CEO Unplugged

Eliot Spitzer, Emperor's Club and Homestead

Last week was unusually exciting around the old Homestead offices, thanks to our brush with one of the more newsworthy events of the decade.  It turns out that the high-end prositution ring Elitot Spitzer has confessed to patronizing--Emperor's Club VIP--built their website using Homestead.

To be clear, we do not monitor the content of the sites built using Homestead... we have way too many sites to monitor, even if we wanted to.  What's more, it turns out that for legal reasons we cannot monitor our customers sites unless they are brought to our attention by a complaint, the legal authorities, or a call from the owner of the site or other "normal course of business."

So, when news broke like a tsunami last Monday about the Spitzer site, and every web browser in the free world starting hitting www.emperorsclubvip.com (and within minutes had taken down the New York Times and www.ny.gov websites) Homestead's servers started receiving almost 150% of their normal traffic.  The good news is that our servers handled the traffic just fine.  The bad news is that our system soon automatically disabled the site because it had exceeded (big time) it's alloted gigabytes of traffic and guess what everybody saw instead?  A friendly Homestead logo and a message stating "Sorry, the site you are looking for is temporarily unavailable because it has exceeded its bandwidth limits."

Old board members called.  My new employer called.  NBC Dateline (and other press) called.  My mom even called (you can imagine what that conversation was like).

But that's not the whole story.  It turns out, unbeknownst to me, that the FBI had contacted us a few months ago and informed us about emperorsclubvip.com and asked us to cooperate with their sting operation.  This is not as unusual (or Hollywood) as it sounds.  We get several inquiries like this from law authorities every month, and we actually have a well-practiced process that dictates how we balance cooperating with criminal inquiries while also protecting the privacy of our customers.  In this case, because of the evidence presented by the FBI--which corroborated with data on the site--we agreed to cooperate with their sting operation.

The FBI failed to mention their prime suspect was the governor of New York.

Thus, because this type of thing is unfortunately rather routine, I was not aware that we were involved with the investigation--or that it was a Homestead site--until everybody else.

Which brings me back to why last week was so eventful.  It brought into public view an aspect of our business that has been central to much of Homestead's ten year history.  Something that Intuit, our new parent company, has never had to deal with--until last week. 

When you introduce a technology or tool to society, you are not in control of how it is used.  Most of the time inventors are not even aware of how their invention is ulimately used, but when the technology is on the internet, you can actually WITNESS it.  This is a beautiful thing--people do amazing things with it that you (the creator) never imagined.  This is also a terrifying thing--people do things that you wish they wouldn't, or which violate your sense of right and wrong.  There are many sites hosted at Homestead which are legal, but make my skin crawl (see www.michaelsavage.com).  Even though I despise what sites like that say, I really would die to defend their right to say it.

Luckily for us, over the years less than 1/100th of one percent of our (millions of) sites have come to our attention as being objectionable or illegal.  But each time we have had to balance the rights of our customers to use this platform that we nurtured and created with the laws of the country and our responsibilities as a business.

When all the dust settled last week, the feeling I was left with was what a great privilege it is to have created (and still run) a business that has such interesting ethical, constitutional, and social implications.

Now if I could only get my new parent company to enjoy it as much as I do. :o)

--jsk 

New year, new company, same dream

First off, Happy New Year everybody!

Well, it's official.  For the first time in my career, I have a boss.  It's kind of fun, actually. (I always wanted to know what it felt like to talk about the boss behind his/her back!  Oops, guess we'll see if he really reads my blog...)  Our acquisition by Intuit officially closed in mid-December, and for all of our customers who expressed some doubt, the earth still appears to be rotating around its axis!

I have gotten many comments from friends, family and customers along the lines of "man, this must feel SOOO good" or "how long until you buy your <insert material sign of wealth here>?" or "so you're totally checked out about now, right?"  Not exactly.  I appreciate the sentiments, but it doesn't really feel like that.  The people who have best related to our range of emotions are other entrepreneurs and very close friends/family who have watched us care and feed Homestead over the past ten years.  The simple fact is that selling your baby is hard and, once you do, it doesn't make you care about it any less.

