Strategies for Success in the Web Hosting Industry with Lukas Hertig from WebPros

In this episode, Lukas Hertig, a seasoned expert in the web hosting industry, shares his journey and insights. Discover the evolution of cloud hosting, the incredible rise of Amazon Web Services, and the secrets behind the industry’s high margins. Lukas also discusses the impact of private equity on hosting companies, future trends, and innovative strategies for success.

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[00:00:00] Lukas: In 2005, six, I think this is when the cloud really started. Yeah. When Amazon, the bookshop decided that their IT department is now a hosting provider. That’s how I would say the same works. And everybody was laughing and I think after a few years nobody was laughing anymore. Amazon Web Services is now the largest infrastructure provider 

[00:00:22] Ken: in the world.

[00:00:22] The hosting industry has gone through incredible changes. 

[00:00:26] Lukas: When you talk about shared hosting, we talk about 300, 400, even a thousand percent margins, like gross margins in some cases. Wow. Really crazy. This is why. So many people also are so rich in this industry. 

[00:00:41] Ken: One of the things that surprises me about the hosting industry is that there are still companies that are growing extremely fast.[00:01:00] 

[00:01:01] Cool. Lucas, uh, thank you very much for, uh, joining me on the Mail Channels podcast. Thank you so much for having me. Can you explain where you are in the world right now? 

[00:01:13] Lukas: So, I consider myself a global citizen, but um, I travel a lot and, but I’m mostly in, based in Switzerland, near to Zurich. 

[00:01:22] Ken: Right. Nice. Very nice.

[00:01:24] Um, so, uh, I wanted to start by just talking a bit about your background and your, your history with Web Pros, um, and more generally in the web hosting industry. Um, you’ve been with Web Pros and its various predecessors for over 18 years, which is an eternity on the internet. Um, can you, uh, step us through your journey from, uh, your early days at S Woft, uh, until your current role today?

[00:01:51] Lukas: Yeah, I’ve seen that you researched my me very well. Um, it’s actually now over 20 years. Oh boy. So, um, it’s a bit difficult where to start, but I try to to, to make it not too long. So originally I actually didn’t join s Woft, but a company named Confi. I’m not so sure if that is still something people remember.

[00:02:15] Confi was the control panel based on Pearl before Plesk. And that was created in Germany. I joined this company actually with 23 years old when I was still studying business Information systems, um, as a reseller for Switzerland. In 2004, I joined the company to be the account manager for Switzerland, Austria, French, and Italy.

[00:02:43] And then s Woft came in and acquired Configs Plus Virtu, also HSP, complete and parallel Automation, and brought everything together. This was mostly by the former creator and founder of Acro. For some people that still, uh, know that. And, um, later I was then also supporting to open an office in France and also switched more and more into selling our large scale cloud automation platform called parallel automation.

[00:03:19] That means a switch from a pure partnership model like you need for to the service providers like you need for the console panels to more like an enterprise sales. I had a lot of learnings in helping telecom companies to build their own cloud offerings. And together with my colleague Neil UniCare, who is still here in Web Pros as Chief Strategy Office these days, I was building up the European Division of Parallels on the go.

[00:03:49] We actually already did some acquisitions that’s maybe a bit less known. So there were other control panels on the market like Helm that was a Windows control panel, N Zm, that was another competitor as well as age sphere. And so we did some m and a already quite early. But after these 10 years, I got quite bored, uh, with sales and leading and managing sales teams.

[00:04:14] I mean, I’m not saying I’m bored of sales because it’s something I anyway do all the time. Um, but I moved into marketing because I had an appetite that had a mentor who basically told me, why don’t you move to marketing? And said like, why marketing? And after one night sleeping over it. It. Uh, I actually went to our CMO and to our CEO and said, guys, I think I could add value to our marketing team.

[00:04:41] And that gave me the opportunity to be a customer focused, customer grown or person coming from sales with early marketing knowledge to learn all the marketing and online marketing and online scale and stuff from scratch. And I also had super great learnings at this time from many people that we hired from Microsoft because in my perspective, Microsoft is one of the best marketing organizations and software and the technology in general.

[00:05:12] So I was really thankful that I was able to learn a lot of marketing stuff from these Microsoft people also. And then later in 2015, I. We basically carved out Plak and the rest parallels got put into, or cut into pieces, 

[00:05:30] Ken: right? 

[00:05:30] Lukas: And I was asked to either go to Ingram Micro with the automation platform or to join Plak and Neil being the CEO of Plak at this time.

[00:05:41] And so this was also rather a quick decision for me to be able to join Plak because I knew the finances of both parts and I knew how profitable PLA was. And so we, I was able to build out the whole marketing team for Plak, [00:06:00] although a bit more than three years. And step by step, I then I, I always build business and business entities in a way that I can transfer it later to an operational person because I never try to, to, to make things depending on myself.

[00:06:17] And I have been asked to focus more on growth and growth at this. Stage was mostly that Les is is available on all the hyperscale cloud marketplaces. Maybe we’re gonna speak about that later a little bit. Um, at, in, in this, in this discussion, there was also a lot of opportunity in building an ecosystem, having now more than a hundred different third party software vendors that we partner with and consolidated.

[00:06:45] That’s still a 25 million plus budget and revenue per web pros today and still growing between 15 and 20% year over year. This is where I first time also started, my first footsteps in in m and a. So besides continuous. Education, education of myself through, uh, advanced Growth Studies and Reforge or, uh, financial Modeling Evaluation and Corporate Finance Institute.

[00:07:14] I worked with coaches in the US and in UK that teach me also like the creative part of, of, of m and a and creative deal making. And since now about two and a half years, I do only m and a for web pros and I’m, I’m still a kind of an influencer, adult advisor to our leadership team mostly. And maybe personally, I’m 43.

[00:07:39] My partner and me have no kids yet. But we love going to the nature in Switzerland, but also in other countries. We love mountain biking, we love good food, we love traveling. And we are based in Switzerland near Zurich. 

[00:07:54] Ken: Excellent. You know, during the last 20 years, uh, that you’ve been working with Web Pros and its pre predecessors, the hosting industry has gone through incredible changes.

[00:08:04] Can you talk about how the landscape has evolved since you began in the hosting industry? What have been the major shifts, uh, over that time? Obviously from your, uh, viewpoint at Web Pros, you’ve seen everything from a really high level, uh, and have probably interacted with many of the key players in the industry during that time.

[00:08:25] Lukas: Yeah, absolutely. We had, uh, over, or we have over two and a half thousand hosting partners globally and, um, we have seen a lot, I would say in the early days. We have been doing a lot of thought leadership also, you know, before parallels at this time. And Virtuoso, there was no VPS or virtual private server offering, eh?

[00:08:49] There was some control panels or there was this, some people still maybe recall the, some Cobalt racks. Yes. That was like real boxes. Yeah. [00:09:00] And you know, the control panels were literally kind of a replacement for these boxes because it’s a UI and it simplifies complexity. This is what it all was about.

[00:09:10] Simplify complexity, simplifies security, simplify operations, and then scale. And this was the time where shared hosting was something new, dedicated was hosting was a, was a thing. And VPS or virtual private server hosting was something innovative. Yeah. 

[00:09:27] Ken: Mm-Hmm. I would 

[00:09:27] Lukas: say teams at these days were. Huge gross marginings.

[00:09:34] When you talk about shared hosting, we talk about 300, 400, even a thousand percent marginings, like gross marginings in some cases. Really crazy. This is why so many people also are so rich in this industry. And at the end it was a little bit, if you look at shared hosting and VPS, it was like a leasing business or car leasing business.

