THS Articles

Q and A with Joel Kocher, Chairman and CEO of Interland

By Cliff Boodoosingh

THS: I'd like to address the strategy Interland has been executing for the past 3 years: 2002 was the year of acquisition obviously, 2003 integration and now we are fully into the organic growth campaign. I was wondering with the acquisition of CommuniTech.Net, Dialtone, iNNERHOST, Trellix and Hostcentric, if these companies completed the number of companies Interland was after?

JK: Yes, it did.

"I've lived through the entire evolution of the PC industry, personally, and came to understand that these technology industries reached a certain point of market penetration where the technologies standardize."

THS: So basically, the puzzle is complete as far as what you need, but what were you looking for specifically from some of these companies?

JK: Well, the vast majority of the companies were bulk oriented, so we believe that over the long term scale is critical because this is a scale business. I've lived through the entire evolution of the PC industry, personally, and came to understand that these technology industries reached a certain point of market penetration where the technologies standardize. And then it becomes a race to size, the big get bigger and the little guys go away. It happens over and over and over again in every industry that I can think of. You just do not find mature or semi-mature industry segments where there are three or four hundred competitors. That's stating the obvious but it eventually always boils down to less than 10 major competitors in any given market. There are always niche players, who may specialize in a specific area, but those are few and far between, but eventually these technologies standardize and once standardization occurs you clearly see a consolidation of the market share. A critical part of our strategy was to get or gain a scale advantage and a large share of the market early in the game - recognizing that the technologies would standardize, the infrastructure technologies would standardize and that eventually it is going to become a game of size. Now, secondarily to that we felt like there were some applications. So, let me conclude that point, the vast majority of the acquisitions we made were intended to achieve that end, essentially to bring forth scale.

The second component was, we felt like there were some applications that we needed. And that is why we acquired Trellix, which was primarily an application software company, targeted at engineering Web site building tools, toolsets. These more importantly are the applications themselves that customers need to have to be successful online. That acquisition was in January of 2003, so that has been about 15 months. That acquisition has established the cornerstone of our growth strategy, which is to participate in a fairly broad way in the changing of the marketing algorithm for small businesses. There absolutely should be no question left today about where the marketing algorithm for small businesses is headed. Now traditionally 48 percent of small business marketing expenditure has gone to the yellow pages. For a large percentage of small businesses their marketing plan every year is very simple: write a check for that yellow pages ad and we are done. Now, that's changing radically. Well, let's take Google. The rapid emergence of Google and Yahoo! search as their force clearly indicates that the way people or small businesses are going to have to market... it's not even a matter of choice, it's not even a matter of gaining a competitive advantage. It's just a matter of staying alive, it's changing radically and it's moving online.