Fall 2000 Trends
from the ISP CEO Roundtable — continued

ISP CEOs on marketing

• 80 percent of the CEOs stated they acquired new subscribers for less than $100 each through their marketing efforts alone, however:
• 40 percent thought it was all right to spend more than $100 to acquire a new subscriber.
• 75 percent of the CEOs said it cost more than $100 to acquire a new broadband client, while
• 5 percent said it cost less than $100 per subscriber to acquire a new broadband customer.

[It should come as no surprise that 5 percent of the CEOs also said that they have no advertising budget for broadband service.]

Of those CEOs that operate their ISP with an advertising budget:

• 97 percent use print media to advertise their services.
• 50 percent use radio or television advertising, with about 85 percent paying cash and 15 percent ISP services for advertising deals.
• 30 percent advertise through direct mail.
• 40 percent exhibit at trade shows, and
• 10 percent use Web banner advertising to promote services.

[It's no wonder that 13 percent are worried about their marketing efforts! Reminder—do not barter dollar for dollar for advertising, but rather ask for a 10:1 or 20:1 ratio when working with media firms whose hard costs are much lower than yours.]

• 40 percent of the CEOs believing that it's getting harder to find new subscribers than it was just a few months ago.
• Only 8 percent thought it was easier get new clients today, than it was six months ago.

[So 52 percent didn't want to think about it?]

• 90 percent of the CEOs agreed that word-of-mouth and referrals are the best methods to pickup new subscribers.
• 85 percent of the CEOs believe that using press releases is a great way to get the word out their businesses, while participating in community and school or educational programs remain the best way to have your business featured by local news media.
• 15 percent of the CEOs said their ISPs formed some type of portal partnership, while 6 percent reporting they were paid cash monthly by their portal partner.

[Mental note to self: Don't do a portal-partner deal unless you're certain it will increase your revenues, decrease your costs, or retain your clients longer.]

• Retail computer outlets can account for 20 percent of some ISP sales. Prepaid dial-up kits available at retail stores remain very popular, of which 3-month prepaid kits were reported as the most popular. ISPs offer retail merchants as little as one-third of the selling price for each kit sold, to as much full retail price of the kit in order to acquire a subscribers.
• Several aggressive ISPs also offer free training in order to entice merchants to promote their Internet services dial-up kits.

ISP CEOs on profitability

• 96 percent of the Internet services said they operated profitably.
• 4 percent said they operated in the red.

[One very deceiving trend is for Internet service owners to report profits, failing to mention that a large percentage of company revenue is generated by non-Internet access services.

While I'm an optimist by nature, I find it very hard to believe that almost every ISP represented at the roundtable is profitable. I think social or peer pressures may have influenced the vote. In fact, I think we should do a hand recount.]

• 50 percent the CEOs said they operate pure-play ISPs offering Internet access with Web and domain hosting services only.
• 15 percent said they also operating an ASP business on the side, while many more CEOs were considering the option of becoming providing applications online.

[Those of you that might be interested in the ASP revenue streams, internet.com is presenting a one-day seminar, From ISP to ASP on Dec. 11, 2000 at the Fairmont Hotel in San Francisco. I'll be there.]

ISP CEOs on human resources

• One-third of the CEOs operate with a dress code, while home based ISPs might operate with an optional clothing clause.
• 20 percent of the CEOs said they thought there was a shortage of good employees available.
• One ISP CEO reported great success by posting help wanted ads at the career counseling offices of local colleges and universities.

[This was much lower than I expected. Some CEOs said they had successfully trained their kids to assist in operating the family ISP business, while others successfully acquired talent from ISPs exiting the business or in the process of being acquired.]

• 40 percent of the ISPs offer 24x7 technical support, of which half said provide support 24x7x365.

[That means most folks operate their technical support 24x7 only during the business week. My suggestion is to not run 24x7, but focus your limited resources on providing extremely fast and expert responsiveness and service during your regular business hours. If you serve residential subscribers as a primary business, then you may have to offer a different set of technical support hours than that of a business-focused ISP.]

ISP CEOs on wireless services

• 20 percent of the CEOs offer wireless services.
• 60 percent said they would offer wireless services within the year. (Popular wireless suppliers among the group include Breezecom, Lucent, Waverider, Cisco, and Arrow.)
• ISPs that offer wireless access said business customers are their primary target market, while only 3 percent of the CEOs said they focused on delivery residential wireless access.
• 3 percent of the CEOs said their wireless Internet service charges are less than $40 a month.
• 18 percent charge less than $100 a month.
• 10 charge more than $100 a month.
• Many folks who resell wireless services from a wholesale provider said to expect to make about 20% commissions on monthly recurring revenues.

ISP CEOs on DSL issues

• 22 percent of the CEOs reported that they currently resell DSL services, with Covad and Northpoint being primary wholesalers.
• Only half of the CEOs said they were making money offering DSL services and many seriously questioned whether they should continue offering DSL access.
• 6 percent provide "home brew" DSL services from equipment they own.
• 98 percent of the CEOs at the roundtable reported that they could not buy dry pairs of copper from telecom companies any more.
• The overall feeling is that relationships between ISPs and DSL vendors are in the dumps with only a couple of CEOs stating that service from their telecom provider improved.
• 40 of the CEOs think their DSL carrier doesn't really care about them or their business at all.
• 12 percent of the CEOs are concerned about reduced DSL prices eroding their dial-up growth rate.

ISP CEOs on caching

• 18 of the CEOs said they used caching systems and services from Cisco, Cacheflow, Novel, and Akami.
• Some CEOs said they save as much as 25 percent on bandwidth expenses as a result of implementing a caching system.
• However, most CEOs felt that caching systems sometimes slow down the end users experience on their ISPs network.

[No matter which direction you take to grow your Internet-based business, be it application services, wireless access or other online ventures, here's to your ISP success!]

Christopher "Sparky" Knight

— End

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Related articles:
	[June 5, 2000]	Insights from ISPCON's 5th Annual ISP-CEO Roundtable
	[Nov. 1, 1999]	Insights from ISPCON's Fall ISP CEO Roundtable