[00:09:56] So you take a server, take the cake, split it into pieces and sell it in a subscription model. Yeah, and to be very honest, and I don’t wanna use very bad words, but it was very often shitty products for cheap costs, right? At crazy price prices that pe because people didn’t understand it. There was a time when you paid for a dedicated server that now costs 50, 60 bucks a month.

[00:10:23] Um, was costing 300, 400, 500 a month. And that was like the early days where there was a lot of kind of, um, gold digger mood and people were really making a lot of money in the early days, uh, with this stuff because nobody understood it. And there was also no marketing. Basically it was just technical feature telling in the end.

[00:10:46] Wow. And over time, you know, in, in 2005, six, I think this is when the cloud really started. Yeah. When Amazon, the bookshop decided that their IT department is now a hosting provider. That’s how I would say the simple words and the, everyone was laughing and I think after a few years nobody was laughing anymore because Amazon, Amazon Web Services is now the largest infrastructure provider in the world.

[00:11:14] Ken: Yeah. 

[00:11:15] Lukas: And at the same time you had. Software as a service providers step by step entering the market that compete to hosting providers that do shared hosting, plus a site builder or shared hosting plus WordPress. MM-Hmm. And actually with a quite much more simpler user experience in many cases, Wix, Squarespace, Shopify, web flow.

[00:11:36] But you know, be careful. There is also drawbacks on these kind of platforms, but this was the time when these guys were coming into the market and said like, this is an opportunity. And also I would say what happened in this time in the middle times is, is, is early kind of new subcate categories of, of services and, and, and, and players.

[00:11:57] So, and they’re still around today, so let’s say site builder for real estate that is basically just a, like a hosting company that, but, but that provides you all the tools just to build the real estate website very specific or all these, these fancy, uh, funnel builders. Yeah. The, the famous Russell Bronson who, who wrote all these books with the ClickFunnels and this is also a, a multiple, a hundred million dollar business these days.

[00:12:25] And the consolidation started, you know, there was like Endurance International Group, but it’s now called New Fault. There’s GoDaddy one-on one, anos, team Blue, TWS, the group, all of them entered the consolidation. With private equity or later went public or combinations of both. 

[00:12:43] Ken: Yeah. 

[00:12:44] Lukas: So that was like the middle time.

[00:12:45] When, when, when, when all this kind of stuff started. I would say, when I look at it today, I think there is, because a lot of people made so much money in this industry, there’s kind of a laziness in the industry to change and [00:13:00] to adopt, to change, because infrastructure is commodity. Web hosting is commodity, websites are commodity.

[00:13:06] WebPress is commodity. Differentiation is in many cases zero. But on the other side, there are now more and more sub-categories of type of service providers there. And there is a future where I believe we can talk about it in the, at the later stage as well. There is some future development that will help to get out of this.

[00:13:30] But I would say the service providers, the hosted providers who know who, they never changed. They are in a very bad situation now. 

[00:13:39] Ken: Mm. You, 

[00:13:39] Lukas: you, you, you are in a situation now where you either are in a very competitive market environment where you can almost not compete when you’re talking about, uh, a cost per click price for VPS hosting of many, many dollars Yeah.

[00:13:56] Per click, right? And, and the same for shared hosting or for WebPress hosting, or you sell your company, but if you didn’t catch this opportunity to sell your company, you, you are not in a good situation in many cases. And, uh, we continue celebrating on the cloud fest and stuff on this page, big events, but I think it’s time to change.

[00:14:19] Ken: Interesting. Very interesting. So I, what, what really captivated me was your assessment that the consolidation phase was a few years ago. Uh, you know, and now we’re in an, an yet another phase of the market where, uh, lazy companies. Um, that are not innovating or that didn’t go through the consolidation process or finding themselves, paying a lot of money for marketing, uh, and, uh, really struggling, really struggling to grow.

[00:14:47] Lukas: You know, it has different elements. First of all, this consolidation definitely started already probably 10 years ago, probably earlier, especially if you look at Endurance International Group and edi, [00:15:00] when they started acquiring companies. The same for one-on-one owners. Um, but the consolidation is still ongoing and the part of the problems that are now in this market is of course, also, um, the consolidation that was using private equity or even going IPO.

[00:15:17] And these kind of movements have partially installed people in these companies that, in my humble opinion, should not be working in these companies. And because it’s a kind of a corporate layer that. It’s very difficult to, to deal with. Yeah, 

[00:15:37] Ken: right. So getting in the way of, uh, dynamism at the company, getting in the way of innovation.

[00:15:43] Yeah. Yeah, absolutely. Okay. So, uh, you, you spoke about the consolidation phase in the hosting industry, but Web Pros has also had a history of, uh, mergers and acquisitions. Um, and before Web Pros, uh, you know, plus parallels woft, there were so many acquisitions going on for a few years there, it, it’s very hard to keep track of all of the move movements that happened.

[00:16:13] Um, can you talk about some pivotal moments, uh, in, in the development of what we now call web pros? 

[00:16:21] Lukas: Yes, absolutely. As I mentioned earlier in my introduction. Um, in the beginning it was config, but at least for me, what was this German control panel? Then we had the acquisitions and consolidation into this SW Soft entity with Plesk.

[00:16:37] With Vizo. HSP Complete was, it was called and ous Automation. And later there was another acquisition. What was basically Parallels desktop. So interestingly enough, parallels Desktop was a consumer product and Woft took over this brand parallels from this consumer product. This consumer product also resulted in the fact that we always had some challenges in the positioning of our company because we have like a huge text or had a, still had a huge tech stack for service providers out there and the consumer product, but was the most famous product to run Windows on the Mac.

[00:17:21] This was always a little bit difficult to to position. So the Parallel Desktop actually is now owned by Corell Software famous for, or Coral Draw, if anyone still remembers that. That it’s 

[00:17:34] Ken: a famous Canadian company from long ago. Yep, 

[00:17:38] Lukas: exactly. And you know, originally Parallels planned IPO, this was around 2006 and we had a whole layer of X Microsoft people in the management that should drive the company forward in its stage.

[00:17:58] It was so, I mean we were at like a 120, 130 million revenue at this time, consolidated. But all the profits were even co either coming from Paradise Desktop or from Plus control panel and a lot of other parts didn’t make a lot of profit there. Right. But we wanted to do IPO. But suddenly what happened, 2007, 2008.

[00:18:19] The financial crisis hit him. Right. So this IPO was dead. Everyone was so excited to do this. IPOI was CFO, not so much because the preparation for an IPO is a, is a different story. When you are the, the chief financial officer, they don’t like that so much. Yeah. But so what happened is we did not go IPO and so step by step, uh, we, we, we still kept growing, but then at some point we got caught into pieces.

[00:18:50] So basically in, um, 2015, but there was also preparation before the parallel desktop was sold to Corral Software, which also became an independent company and still is today with my friend Alex Fine running it. And then KLEs was carved out together with Oakley Capital. And with two other German investors.

[00:19:18] They were the, the two founders of the Cloud Fest at this time that are out, so still of our, our investor. And, um, so I personally had the luxury because I, I, I knew both businesses, that automation business and the PLA business, and I had that luxury to choose if I want to go with Plak or with cloud, my Ingram Micro, what is now called Cloud Blue.

[00:19:43] And I. Love, scalable mass market selling even to indirect partners. And I knew the finances of both divisions. So my decision was quick. I would join Neils and join Plesk and Chop into the cold water again because, uh, Neils asked me to, to build the marketing team there. So, and in between, there were a lot of other smaller acquisitions.