No question, it does feel good to have external validation for something we've worked so hard to build.  But, as I shared with you in my original post about the acquisition, this is not why we strap on our boots every day.  In fact, having a third party pay a significant amount of money for our "work in progress" actually makes us feel even more of a responsibility to keep building.  We don't really know what else to do in both good times and bad, except keep building. 

I think this explains why people like Bill Gates and Steve Jobs and Richard Branson keep showing up for work every day.  You get addicted to building things, not just for the financial reward, but for the feeling you get when you see employees loving their jobs, or customers who are addicted to your products, or a world that--in some small way--has one less problem, or one more smile.

So, I know I speak for all 150 people on the Homestead team when I say that selling our company doesn't mean we've reached the destination.  It's just a big milestone on a long journey.  And it hasn't changed our dream, except to make it bigger.

Thanks for all of your continued support, and we look forward to lots of exciting new adventures in 2008.

--jsk

More on Intuit + Homestead (inquiring minds want to know)

Wow.  Thanks to all of the amazing feedback over the past week concerning our announced merger with Intuit.  Between the hundreds (almost 1000!) of congratulatory emails, the lively discussion on the blog, and the massive coverage in the press and blogosphere, it's been quite overwhelming. Throw in a buck-fifty (note use of web lingo proving I'm hipper than I seem) excited Homestead employees, a bunch of Silicon Valley well wishers, and several thousand buzzing Intuit people and you've got yourself a party!

I have not been able to reply personally to many of the emails or inquiries, so I thought I would respond to some of the common themes.  Here we go (by order of popularity):

Theme #1 (roughly 60%):
CONGRATULATIONS/CONGRATS/WOO HOO!/ROCK ON/ETC.

What I would say if I could respond to each of you individually:
Thanks, dudes.  Much appreciated.  You guys rock, and your support means a ton to all of us.  We have not forgotten in all of this that, without you, we would have nothing.

Theme #2 (roughly 20%):
YOU'RE GOING TO RAISE PRICES/PLEASE DON'T RAISE MY PRICE/U IZ A RICH BAZTARD NOW DON'T RAIZ R PRICES!/YOU PROMISED CHARTER MEMBERS YOU WOULD NEVER RAISE OUR  PRICES ARE YOU GOING TO KEEP THAT PROMISE?

What I would say if I could respond to each of you individually:
We have absolutely no intention of raising prices!  We do intend to accelerate our development of new products, and we'll probably charge for some of these additional features and include others for free in your packages.  As for Charter Members, who have been with us since the very beginning, my promise to you of never raising your price again is still in tact--you don't honestly think I could get away with that and look myself in the mirror?

Theme #3 (roughly 10%):
YOU'RE GOING TO OUTSOURCE YOUR SUPPORT TO INDIA/THIS IS THE END OF YOUR EXCELLENT SERVICE/NOW YOU'RE GOING TO GIVE US BIG COMPANY SUPPORT/THEY ARE GOING TO RUIN HOMESTEAD

What I would say if I could respond to each of you individually:
I was really pleased to read all of your notes and comments about how you much you like Homestead's support.  Words like "Homestead is the gold standard of web support" or "Homestead agents always know how to make us dummies feel smart" were music to my ears!  We're still working hard at figuring out how to deliver world class support to all of our customers and, in spite of the many generous comments this week, we still have work to do. 

As for whether we are going to outsource it--no, no no!  In fact, this week was exciting for another reason.  We opened our new customer service center in Denver.  Yes, as in Colorado, as in the good 'ol U.S. of A.  It should have 100+ additional folks by the end of next year, combined with the great team we already have here in California.  One of the major reasons Intuit wanted to join forces with Homestead is because of our unique philosophy of actually wanting to talk to our customers on the phone.  We've figured out ways to do this profitably, and we're not going to be changing this approach.

