the trend is slightly up. But they seem to hang around 45-50% historically and maintain that despite the dips from bad events. There is arguably some room to for them be rated higher depending on the time frame you think is fair, but we're talking a couple percent at most.

What about outages affecting multiple companies? eg. Resellers, infrastructure providers, like Amazon, who others are hosting on top of. Are all the companies affected equally?

No. Just because there is an outage with a big provider that services multiple providers doesn't mean that all the providers will be treated identically. The customer reaction may be heavily influenced by the behavior of the provider they are actually using.

Let's say there is an outage in Data Center X(DC X). It hosts Host A and Host B. DC X has an outage lasting 4 hours. Host A tells customers 'sorry, it's all DC X's fault' and Host B tells customers 'We're sorry, our DC X provider is having issues, to make up for the downtime your entire month's bill is free because we didn't meet our 99.99% uptime guarantee.' Just because Host A and Host B had identical technical issues, I imagine the responses from customers would be different. I've definitely experienced great customer service which changed my opinion of a company dramatically on how they handled a shitty situation. I think the same applies here.

Customer opinions are definitely shaped by internal and external factors. The ranking system here at Review Signal definitely isn't perfect and has room for improvement. That said, right now, our rankings don't seem to be showing any huge signs of weakness in the algorithms despite the potential for issues like the ones talked about here to arise.

Going forward, the biggest challenge is going to be creating a decay function. How much is a review today worth versus a review in the past? At some point, a review of a certain age just isn't as good as a recent review. At some point, this is a problem I'm going to have to address and figure out. But now, it's on the radar but it doesn't seem like a major issue yet.

Black Friday Web Hosting Deals

Since there are some huge sales going on this weekend, I thought I would compile the list and share them here. They are sorted alphabetically by company.

A Small Orange [Reviews] - Coupon Codes Available Only Black Friday and Cyber Monday (EST)

'GOBBLE13' - 50% off shared, business, reseller (first invoice, all billing cycles)

'TREAT13' 50% off add-ons

'CHEER13' - 35% off Hybrid/Dedicated

2x RAM on Cloud VPS

BlueHost [Reviews] - $3.95/month

Digital Ocean [Reviews] - Coupon Code 'BLACK50' $50 Free Credit

DreamHost [Reviews] - 80% Off Through Monday

Host Gator [Reviews] - 60% Off with 75% Off Fire Sales (times listed below)

All Times in CST (GMT-6)

Friday 12AM - 1AM, 9AM - 11AM,  9PM - 11PM

Saturday 12PM - 1PM

Sunday 8PM - 9PM

Monday 12AM - 1AM, 10AM - 12AM, 10PM - 11:59PM

HostMonster [Reviews] - $3.95 per month Black Friday - Cyber Monday

JustHost [Reviews]- $2.25/month

MediaTemple [Reviews] - 75% off Grid / DV First Month

SiteGround [Reviews]- 70% Off Through Monday

WPEngine [Reviews] - 33% off Annual Plan Black Friday - Cyber Monday

'cyberhostspecial13' - 4 months free when signing up for annual plan.