[00:20:06] Sometimes we acquire products and we just killed the product. Also happened, um, we changed teams. It was all on an international level, quite exciting, but also sometimes challenging for young people like us who adopt into to, to Charles the results. Yeah, 

[00:20:24] Ken: I mean, I, I, from my perspective, looking in, from the outside, you know, just as a software vendor selling into the hosting industry, it, it always blew my mind how much, uh, dynamics, how many dynamics were going on in the hosting industry, uh, with companies like.

[00:20:42] Web pro cPanel, uh, you know, uh, I never quite could wrap my head around it. It all seemed to be moving so quickly. Kind of like a cowboy mentality, a wild west mentality in the industry. Do you think that that, uh, that mentality is gone from the industry now or are there still, uh, are there still cowboys out there in hosting?

[00:21:07] Lukas: I think there are a few left because, because hosting is so profitable. Mm-Hmm. Or I think it’s a little bit less, but it’s still very profitable if you do it right. 

[00:21:18] Ken: Hmm. 

[00:21:19] Lukas: There is a lot of cowboys who, who just operate hosting as a lifestyle business. Right. It pays them one, two, 3 million every year to the bank account.

[00:21:28] And I know personally, multiple such people that are far away from trying, they, they never would want to sell the company. Right. It just pays them every year a few million to the bank account that they say, I don’t work a lot. You know, this is a convenience to convenient time to be in. Why should I sell the company?

[00:21:46] And those are usually much more cowboys. They don’t work a lot. They travel a lot. They party a lot. Um, in the past it was much more cowboys and more craziness, more parties and stuff. But I think especially the large scale providers, the most of the old guard has moved out and, and now it’s, now it’s a more corporate kind of environment in most of the larger, especially larger players.

[00:22:10] Ken: Like private equity. Yeah. Private equity driven. Yeah. Uh, I mean, one of the things that I. Surprises me about the hosting industry is that there are still companies that are growing extremely fast. There are breakaway, you know, it’s, it’s like sometimes a company breaks away from the pack and it’s just growing like crazy and it, it moves into the top 10.

[00:22:32] Uh, I don’t wanna name names, but, you know, uh, one of our customers is one of those extremely fast growing companies that’s become dominant. Uh, and uh, I just don’t understand how that can happen. It seems like hosting is so commodified, you know, what, what could possibly cause a company to grow so quickly in such a commodified industry?

[00:22:54] Is it just, you know, are they, uh, putting their cowboy hat back on [00:23:00] trying new approaches? Are they just not the lazy ones? Uh, you know, what is it that drives a company so late in the game to grow so quickly? 

[00:23:11] Lukas: I think there can be different, different parts. First of all, hosting. Globally. I mentioned some of it earlier.

[00:23:20] It’s not so extreme anymore, but in many cases it was a shitty product. So to say. Web posting is something that got hacked all the time. You know, you did WordPress every, every few months you got hacked because the host didn’t care about security tools. Um, it was just a bad product. And I think the first thing is today, good product.

[00:23:41] Second is good speed performance, and also for WebPress, because that’s difficult to achieve. And clear differentiation. Very important. Not don’t be everything for everybody. That’s like the startup world. Very similar. And the second, the last thing is probably marketing. A lot of hosting companies, I mean, especially if it’s the long tail, not the few big ones that do very strong marketing, but the rest of it.

[00:24:09] They don’t do much marketing and I think there is many of them. They don’t even know how, what their customers are doing with their stuff. Yeah. And so those who actually realize that and start data mining, their customers start doing online marketing based on this segment they have chosen or the niche they have chosen, they can be much more successful together with a very good product.

[00:24:34] And that’s definitely possible. And if you combine this with some kind of a community building or you go to community events, like when you do WordPress specific hosting, that you actually go to the WebPress community, you go to the bird camps, you actually care about these people. That’s what the most are not doing.

[00:24:53] Yeah. The most of them are like this lifestyle business cowboys kind of style and think everything sells itself. And if you do everything what I just said, I think there is a very good chance that you could still grow quite close. 

[00:25:04] Ken: Ah, amazing. I, I wanna talk a bit about private equity, the role of private equity in the industry.

[00:25:10] Obviously, uh, web Pros was sort of a, a creation of private equity, but so were many of the other companies along the way, uh, that you’ve worked with on your journey. Uh, what’s your view of, uh, of private equity, uh, and, and what has been your experience working with private equity firms generally along this journey?

[00:25:31] Lukas: Hmm. I would say it depends how you look at it. 

[00:25:35] Ken: Hmm. 

[00:25:36] Lukas: Um, so when you, when you think about, when we carve out sk from, from Parallels that required private equity also besides other investors, what later happened is that Plak was much smaller than Cedal. We were competing for so many years against each other, and Cedal was more than double the revenue of PLAs.

[00:26:03] And with the help of private equity, we were able to take over CA. What is an amazing story here, right? So it opens up a lot of opportunities. The next thing is maybe a bit more challenging. Where we have now, uh, it depends on how we look at our reputation in the industry is price increase. Because very classic private equity approach and m and a approach, approach in general is every 1% that you increase your prices adds 10% to your bottom line or profit.

[00:26:40] Right? And the top of it comes cost optimization. And so that can be seen this or that way, you know, I mean it’s just the fact that private equity, this is how it often works. Yeah. And they’re not doing any risky endeavors. Yeah. And so the other thing with private equity is also. If you are a hosted company or are a owner of a hosted company, or you are part of Web Pros and you work with private equity, the best you can do, instead of just laying back and saying, oh, these evil investors, blah, blah, blah.

[00:27:16] The other thing you can do, and that’s what I have done in, in in the early beginning, is to try to learn how private equity actually works. 

[00:27:23] Ken: Mm-Hmm. So 

[00:27:24] Lukas: why are they maybe a little bit slower? Why are they focusing on increasing prices and reducing costs? And also why do they focus so much on a long-term stable business?

[00:27:38] Ken: Mm-Hmm. And 

[00:27:39] Lukas: the answer is private equity in the end is also kind of a broker. I mean, they’re bonds, but they’re kind of a broker because they don’t own this money. What private equity is doing is they take the money from pension funds, from insurances, and maybe high network individuals. That park their money for five to eight years in a fund in exchange for a much higher interest rate.

[00:28:10] And obviously if you think about this way, pension funds, that’s also your money and my money. Yeah. Right. So you don’t want to be in a, in, in a risky endeavor for for, for, for, for private equity if your pension funds invest in it. Yeah. You know, when you, when you look at a venture capital that is a kind of a top segment of private equity.

[00:28:34] Mm-Hmm. This is of course very different. They are doing high risk. It’s much more gambling. Um, I could talk about that a bit later, maybe also, but venture capital is a very different game. But the key thing is with private equity. Is to understand them, how they operate, that makes it much clear on how you can work with them.

[00:28:52] Mm-Hmm. And what kind of business cases you can present and what maybe you should not present. Yeah. So, so, so that’s like an, an important part. And last but not least, I could tell you private equity, they’re also humans. You can talk to other humans and you can make deals and you can discuss and you can arrange yourselves.

[00:29:14] Yeah. I mean, um, but understanding these mechanics, how they work, even though it’s always about billions and billions of valuations and billions of dollars. And then they usually combine also 50% of the buying, the buying price of a valuation or of, or, or of a company. They, they, they, they do with leverage from banks.

[00:29:35] Right. But that’s, that’s like a, a huge challenge also. But it’s also important to understand how this operates. 