Theme #4 (roughly 5%):
NOOOOOOO!/YOU IDIOTS, THIS IS GOING TO END JUST LIKE PHOTOSITE/I CRIED WHEN I GOT YOUR NOTE/IT'S DEJA VU ALL OVER AGAIN LIKE PHOTOSITE/IN TWO YEARS THEY ARE GOING TO SHUT DOWN HOMESTEAD!

What I would say if I could respond to each of you individually:
I totally understand how a few paranoid folks might think this story ends like our sale of PhotoSite did.  But trust me, people, this is totally different.  We sold PhotoSite because we couldn't afford to continue running it ourselves at the time.  It was a labor of love, but nowhere near a mature business (i.e. it was losing a lot of money) which was directly related to its ultimate demise.  In contrast, Homestead is a very healthy business, and is growing rapidly.  A company as well run as Intuit isn't going to pay $170M for a company and then shut it down. This is more like Ebay's acquisition of PayPal, Google's acquisition of Keyhole (became Google Earth), or Yahoo's acquisition of RocketMail (became Yahoo Mail)--all previously established businesses that expanded rapidly in their new homes.  Finally, shutting down Homestead is going to happen over my dead body (and the dead bodies of about 150 other people).  And we're not going anywhere.

Theme #5 (roughly 5%):
MAYBE NOW YOU CAN MAKE MY MAIL SYSTEM WORK/DON'T TRIP OVER YOUR PILES OF MONEY ON THE WAY OUT THE DOOR/<INSERT RANDOM BIBLE CITATION HERE>/THIS IS THE LAST NAIL IN THE COFFIN OF HUMANITY/OTHER CYNICAL OR HUMOROUS REMARKS

What I would say if I could respond to each of you individually:
God bless the Web.

--jsk

 

Intuit and Homestead join forces

Big news in the Homestead universe today!  We announced this afternoon that Homestead has entered into a definitive agreement to be acquired by Intuit for a generous amount of cash.  You can read the standard-issue press release here.  It's expected to close early next year.

The backstory is a bit more interesting.

Ever since I started Homestead in 1997, I have kept two lists.  The first list is all the acquisition offers we have received over the years (it's nineteen long, not counting this one).  The second list is a "wish list" that contains companies I would actually consider selling our "baby" to; companies that have resonated with me and the Homestead philosophy of doing business over the span of my career (this list has four members).  Intuit is on the first list twice and, as you might guess, a member of the illustrious second list.

You have to understand that when you start a company in your bedroom because you don't want to work for "the man," it is quite exhilarating (and a bit amusing) the first time another company comes along and offers to pay you a lot of money for what you've created.  I've never intended to sell Homestead, but then again I've never intended not to sell it either.  It just hasn't been a primary focus.  It's much more fun to hire amazing employees, build great products, and delight the pants off of your customers.  In fact, you can ask my wife: getting an acquisition offer is a major distraction and usually knocks my world off of its axis for a few weeks until we eventually say no.

Saying no, even though we've done it a lot of times, is not a simple matter.  We have investors who have put millions into our company, and they deserve a rewarding and timely return.  We have employees who have spent many years laboring away, and they deserve to sock away some money in their kids' college funds, maybe upgrade from their 1200 square foot million-dollar Silicon Valley house (or buy one at all).  We have white boards full of product plans that don't see the light of day because of scarce resources.  We have 100's of thousands of business websites that are counting on us being around--and staying the best in the industry--for many years to come.

I have to weigh all of those factors (and consult with many folks) every time this happens, before I can give a response that I feel is fiducially and ethically responsible.  Nineteen times that calculus has resulted in a "no."  Last week it came out with a resounding "yes."

Here's why.  We don't get our kicks out of delivering financial returns for our shareholders (although it feels good, we think of it more as a responsibility than a thrill).  As I said above, our thrills come from employees, products and customers.  So if we can deliver a great return to our shareholders--while accelerating our dreams for employees, products and customers--an acquisition makes a ton of sense. 

