Q&A Part 1: Network Solutions CEO touts small-business push

'We don't see ourselves as a domain-name company anymore,' says Champ Mitchell

It has been a challenging road for Network Solutions Inc., the one-time monopoly registrar of .com domain names that, when its market was deregulated, lost market share at a record-setting rate. Now, the Herndon, Va.-based company plans to evolve as a provider of online business services, and today, it announced a major push into the small-business market. Computerworld's Sharon Machlis spoke with Chairman and CEO Champ Mitchell about charging $35 for domain names when some competitors price at $8.95, how the Hushmail domain hijacking really happened and the importance of answering the phone. This is Part 1 of a two-part interview.

How do you sustain a business where you're charging $35 a year for something that a lot of your competitors are charging maybe one-fifth the price for? We're a lot better. As you know, Network Solutions used to be the monopoly. Between a combination of abusing its customers and giving the poorest customer service on the face of the planet, they managed to gain a first: They lost market share faster than any former monopoly in the history of the United States. I will say that as one of their customers, I think it was well deserved.

Obviously, there were lots of issues when I came here [in August 2001]. The customer-service aspect of the business was probably the worst part of all. The abandonment rate [for callers waiting to talk to a service representative] was 30%. And I was like, "I beg your pardon? What the devil is going on?" (Except I may not have used "devil.")

They were very nonplussed by that; they said that was normal for them. But since their average wait time was an hour and 15 minutes, it was not a shock. Today, our abandonment rate is less than 1%, and our average wait time is about 15 seconds.

We've stabilized. We've got about 7.5 million domains under management. But here's, I think, the key thing for us: We don't see ourselves as a domain-name company anymore. Our revenue mix reflects that we are moving away from being a domain-name company. In the last 18 months, we've gone from less than 10% of our revenue coming from something other than a domain name to over 30%.

Is that Web hosting? It's a combination of online services for small businesses. That's the part of the business that's growing. I think it shocks people when I say we are the small-business experts online, because we have the largest customer base of small businesses of anybody online. ... The fastest-growing part of the marketplace online is small businesses. Right now, [there are about] 8 million small businesses with online presence. However, in the next 12 months, according to our customers and the survey data that we do -- and we do an awful lot of market research, something that the old Network Solutions didn't do, because they didn't care -- 2.7 million small businesses who are not online today said they plan to be online.

Why all of the sudden is there this surge? It's search. Increasingly, small businesses are becoming aware that the way to be found is online, that people have stopped going to the Yellow Pages. They do local search; 58% of our small business customers report to us that their business jumped drastically as soon as they went online. That's an especially important number when you realize that fewer than one out of three of our small business customers sells anything online.

This is why we are able to do a reasonable amount of premium pricing.

Network Solutions offers 100-year registrations. Why would someone want to buy a domain name for 100 years? It's called protecting yourself. Do you remember when The Washington Post forgot to reduce its domain Washpost.com [and lost e-mail for several days]?

Would you like to have been the head of IT at The Washington Post that day? I don't think he or she probably had a very good day, to put it mildly. That's why some people choose to do it. It puts the onus on us. We're not going to miss renewing a domain. That's what we do for a living.

Aren't there other ways you could do that, like insurance or auto renewal? A hundred years is a long time. A hundred years at $9.99/year is less than $1,000. What's [Computerworld.com] worth to you? You couldn't buy insurance with a premium that cheap. It's by far the cheapest way to do it.

That's a large corporate buyer. We've got a number of those. We cherish them. They'll manage 10,000, 15,000 domains. And the truth is, no matter how good our customer service is, they don't want to call it because they've got too many domains to manage, and they're professionals. What they want is self-management tools. We work very hard to keep the best self-management tools in the business for those people.

But the growth part of our business is totally different. They are very bright people, who are pretty aggressive -- that's why they started their own business -- but they aren't technologists. And we've had to change ourselves and reinvent ourselves in order to service them.

So we've gone from where we used to spend about six minutes on a phone call to, in the first month we have a small-business customer, we talk to them for about an hour. We've moved away from pushing our customer-service people to get average handle time down, to say, "No, talk to them as long as they need to be talked to." And we've moved from taking orders to building relationships. We have moved into a consultative forms of servicing people.

In fact, we removed a lot of the incentives to upsell because we don't want our customer-service consultants putting customers on packages that are more complex than they need. The customer's not going to be happy. We lose money with every customer we add today, but ...

That doesn't seem like a good business model. But if we keep them, we will make more money in the long run than we used to make on just the one-time sales. What we're getting is the type of very intimate, trusted-adviser relationship with people that leads to long-term benefit for us and them. ...

We do have the gold standard of customer service. We spend that hour in the first month on the phone with people. We do answer it in 15 seconds. We speak to people in plain English; we stay away from the jargon. And because of that, we have a highly satisfied customer base. But this consultation has to go on constantly.

Our small-business customers have two great fears. And, one of the two great fears is they don't understand the technology, they're afraid of it, and they're afraid of looking dumb. These are high-achieving people. ... They have never gotten awarded for not knowing. So one of the hardest things for them is to say, "I don't know, I need help." We train our customer-service people very carefully, to help them get out that first question. And after that, it goes much more smoothly because they're not going to have somebody treat them like they're foolish to ask.

We had really bad customer service, truly the worst I've seen in 30 years in business. It was so bad that I couldn't fix it. And the main problem was the attitude. So what we did was, we had a company-owned store in Herndon -- we closed it down. We had four outsourcers, got rid of all of them, fired the bunch of them and brought in a whole new team. We opened up a new customer-service center in Hazleton, Pa., which is up in the Poconos, where people wanted a job and were willing to treat customers decently. And we spent a lot of time training them.

By the way, our average handle time at that point was about 9 minutes, but the first 4 minutes on average of the phone call was people screaming about being left waiting. Today, 87% of them put us in the top two [survey] boxes, the high-satisfaction boxes.

This is where our whole model is going. That's why the domain name is less important as a source of revenue, it is a declining percentage of our revenue and rapidly declining -- not as much because of pricing as because of the fact that we're moving into these solutions areas. Now what we are is, we're the place small businesses come to get started being found online and over time to grow.

There's no reason they can't also get services that are delivered to them online, that they could get off-line [with] software installed.

Go to Q&A Part 2: Network Solutions CEO on domain name security

Copyright © 2005 IDG Communications, Inc.

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