[00:29:43] Ken: Interesting. So it’s kind of like you, you just have to respect them for the, for the animal that they are. Uh, and then it’s easier, right? I, because I think, uh, especially in the tech business, private equity to some degree is seen as, um, uh, a little bit evil, to be honest.

[00:30:01] Just to put it plainly. I mean, uh, private equity companies come in and they do their cost cutting. They do their price increases. It’s, it feels like nobody is happy at the end of the day other than whoever was investing in the private equity strategy. This is from 

[00:30:16] Lukas: one 

[00:30:16] Ken: side. 

[00:30:16] Lukas: True. 

[00:30:17] Ken: Right. 

[00:30:17] Lukas: On the other side, I think there have been also a lot of changes in the, in the, in the investor and private equity industry.

[00:30:23] If you look at it, it’s not the, the eighties anymore, you know where yeah, where it is. Wolf of Wall, wall Street type of people, uh, worked in and put the company into pieces, sell everything for cheap, um, making a lot of money with it and don’t care about people. You know, a lot of these private equity investors, they have a lot of requirements these days, for example, in terms of ESG and environmental, social, and governance.

[00:30:53] So that includes all these factors that are underneath the ESG [00:31:00] umbrella. And that that is also required by their customers, eg. The, the, the, the, the pension funds or the insurances or other people who invest in these funds. They require that they are operating more ethical, more following, um, climate environment that all these kind of things.

[00:31:20] I think it got a bit, uh, different, but that doesn’t change that it’s still there, that that price go up and costs need to go down. But it should be, I think today it’ll be done in many cases in a bit more ethical and, and, and fair environment than in the past. 

[00:31:36] Ken: Right, right. Yeah, I suppose that is a positive, uh, a positive change.

[00:31:41] Um, and, and you know, specifically you’ve been through many transactions over the years, uh, way more than most people actually in their career. I would, I would think, uh, the most recent transaction was, uh, with CVC partners. Is that correct? Uh, and uh. And what was that experience? What was it like working with really a top tier PE firm?

[00:32:04] Lukas: Honestly speaking, um, not so different than with any, with any other private equity. Yeah. It’s, uh, it’s, it’s, it’s a, an amount of, it’s a team of humans and Right. The most important part is like for any startup or for any company you want to sell, you need a very good spread. You need, you need a, a very good slide deck and a very good spreadsheet.

[00:32:32] That’s usually what we’re looking at. Yeah. 

[00:32:34] Ken: And have you been the guy to make the slide deck or the spreadsheet or both? 

[00:32:39] Lukas: Yeah, I mean, I have created both, but. Most of it, usually, especially the the slide decks. The slide decks is, is, is slightly easier, especially for more recent acquisitions that we have done.

[00:32:53] You know, I mean, I know the structure, what needs to be in there. And for a smaller deal, you don’t engage with an expensive consulting company to actually do your slide deck. 

[00:33:03] Ken: Right. 

[00:33:03] Lukas: Um, and the financial modeling is, is, is always a combination with finance people. 

[00:33:13] Ken: Hmm. And I’m not 

[00:33:14] Lukas: saying accounting because accounting is backwards looking.

[00:33:17] Right. And finance is like forward looking. And when you do forward looking calculation, one of these calculations is, for example, called discounted cash flow calculation. Right. It’s one of the most classic ways of how you. Define future cash flows to, to at least as a part of the valuation of the company.

[00:33:37] It’s not never the only valuation because there’s many other ways to value a company. And, um, creating such kind of calculation obviously needs a lot of business input and a lot of analyze this research from the business side that says like, here, I think we can go in this direction. Here, we go in this direction, like strategic, strategic inputs.

[00:33:57] And then finance those, their magic to create the, the final calculation. 

[00:34:03] Ken: So things like, uh, Monte Carlo simulations of future trends. I mean, I have never done 

[00:34:09] Lukas: a multicolor simulation and I think, uh, it’ll not give you a better guarantee that the business will grow. 

[00:34:15] Ken: Absolutely. I mean, it’s just right. I, I, I’ve personally done lots and lots of financial modeling over the years and I.

[00:34:24] It amazes me how powerful a good spreadsheet can be, uh, where you just make some assumptions and you, you test the assumptions with your team, uh, to, uh, you know, say like, okay, well here’s what we’ve got now. This is what we expect will happen. This is what we’re aiming for. Uh, and, uh, you know, you figure out what the ratios seem to be between your revenue and certain expense items.

[00:34:49] That can be a really powerful model, uh, that, that allows you to nail your numbers year after year. Uh, I don’t think you need a lot of fanciness. 

[00:34:58] Lukas: No, absolutely. Um, and you know, you are in a subscription business like we are. Yeah. That makes it a lot easier. To, to, to do the calculation. And so, you know, I think usually simpler is better and more, better.

[00:35:14] Business input is also better than too much, uh, science and magic from a finance perspective. 

[00:35:20] Ken: I, I, I hardly agree with that. I, I more than once, I mean, my, my background is engineering and math, and so when I approach a, uh, financing, uh, question, a budget question, I look to the mathematics and my board often kind of laughs at me and they’re like, boiled the ocean on this one.

[00:35:42] This is way too complicated. You know, let’s talk about the fundamentals. Um, and your model’s really cool and everything, but you know. What are you, you know, what’s the business doing? What, what are your actual plans for shifting things in one direction or another? How are you actually going to make sure that you retain the revenue that you’ve got on your p and l statement, and how are you going to increase your margins over time?

[00:36:05] Those are, those are like the really important questions to ask. Um, 

[00:36:09] Lukas: absolutely. Yeah. 

[00:36:11] Ken: I don’t wanna boil the ocean on this particular question, but I do wanna ask. Um, when cPanel was acquired, uh, and the price was increased, it really angered a lot of hosting companies, especially smaller hosting companies, and many of them, uh, responded to that by eventually leaving cPanel behind and going to some other alternative, you know, cheaper control panel.

[00:36:38] Um, at the end of the day, do you think that that, uh, price change strategy worked out, uh, for, for cPanel and, and did it work out for the investor? 

[00:36:50] Lukas: I would say it to certain extent it played out and to certain extent it also produced Cher. But I also had many discussions personally on an event like Crab Fest.

[00:37:05] And you know, you mentioned cowboy mentality. I have talked to many people. One of my success recipes in working with hosting providers and service providers forever was that I always went to the hosting provider and said like, okay, something doesn’t work for you in your business in terms of your marginings or your prices that you can charge to be in a competitive environment, et cetera, et cetera.

[00:37:34] And one of my biggest parts was always to actually do an open book calculation with this holistic providers. Hmm. And say like, look, we make this amount of money. You have support infrastructure costs, you have marketing costs, you have support costs, and then you have the price that you can charge on the market that should be competitive to others.

[00:37:59] And that very quickly gives you a model, not fancy, simple model in even just percentages where in the end, we as an enabler can keep somewhere between 10, 15, 20% of the business maximum. So with the very large providers, much less mm-hmm in terms of from the end customer revenue that they do. And so the ones that complained the most to me, and I said, here’s my business card, please send me an email.

[00:38:39] Let’s have a call. I want to personally look into your calculation, what doesn’t work. And I’m happy to look at all you guys, how we can optimize this. And unfortunately, all the people I talked to where I gave my business card and send a follow up email after the last cloudfest, I never get any response to set up a call.