Which brings us back to the second list.  A suitable acquiring company for Homestead has to be a place that we all can feel as strongly about as we do about Homestead.  It has to have a set of core values that matches the Homestead Creed.  It has to have a hiring policy similar to our "no jerks, no idiots" rule.  It has to believe in giving back to the community.  It really helps if we can keep our brand, our offices, our wacky traditions, our identity.  And we absolutely have to keep all of our people, and be able to maintain the sense of ownership and pride that we all feel today.

I'm happy to report that Intuit passed all of these tests with flying colors.  I'm 100% confident the merger between Intuit and Homestead is in the best interest of all 5 Priorities that Homestead's Creed spells out.  To our Shareholders (#5), we'll feel proud that we delivered for them as we bid them a fond farewell and begin serving different financial stakeholders.  To our Community (#4), we'll be announcing several fantastic initiatives in the coming months (stay tuned).  To our Customers (#3), you'll notice no changes (except a new privacy policy and a little "an Intuit company" logo under our name); however, we'll be rolling out more great Products (#2) even faster.  And finally, to our Employees (#1), you'll have to buckle your seat belts once again--this wild ride is only going to get more exciting in the years to come!

Oh, and the blog stays, too.

--jsk

PhotoSite Update

I wrote a few months ago about the unfortunate news that United Online, the company that bought PhotoSite from us, was shutting down PhotoSite.  While that has happened, it is still the case that you can move your photos for the next few months by using a migrator that the folks at SmugMug built.  I thought I'd post the instructions if you want to try the migrator:

You can download and install the tool at http://www.smugglr.net/. You’ll need Firefox to run this since it’s a Firefox extension. After you install the tool go into the Firefox Tools menu and click on Smugglr. This will launch the migration wizard which is pretty self explanatory. You’ll need to enter your PhotoSite login / password and your Smugmug login / password into the tool for it to migrate the data over. So make sure to create a Smugmug account before running the tool. You can use the coupon code “photosite” to get 50% off the first year of your Smugmug membership.

Enjoy!

--jsk

Wooden pens

I spoke to a homestead customer the other day who makes beautiful "turned" heirloom wooden pens and bowls.  The customer had some gripes which he emailed me about, so I called him back.  I can't stress enough how important and beneficial it is to engage customers who have complaints or issues with your service or product.  Think of each customer who reaches out to you as a gift--worth much more than whatever cost you incur to speak with them, resolve their issue, and/or refund their money.   

I try to personally respond to every customer who emails me (sometimes over 100 per week, so I can get behind!) but I typically call ones who have complaints--as long as they are reasonable and constructive.  This is where I learn the most, not only in the many ways we could be better serving our customers, but also in improving my understanding of work our employees do on the "front line."  This latter point can be crucial, as our failure to empower them with the proper tools/products/policies handcuffs their ability to delight our customers.  And it's very easy to lose touch as your company grows and you're busy "at the top."

But back to wooden pens.  One thing that struck me as I was talking with the wooden pen maker was this: he wasn't going to be happy, no matter how great his website was (it was actually pretty great), until it actually started delivering him real revenue.  And his definition of real revenue was pretty significant.  He wanted to know why he wasn't first in the Google search for "wooden pens," why he couldn't easily create back links, why his SearchLight campaign had "salad bowls" as a word when he didn't make salad bowls, etc.  Reasonable but challenging demands.

The "aha" moment for me was that no matter how hard we try to be the best "DIY website" company out there, what our customers actually need is for us to be a "DIY online business success" company.  Now, there is no way we can single-handedly make small businesses successful online--they need quality products, business sense, a marketing plan, and a lot of entrepreneurial drive.  But there is so much more we could be helping them with, above and beyond building a website.  So I'll promise right here and now that we will dedicate much of our product resources over the coming years to helping our customers not just build websites, but build successful businesses.  And I think I'll start with our customer who makes such beautiful wooden pens: click here to check out his work.

--jsk 

Happy 10th Anniversary Homestead!