[00:39:05] So either they don’t have this calculation because it was the, the lazy boat. We make a lot of money. The evil VePro is increasing the prices or they’re already leaving us. But from the numbers that we see, our churn is not so strong. And also we are focusing to really enhance that core. Platform Now with more innovations, we acquire companies that where we afterwards provide a part of it bundled free of charge.

[00:39:42] Um, we, we are very partner focused to help partners, et cetera, et cetera. So there is a lot of opportunity also. But if you are a cowboy and your mind is a bit closed, it’s very difficult to do business anyway. Yeah. 

[00:40:00] Ken: Yeah. 

[00:40:00] Lukas: So I have done multiple different experiences and also for whomever sees Baby Dad video here, we are always ready to talk and we are always ready to look at your calculation and make sure everyone makes money in a reasonable way.

[00:40:19] But if we are not talking and you just write your things into some kind of a low end box forum. I cannot do much about it. Yeah. And neither can do my colleagues from the manager. 

[00:40:32] Ken: Yeah. Interesting. I must say, uh, price increases are always difficult, uh, as a business, as a service provider, you know, uh, going to your customers and saying, our price is increasing.

[00:40:47] It’s never a good conversation. Nobody wants to hear it. But here’s something I’ve noticed over the years. Well, mail channels is not considered the cheap option. We are considered the expensive option in the market. Uh, you know, it’s, it’s sort of considered to be more expensive to use mail channels than to do it yourself with open source, for example.

[00:41:08] Um, however, we invest everything we make back into research and development to improve the product. Uh, a couple of years ago we did some research, uh. In partnership with a, uh, company that collects data on the hosting industry in a very, really excellent, excellent quality, uh, data that allows us to assess which hosting companies are growing the fastest.

[00:41:36] Um, and when we looked at the data between 2016 and 2022, uh, nearly all of the top 10 hosting providers in terms of growth rate during that time used mail channels. Now, I don’t think, I can’t confidently say that because they used us, they grew fast. I think what’s more likely is that the companies that are growing fast, um, see the value in spending money on an expensive option that delivers them a lot of value and allows them to focus on something else.

[00:42:12] Uh, for example, you know, a hosting company, a kind of like old school hosting company run by a cowboy, a. CEO, uh, is hacking around in Pearl and, you know, and system commands and stuff to do a bunch of their own engineering, when there’s probably a specialist vendor that could do a much better job, uh, for a little bit of money.

[00:42:35] But at the end of the day, if they spent their time focusing on marketing, they could grow their company way faster and make tons more money. And we’ve seen that. We’ve definitely seen that. When we look at our fastest growing customers, they, uh, they spend very little of their organization’s effort mucking around on details that, uh, vendors should be handling.

[00:42:57] So they’re working with companies like Web Pros. They’re using Plesk and cPanel as their control panel. They’re not using a bargain basement control panel that the fastest growing companies seem to be using the most expensive tools. Um, I think that that’s kind of more consistent with what you could call like the Silicon Valley way, uh, which could be stated as.

[00:43:19] Money solves all problems. So if you’re trying to grow, you put money into the right places and then you grow. Uh, whereas there was this first phase of the hosting industry, which where, where companies were run by engineers and IT guys, and a lot of the companies are still run by those same people, but maybe those are the lifestyle ones.

[00:43:40] Those are the ones that are making one, two, 3 million a year for the founder. Uh, they’re very happy, but they’re certainly not growing the way that the, the, the properly run companies are. 

[00:43:51] Lukas: Absolutely. See it in the same way. Yeah. And, and honestly, a lot of people where still some engineer is running the company, I’m not saying this is something bad, but some of them have never invested time in learning the business part of it.

[00:44:08] Mm. 

[00:44:08] Ken: You 

[00:44:08] Lukas: know, I think this is some something where even me after 20 years, I’m still learning, you know, and some people they just. Never learn, and that’s becoming a problem. Yeah. And so, but yeah, it’s a topic on its own and either you know how to grow a business or you don’t. 

[00:44:27] Ken: Right. Yeah. And I mean, I guess it’s fine if you wanna make a few million dollars a year and travel all the time.

[00:44:35] I guess that’s an okay lifestyle. Agreed. You know, for many people. Absolutely. Let’s talk a little bit about Plesk. Um, so Plesk, you know, for, for people in the, uh, audience who don’t know about Plesk, it’s a, uh, web hosting control panel, um, that is widely used. Um, obviously the PSK brand is now owned by Web Pros.

[00:44:58] Uh, but when you were at psk, you were the VP of Marketing and Strategic Alliances, uh, and you built the entire marketing team. Now my external view is that Plesk has always had extremely good marketing. The website’s, you know, always been really good. It, it always looked really polished, to be honest. It, it almost looked a bit like a Microsoft product.

[00:45:20] And you’ve mentioned Microsoft in the past. You’ve mentioned being inspired by their approach to marketing. How did your marketing strategies evolve for PLAs as the hosting industry itself matured? What did you do to embrace the change in the industry when companies were shifting from cowboy to private equity?

[00:45:40] Lukas: Absolutely. So I would say, when I look back to parallels, we had really, really good product management. And later when we got all these Microsoft people in, we also added very good product marketing. And this is where when I said I learned marketing, I actually learned. Product marketing because at this time in 2000 6, 7, 8, et cetera, we didn’t do too much online marketing.

[00:46:12] You know, when, when, um, when we took carved out plastics and I took over the marketing team after I was lucky to be able to learn all that stuff and apply a lot of stuff in practice, I could tell you the first thing that I actually did is I killed $250,000 PR budget because 

[00:46:39] Ken: Wow. 

[00:46:40] Lukas: In 2015 and even today.

[00:46:43] PR is important, but only if you do it right. If you build, uh, relationships with journalists, if you actually have news and not something from, uh, 20 years ago, if you are not spammy, et cetera. Like if you really build the PR strategy, you could do pr, but otherwise better use this, this budget in a different way.

[00:47:05] So the first 250 KI killed completely, uh, this, this PR budget. And then what we did in Exchange Plus additional investment of course, is that we top it down on online marketing and I basically hired a whole team of online marketing specialists based out of Barcelona in Spain. Multicultural, multi-language, wonderful environment.

[00:47:32] I, I still work from there, from, from time to time. And that gave us specialist in the area of design copywriting, SEO content marketing, paid advertisement, like you name it, you know, like social media management. And so that really brought up our, our initial push on, on focusing on online marketing. And this online marketing was also including stuff like, uh, an online community.

[00:48:03] When you look up the, the blessed online community on Facebook has over 6,000 members today. And it’s probably one of our best places where we can get feedback also from end customers, meaning not the SB really because the SB really gets the solution, but the ah, CS, um, lancers that are sometimes the, the holsters end customer or reseller.

[00:48:28] We get a lot of feedback there. The second thing, what we did also is change the event actually a little bit towards end customers, meaning web professionals. That’s actually the reason why. One of the reasons why Web Pros is called Web Pros because it’s focusing on web professionals. They’re the actual users of our products, and the service providers are kind of a fulfillment engine for us and the end, end customer that is the s and p.

[00:48:56] So what we did is because we decided to double down on WordPress, meaning we looked at all the most innovative WordPress providers out there that did not use our products, stole all their features, and basically created the WordPress toolkit. Where you manage different purpose installations, staging, cloning, backup, automated security, premium security options, um, whatever you name it, you know, it’s, it’s, it’s doing everything and much more today.

[00:49:30] And Purpose Toolkit is also, um, completely adopted to, to cPanel in exactly the same way. It’s the same product inside cPanel. You don’t see that the actually former plastic team is developing that. 

[00:49:42] Ken: Huh. 

[00:49:43] Lukas: Last but not least, in terms of marketing. We started attending work camps. Work camps are the international events of WordPress.

[00:49:56] And we started building relationships. We started contributing to WordPress and we really went into this community because if you want end users, and you know, when you say. Shared hosting is kind of a platform as a service in modern terms. You need to be very close to the people that use your stuff. And that allowed us to also get a lot of feedback and continuously improved.

[00:50:21] And of course, the other thing that we also did as part of the initial creation of the marketing team, because I was running marketing and strategic alliances, each business development, we also started to be present on all hyperscale cloud marketplaces. 

[00:50:39] Ken: Mm. 

[00:50:40] Lukas: And their events, and did co-marketing with them and start building our ecosystem what is now a 20 million plus business.

[00:50:50] Ken: Wow. 

[00:50:51] Lukas: Growing still 20% year over year of third party products integrating into plastic. And of course continue to, to, to position us as an expert in into service providers industry, helping the SB market. Being successful in their digital journey. And so this is something that we really implemented in 2015, maybe last but not least, but they also implemented what is still being used today is what I call a messaging and positioning brain.

[00:51:26] That’s something I also learned from the Microsoft people. 

[00:51:29] Ken: Yeah. 

[00:51:29] Lukas: This is something where you say, okay, we take the value proposition, commerce jobs to be done, pain creators, um, uh, pain painkillers, game creators based on this. You create, uh, messaging house basically. So you, you you in, in the plus scale that still today it’s called build, secure run.

[00:51:54] And then we put all the benefits, not just the features, but the benefits under these pillar. And afterwards we had, uh, treat friendly. Elevate the pitch of plesk, that means less than one 40 characters. It was on this time now called X. It’s a bit different. 

[00:52:14] Ken: Yeah. 

[00:52:14] Lukas: Then one, one messaging block in 25 words and 50 words, and then 100 words.

[00:52:19] Ken: Huh. 

[00:52:20] Lukas: And this was the original foundational document that I created with the team, and it’s still in place today. I told them many times, please change it. Please adopt it to the newer, uh, environment. But it seems to be okay for, for now that that the best original messaging and positioning framework still works.

[00:52:42] And this is absolute foundational work that you need to do because this is then going to be the description when someone asks, what is plastics? That’s the first thing. And the answer is everything You need to build, secure and run websites, applications, and holistic businesses. 

[00:52:56] Ken: Right, 

[00:52:57] Lukas: right. I can still speak this today. 

[00:53:00] This elevate the pitch. And that’s, but that’s also the description page on every hyperscale type marketplace. It’s any partner marketing materials, it’s on any giveaways and the build secure run. You know, it’s like everywhere. And if you don’t define this upfront, um, you will never have a good marketing.

[00:53:20] Ken: Very interesting. So it kind of creates a consistent appearance of your brand everywhere market consist always says, yeah. Yeah. Same message over and over again. I love it. I, yeah, I think that’s a, a powerful insight. Um, an advisor to an advisor to me, uh, shared a marketing framework, a marketing messaging framework with us a few years ago, and it was really helpful, uh, you know, to capture the essential things, like you said, like different columns, you know, um, and then to have, uh, everybody speaking the same message everywhere.

[00:53:58] It makes your company seem like, oh, this is what they do. There’s no ambiguity. And you also end up wasting less time crafting a message over and over again for each different scenario. You just have the same message. You go to your sort of playbook and you say, well, which, which thing is appropriate for now?

[00:54:13] And then copy, you know, copy and paste that, that, 

[00:54:16] Lukas: absolutely. Yeah. 

[00:54:18] Ken: One of the things that you, uh, comment about in your, uh, on your personal website, uh, is the concept of servant leadership. Can you talk a bit about the concept of servant leadership and how that has, uh, been a successful leadership strategy for you over the years?

[00:54:39] Lukas: Well, um, there are different definitions of servant leadership. Yeah. Um, I have kind of my own, and I think it’s a, for me, it’s a, a set of building blocks on how you interact with humans. Yeah. Because leadership is not only the people that are in your team, but leadership can also be even in a, in a, in a, in a independent position.

[00:55:06] Yeah. So you can be a leader, but I would say it’s multiple building blocks for me. These building blocks include, not limited to, I would say I often use start with why, meaning it takes me only 30 seconds more when I ask someone to do something to tell this person also why they are doing this. 

[00:55:28] Ken: Mm-Hmm.

[00:55:29] Lukas: The topic of intrinsic motivation versus extrinsic motivation. Mm-Hmm. I also believe that as a leader, you are in charge of your people and helping them, and they’re not in charge of you. So my first thing when I deal with people in my team is how are you, how can I help? And I learned this from my mentors because.

[00:55:51] This is a very important part because then the discussion starts, and I also practice usually a rhythm, very strong rhythm of business with people that I do even today in m and a, by the way, that they have a very strong rhythm of business. So rhythm of business with a team. I can explain you with a based, the sales team or based the marketing team is, I’ll have a group call once a week.

[00:56:15] The group call, everyone talks about its projects where they’re working on and where they need help from each other. This also creates some kind of bit of a group thinking that if one person never anything that does never anything, it’ll be pushed from the team at some point. And then of course I will do one-on-ones either once a week or every two weeks.

[00:56:41] But once a week is, is, is is maybe a, a good term then I would say as a leader you need to be open for criticisms. So that you are open, that people can actually criticize you as a manager as well. Another component for me is I never steal ideas from other team members and sell them as my own. Whenever I actually take ideas from a team member, I quote them that they had a good idea because they might also need a promotion in the future.

[00:57:20] You know, when they had a good idea. Right? Right. And if, if we discuss a project or certain problems, and if a team member has a better idea than me, I’m more than happy to take the idea of this person and promote this also that this person had this idea. And I think maybe last but not least, this is because I was so young when I started, um, working internationally is always take multicultural aspects.

[00:57:51] Into consideration with every action. An American person or a Spanish person, or a French person, or a German person, or a Swiss person, they all have their own kind of cultural kind of thing. Of course, we are all humans, but they’re in a certain environment with specific cultural aspect, and I think as a leader, it’s very important to be aware of this and also to take care of this in, in the way on, on what you, what you expect from the people or, or how you interact with the people.

[00:58:25] I would say this is like a, the, the rough components that I see as, as part of leadership, that that helped me a lot to, to, to, to work with people over time. 

[00:58:37] Ken: Fascinating. Fa I mean, it, it, yeah. This is something that isn’t, is not talked about enough in my opinion. People love talking about businesses and how, you know, they did this transaction or that transaction, but really.

[00:58:49] You know, each, with each passing week you’re working with your team. And if you don’t have a strong team, if you’re not really connected with what’s going on for them, if you’re not helping them in their careers, you can’t execute these big moves. Right. You can’t do it all by yourself. Uh, yeah. Absolutely.

[00:59:07] Yeah. Absolutely. And, uh, 

[00:59:09] Lukas: you know, you can talk forever about diversity and equity and inclusion. Yeah. And about values that you defined on some papers that nobody lives it. That’s something that I also know how to do, but it’s, it’s, it’s very, uh, it’s not practically the end. 

[00:59:26] Ken: So the web hosting industry, you’ve been a part of the web hosting industry, you know, as a, as a key vendor for many years, for 20 years.

[00:59:34] Where do you see the industry going in the next five years? I mean, we, you know, we hear so much about generative ai, uh, serverless computing, obviously the hyperscaler clouds, or even more hyperscale than ever. They’re connecting directly to nuclear power plants to power massive farms of GPUs. Like, there’s just been so much change.