We just hit a big milestone here at Homestead: 10 years in business!  Technically, we didn't launch the first version of Homestead until January 1998, but we use October 1st as our official birthday because it lines up with the anniversary of the original company, KartoffelSoft.  I started KartoffelSoft on October 1st, 1994, so it's the 13th anniversary of our company if you trace it back to the very beginning.  It's amazing how far things can progress once they gain a momentum of their own.

KartoffelSoft was an educational software company that paid the bills by "bootstrapping" (read: doing anything that was legal for money) while we tried to invent great software that would free us from the indentured servitude of technical consulting.  All these years later we've built something quite different than what we set out to do, but in many ways it is much more exciting and bigger than our original dreams. 

Maybe there is a lesson there for aspiring entrepreneurs?   You rarely recognize the true "big idea" at the beginning, but if you don't start somewhere you are guaranteed to get nowhere.

Happy Birthday Homestead.  A sincere "thank you" to our hundreds of employees and millions of customers who have been a part of our journey so far!

--jsk

Goodnight PhotoSite

While I've never gone all the way through the process of selling a business, I approximated that experience in 2005 when we decided to sell our PhotoSite division to United Online.  Thus it was particularly upsetting when I received (along with about 700,000 other PhotoSite users) an email announcing that UOL was shutting down PhotoSite at the end of September. 

I was so bummed about it that I composed a song for the Homestead talent show entitled Ain't No More Photosite to the tune of Pink Houses by John Mellencamp.  I tried to make it funny but it turned out just sounding depressing.  When I think of the literally thousands of hours we all spent making that product the best photo sharing product on the market (if I do say so myself), it's hard not to be depressed.

The moral in this story?  Sometimes you make the right business decision on paper but you can never predict all of the ramifications.  I would probably still make the same decision today given the same situation that we faced two years ago, but I wish I had given more thought to this scenario.  There were two scenarios that I thought were the most likely outcomes: 1) PhotoSite would explode in growth, and we would regret having sold it; or 2) PhotoSite's growth would stagnate due to market conditions or poor handling, and it might meet an untimely death.  I just never thought #1 would lead to #2 (PhotoSite grew about 400% in the 2 years after we sold it).

I have no other great insights here, except to say that I'm very sorry to all of my fellow PhotoSite users for the trauma of potentially losing the online photo collections we all spent so many hours meticulously crafting. 

IMPORTANT NOTE FOR CURRENT PHOTOSITE USERS:

For those of you who don't find Snapfish adequate for your photo-sharing needs, you might consider SmugMug as an alternative.  Note that SmugMug is not free, but they have offered to give all PhotoSite customers a 50% first-year discount (use the discount code photosite when signing up).  We always felt that SmugMug was the best competitor to PhotoSite, and they have continued to innovate and improve in the past two years.  They seem to run an impressive operation.  For what it's worth, I have decided to move my 6000+ family photo collection there. 

Smugmug is working on a migrator that will automatically grab all of your photos from your PhotoSite account, but it won't be ready until October.  Note that this will still work until June 2008, even though your PhotoSite will no longer be viewable to the public after September 27th. 

In the meantime, a PhotoSite fan wrote a program that you can run on the computer you have PhotoSite installed on, and it will upload all of your photos to a SmugMug account.  Many folks have already used it successfully, and it has the big advantage of moving all of your high resolution photos from your computer, even if you never uploaded them to your PhotoSite.  Just be warned that a) the interface isn't very pretty and b)it can take a long time if your Internet connect is slow (mine took over 24 hours). 

Click here to install the PSmugMug Migrator application.  When prompted, you'll need to hit "Run" twice in a row, and then you should be able to launch the application from your desktop.  Please read the instructions carefully on the first screen that appears.  Also note that you will need to create a trial account at SmugMug (no credit card required) before you begin.  If you can't get this to work, just wait until the official SmugMug migrator is finished (I'll post instructions on my blog when it's ready).

Long live PhotoSite.

--jsk

Web Marketing 102: Dipping a toe online

My post a few months ago entitled Web Marketing 101 has generated a lot of positive feedback, as well as cries for me to fulfill my promise at the end of the post for a subsequent post on Web Marketing 102: Acquiring Customers Online.  One warning: what this blog lacks in frequency (this is my 8th post this year) it makes up for in wordiness (er, "depth"), and I'll no doubt continue the trend here.

A quick overview

Please start by reviewing the post for Web Marketing 101 (that is, if you haven't committed it to memory).  As a summary, the fundamental questions you must answer before you can really start marketing are:

1. Who is your customer?
2. What need(s) are you addressing?
3. How much does it cost to acquire that customer (CPA)?
4. How much is the "lifetime value" of that customer (LTV)?

Now, don't worry if you don't have final answers to those questions.  It takes months just to get your head around them, and you'll spend years trying to perfect the answer.  But, it's essential that you understand the methodology behind these questions.  No matter how good you are at marketing, and how advanced your business is, the answers to these questions are works in progress.

Setting a few things straight

Every customer I talk to--without exception--secretly hopes that if they just put their business online the money will come pouring in.  If you believe that, or are even hoping it in the back of your mind, STOP RIGHT NOW.  Slap yourself silly.  Pour come cold water on your head.  Ask your friend to run over your foot with his car.  Okay, are you feeling the sharp pain of reality yet?  Does it hurt bad?  Good.  Now we can get down to business.

Marketing online is no different than marketing offline, except you are online.  Repeat that a few times.  Some things about being online are advantages: it's interactive, the customer can be in the comfort of their own home, the customer can be miles (even oceans) away, it can be the middle of the night, there's lots of room for pictures and words.  However, these same advantages are also disadvantages: interaction can be overwhelming, the customer isn't face to face with you, the customer might be a little *too* comfortable at home, and all those words and pictures can get in the way of accomplishing what you actually want: sales.

Still, online marketing presents opportunities that no other medium can, and it all starts with one important concept...

Four weeks and a shave

Hello everybody,

I apologize for my long absence from the blog, but I have just returned from my Homestead Sabbatical, a nice perk that all employees at Homestead receive.  For every five years of employment at Homestead, you get four weeks off paid, on top of your normal vacation time.  The intent is for folks to take an extended break, whether to explore the world, take an intensive continued education course, learn to cook, or bike across the country (all real examples).  For me, it was an extended overseas trip with my family, and a chance to grow a beard.  (Some sort of romanticized notion of freedom from social constraints when travelling overseas? Or all those caveman ads getting to me?)

Besides making our employees feel great, the sabbatical also plays another important role in our company.  It makes us a better organization.  When one of your key employees leaves for a month (and anybody who's been here for five years is definitely key), it forces other people to walk in his/her shoes, and learn how to do his/her job.  This is a key piece of building a "learning organization" which is my term for a company where employees are encouraged to ask/answer questions, enjoy teaching their colleagues about their jobs, and welcome feedback from folks who have different or new perspectives.  A learning organization is the opposite of  "silo" or "Dilbert" organization, where people hold on tightly to their knowledge and don't want to share it, because they think it is the key to their job security and/or power.  Just read Dilbert if you want to know what it's like to work at a place like that.  Or, you probably can just recollect one of your past jobs.

I realize that not every entrepreneur is in a position to give their employees long amounts of paid time off, or may be too new to benefit from a policy like this.  But there are other ways to get the same results.  Schedule a key presentation when you know your best presenter is going to be out of town.  Then watch other folks step up, and watch how your star tries to prep them and help from afar.  Or encourage some of your senior folks to take off a week of extra paid vacation and then get all of your new people into a room and tell them you are counting on them to step up and learn the ropes quickly.  Have "ride along" days where person A "rides along" on person B's job; then switch positions the next day.

I am pretty confident that you want to build an organization, no matter how big or small, where the knowledge in the collective organization is greater than any individual.  And you want employees who know you care about them hollistically as people, and realize that it makes them better employees.  For every day or week or month of time you give them, they will give you back many multiples of that in hard work, fresh ideas, and loyalty.

What I can tell you for sure is that I've returned more energized than ever about the business, and in dire need of a shave.

--jsk