[00:59:54] Looking ahead for the next five years, what do you, what do you think we’re going to see in, in, like, hosting, what’s the next five years look like? 

[01:00:03] Lukas: Right. O of course, it’s a, it’s, it’s not so easy to, to predict the future and yeah. And hosting has been a kind of a business that stayed almost the same for a very long time.

[01:00:14] I think one of the developments that we see is that more and more good hosting companies. Transform from a generalist to be a specialist. 

[01:00:27] Ken: Mm-Hmm. 

[01:00:28] Lukas: You know that they finally start to learn from their data or they get data to find out that the majority of their customers is actually lawyers, 

[01:00:38] Ken: right? 

[01:00:38] Lukas: And need to do a law specific, uh, lawyer specific offering.

[01:00:41] Just an example. Finally, do marketing based on this. I think that will also be a big thing and learn the model business framework to rethink your business, especially if you have an engineering background and also use the apply AI. To your business. There is no excuses anymore. I think there will be probably much more successful businesses coming out of this just because AI is there.

[01:01:07] I would say AI is going to be a disruptor, but not, but specifically for hosting, maybe not as far as deep. We think we first of all overuse a lot of AI spec for, for example, in in, in CPA or in place. There is already today a lot of algorithms and automations happening in the background to keep the infrastructure, uh, performing, to keep it up to date, to, to security.

[01:01:32] I would say WordPress is here to stay. It’s yeah. 0.3% of the market and the most people don’t understand why vers is so big. You know, and I can tell you, I think I know why vers is so big and why, why not? Everyone wants to use Wix and Squarespace and Shopify. Yeah. When you have your web website on Wix and Squarespace and Shopify.

[01:01:55] They don’t like something, even some, something small, they may just switch off your thing. And that means your business is offline. And if you use WordPress, it’s a open source. It has more than 60,000 plugins as an ecosystem, right? It has also WooCommerce, what is a complimentary e-commerce engine. Maybe it’s a bit more difficult, but um, it is also more than 40% of the e-commerce market that people don’t realize this.

[01:02:29] Wow. So where per my perspective is here to stay, but it will get better, it’ll get easier to use and it will get influenced by ai and so will the software as the service players like Wix and Squarespace and, and and, and all these kind of companies, Shopify. I think at the beginning they want through use experience.

[01:02:49] Now they’re trying to compete with Big Studio and Shopify Plus. Like they want to go after the, the, the, the players that want more flexibility. Right? But that also means it’s, uh, it’s going more complicated to use then it’s not then, then this argument is not there anymore for simplicity and I would say what the hosting companies will hopefully do, and I think the bigger ones do that already, is to attract to the younger generation.

[01:03:20] You know, I was also a C sub 26 years ago, 27 years ago. And I think a lot of hosting companies are still kind of CSO means and PO and position themselves to, towards CSO means. I think that’s something where we need to get ready for the younger generation to come because the SaaS players already do that.

[01:03:41] Right. I would say that Hyperscale Cloud has also an interesting take there. I would say, you know, when you are a a, a holster that has, you probably just data centers in one country and wanna go global, right? You can actually partner with Hyperscale Cloud and use their data, all their other data centers for going global.

[01:04:05] That’s the, the global service providers already do that. You control, keep the control over the data. I mentioned before, that would be an important topic, never, ever done before because that was GDPR. In Europe there is different kind of GDPR, similar privacy laws in the United States, India has its own version.

[01:04:29] Browsing has its own version. And many other countries as well. That potentially gives hosting an opportunity again, also that in country or being a local company in the country is more important again. Right. And probably the wars and the reduction in globalization that we have in today’s time might also contribute to the trend that you will have actually more regional operations.

[01:04:59] Again, what would help the hosting providers again. And other than that, I think there is kind of a, a early sign of some hosting companies being just marketing players. 

[01:05:14] Ken: Mm. 

[01:05:15] Lukas: Because Bluehost, for example, that is part of New Fault, has now first time launched its own. Premium WordPress offering that is based on infrastructure from automatic, like the company behind word WordPress.

[01:05:30] Wow. Literally just a wrapper like wp, WP Cloud. Wow. And wp.cloud is a highly scalable WordPress as a service, API first infrastructure platform for WordPress. So there can be such kind of trend as well that there’s kind of a hosting at service going on that may be lost, but not least. What I recommend the most hosting providers and what the, what the more successful ones are already doing is when you look at the cloud infrastructure as a service software platform as a service, and software as a service, decide on which of these layers you’re gonna play because you cannot play on all the layers and become best within that competitive environment.

[01:06:21] On the layer that you choose or maybe you are best at already. Hmm. You know, it’s a very unknown fact. You mentioned you have a lot, you had a lot of data. We have also a lot of, a lot of crawling data that we do every quarter about the hosting industry and what is changing. A lot of small and mid-sized hosting companies are surprisingly using infrastructure from companies like Hener, right?

[01:06:47] Or from OVH, especially on the emerging markets. I think talking about emerging markets, I think there is still a way to go, especially in emerging markets. There’s still so many mbs not even having a website today. 

[01:07:04] Ken: Yeah. 

[01:07:04] Lukas: And you can argue, well, it’s a mobile society, blah, blah, blah. But if you want to redo real business at some point you, you’ll need a computer and don’t do everything on your mobile, and then you need a website and build your applications and stuff.

[01:07:18] So, um, I think these are different topics. I, I would say that at least influence the future of hosting, and we will yet see who will make it out of this pure play hosting and find its niche and be able to successfully transform from a generalist to a specialist. 

[01:07:41] Ken: I mean, fa that’s really fascinating. I, I, I think there’s probably, uh, you know, there’s probably a role for, uh.

[01:07:50] This specialization within, uh, some of these hosting conglomerates that have been put together. Uh, you mentioned companies like the Miss Group, uh, you know, uh, your online is another example, uh, from Europe where they’re, they’re consolidating, they’re just buying tons of hosting brands all over, uh, all over the world.

[01:08:09] Uh, and, uh, they’re putting them under one corporate banner. They have standards across their group, but the companies continue to operate rather independently. And so I wonder if, if one of the sort of future trajectories of the hosting industry is that we see this consolidation happening, but group, group members within a hosting group, uh, all have the opportunity to specialize into a particular layer, uh, or a geography, uh, in the future.

[01:08:39] Um, you, you mentioned, uh, privacy laws giving local companies a bit of an advantage, right? Uh. We’re definitely seeing that. Um, when GDPR came out, we, you know, we had some questions about it. We engaged a, a law firm to analyze the situation, um, to write a white paper. Uh, but then aside from occasionally doing a deep, uh, a data protection addendum with a client, we didn’t see much of it in the last six months.

[01:09:08] Uh, we’ve had so many requests for DPAs from customers. It, it has really become an actual issue. And we’ve had to reengage privacy experts to help us navigate that territory. But I think out in the hosting industry, it is probably handing a bit of an advantage, uh, to local providers. You also spoke about emerging markets.

[01:09:29] Uh, you know, I definitely see a lot of activity happening in emerging markets, even in, you know, in places like Sri Lanka. There, there are thriving hosting providers, even though. The economy in that country is, is a, a real basket case. 

[01:09:42] Lukas: Bangladesh, for example, right. In Africa in some countries. Absolutely.

[01:09:46] And you know, look, look at it. You, you and me, we are living in, in, in some kind of bank event on countries, you know? Yeah. Um, with, with high costs and high salaries. But imagine if someone makes, is in Bangladesh or in, in, in an African country, that, that might be less developed. Not all, but some they are less developed.

[01:10:09] And you make as a small comp team of three people, you make $2,000 extra a month, or you make $5,000 extra a month. That’s actually huge money for Right. In such kind of company, uh, country. 

[01:10:23] Ken: And I think that there’s this perception that the, that there’s not very much money in the third world, but that’s actually not true.

[01:10:29] There’s a lot of poor people. There’s definitely a lot of people living on, on, uh, $2 a day, which is, uh, awful. Um, but many of these countries that I think we might’ve previously thought were, were never going to digitize, uh, are rapidly going there. Uh, certainly some of our fastest growing customers are, are located in South Asia.

[01:10:53] Uh, you know, in parts of the world that we’re probably the last to become digitized, and they are, they’re rapidly going online. I, I’m personally very excited for what the future holds, uh, in those parts of the world because I think that the digitization of business, uh. It ultimately raises the standard of living in those countries.

[01:11:14] You know, they, they haven’t been able to benefit from a lot of what the internet has brought to the west, uh, even in terms of, um, uh, of how it contributes to democracy. Uh, we don’t think much of having a WordPress site where we can just have a blog and express ourselves. But, you know, in, in countries that are poorly managed, having a WordPress site and being able to express yourself, uh, online makes a huge difference in the, in the West.

[01:11:42] It’s just, you know, uh, maybe my, my opinions on fashion or something like that. But in, in other parts of the world, they can be pushing really important issues and, and being quite disruptive and, uh, progressing their society. 

[01:11:54] Lukas: Absolutely. Yeah. And, and, and also they, many of the emerging markets, they basically skipped.

[01:11:59] Some steps that we went through in the West. You know, I, I remember, I, I used, um, 43 Kilobits. Modems 

[01:12:08] Ken: right. 

[01:12:09] Lukas: On a, on a, on a, on a Windows 3.1. And later on Windows 95, and then I moved to ISVN. I’m not even sure if you had that in the us. I, I 

[01:12:20] Ken: remember ISDN it was hard to get it, but I worked for us. I was the first employee at a, uh, electronics company in 1999.

[01:12:30] And we, right. So my favorite was, yeah, 

[01:12:32] Lukas: ISDN channel bundling. You got Honda 20. Oh, yeah. And so I, I, I managed to, to do some business online even when I was, was like 16, 17 during my, uh, teenage years. And, um, but the emerging markets, they went, they didn’t go to all this, you know, they directly went from nothing to mobile.

[01:12:55] Ken: Yeah. And 

[01:12:55] Lukas: mobile provided internet. And now we have. Starling on top of it, right? Where you get to a hundred dollars a month, you get a hundred gigabytes, uh, a hundred megabytes all over the world. 

[01:13:09] Ken: I, yeah. And I think this is something that, uh, that Bill Gates has really done a, a good job of, uh, of publicizing, right?

[01:13:15] Because he’s gone to Africa, uh, with the Bill and Melinda Gates Foundation, he’s gone to Africa and he’s kind of shown the world what’s the amazing innovation that’s going on, uh, in these parts of the world that everybody had forgotten about and just assumed were, were poor basket cases, you know? But there’s actually a lot of real, you know, local innovation and leapfrogging going on.

[01:13:36] Uh, that’s tremendously exciting. Uh, I think star, absolutely. I think starlink has surprised all of us. Uh, I bought the original starlink antenna when it came out because I just had to see what it was all about. And I, I fired it up in the backyard and I got 300 megabits per second in 20 millisecond latency.

[01:13:58] And my first thought was, this is going to change everything, you know, because I, I, obviously, I can get wired internet where I live, but I could be in the middle of the mountains and get 300 megabits per second. You know? What about the middle of Africa? I mean, absolutely. Yeah. 

[01:14:15] Lukas: And this opens up the whole internet for all these people.

[01:14:18] Right. If it’s in Africa or if it’s in Asia, in some of the countries or in India. And, and I think this is actually very exciting because this is, this is another, how is it famously said, another one or 2 billion people coming online, right. To participate, uh, in, in these operations and to make this world become one name.

[01:14:39] Ken: Yeah. And they say, uh, you know, and I believe, I believe this, that, uh, the reason why, I mean Barr, Russia’s invasion of Ukraine, I. Uh, there haven’t been any major conflicts in the West since the second World War, uh, between Western countries. One of the reasons for that is that we trade with each other, you know?

[01:15:00] So, uh, if you’ve got, you know, two democratic governments where the people want to continue being prosperous, they’re going to tell their government, please don’t get into a war with our neighbors. Like, we wanna make money. Just let us make money and travel between each other and have friends and stuff.

[01:15:16] Um, I think that the, uh, rollout of the internet and hosting services by extension to every corner of the world, to countries where they either don’t have much of a democracy or don’t have a democracy at all. Uh, it, it starts to make that kind of thing possible for a lot more countries. You know, you just spread more information.

[01:15:36] You, you give people access to, uh, be able to learn everything online. 

[01:15:42] Lukas: Their country leaders allow them to use this in this way is another question. Right. And I would say from a German expression that we use your word in God’s ear. Um, we, we have, I was hoping about what you just said for many years also that this is going to be the case today.

[01:16:01] I need to say, I think it’s a matter of one more generation, right? Because humans stay humans. And if you look at the countries, uh, that actually start the war or that are very, um, authoritarian and so on, mm-Hmm. It’s mostly double generation or people, yeah, they know what they’re doing, but they know what the next generation will, will do this differently and.

[01:16:29] It’s, we, we will see how it goes. You know, I mean, I have a very visionary, uh, idea of where this could bring us, especially with crypto and blockchain, and specifically blockchain, because Switzerland is probably one of, besides the United States to certain extent. Mm-Hmm. The only countries that really do this direct democracy where you have your ballots and your initiatives and all that stuff where you can vote on, and the blockchain is kind of the digital version of this direct democracy.

[01:17:00] Right. And I strongly believe that if you would ever think about a world government, that if we could arrange ourselves somewhere democratically legitimated, not through this organization that we have right now, you could use blockchain to do that. But you know what? We are still in a, in a, in a, in a world of nation states, we agreed on that system, that nation states is our foundation.

[01:17:25] And unless we find a way and the arrange ourselves. To use what we have and kind of build a more or less fair, uh, democratic international system. I think we are so far away from this. Yeah. Because the people who are currently in power, and I don’t do conspiracy theories, um, the people who are currently in power, they’re not interested in giving more power to the people in many cases.

[01:17:51] And so we would have everything, what is needed. Yeah. In the beginning it was trade or like until 20 years ago it was trade. Now it’s more technology. I crossed fingers that what you said is actually going to happen, but it’s yet to be seen. 

[01:18:06] Ken: I think so, yeah. Well, I think this is, this is a really good place to end our conversation.

[01:18:11] Uh, but I, I, I think we should talk again, uh, and, and maybe, uh, speak more about your ideas around blockchain, uh, anytime. Yeah, absolutely. Um, I can tell you my own story of being involved with Bitcoin in 2011 and how that went. Um. Anyways. It’s been a real pleasure having you on the podcast, uh, today, Lucas, uh, and, uh, learning so much about your history at Web Pros, um, your impressions of the hosting industry’s past and future, uh, and, and your advice to, uh, entrepreneurs and managers on, on how they can run their teams effectively.

[01:18:49] Thank you very much for joining me. 

[01:18:51] Lukas: Thanks so much for having me. Really appreciate.