Web Africa feedback to email

[Gatecrasher]

Well, I receive an "it is our pleasure" email from Web Africa today to tell me all about their revised products and pricing.

I replied:

Dear Web Africa,

Nice to see that you have reduced your prices, but honestly, they are still way too high to be taken seriously. There are just so many other bandwidth options in the market offering much better value for money.

Regards...


I received this response from Abigail Dawson, not incidentally via email, but on the support ticket system when I logged into my client zone:

Hi,

We are investing in our network so as to build a solid business that will be here for the long run and due to this investment will be able to be the most beneficial/reliable value-added ISP for our consumer.

Unfortunately in this cut throat industry there are those that will come and go as has been proven time and again trying to offer a quick fix and make a quick buck only to fail after a few years. We have chosen this route to build a solid foundation and structure. Then in a few years we can expect a sudden growth spurt when another ISP disappears that used to be the talk of the town...

We also took in to consideration that our customers asked for reliability and value over price and have worked on our network accordingly. Unfortunately some peoples' "wants" changed upon seeing below cost pricing.

We had stated we were expecting around R50 to be the benchmark and have looked and changed what we can and worked on being more value added whilst working realistically within the consumer's budget.

We also looked at the DSL complete products and are able to drop the prices on this so we can transfer customers line from Telkom which takes 2 - 3 weeks with no downtime, then one can end up only paying eg. R17 for the GB [where else will you find that?] and they have the convenience of a single point of contact [no more talking to Telkom!], as well as receiving 1GB of free bandwidth for transferring.

We have always strived to be innovators in the market too and we've done this - This is going to be the way forward in the future, watch and see how many ISPs follow suit , and we will have ones following at some point investing in a network. We've done it sooner as it will definitely pay back in the end when we are able to step up a level - even adding Freezone where customers can save so much bandwidth is a testament to this. We do apologize though for not bringing this across in the best way - Our CEO's were the first to admit and apologize that they also could've communicated better to try and dispel some of the hype created.

We are a young growing company that have learnt alot and are constantly learning and improving and working on investing in a structure that can grow with us so that we have the capacity to handle the growing clientbase whilst implementing new features/value added products etc. We also invested in improving our entire billing system, and have many things in the pipeline but can only implement in phases so as to not incur errors etc. We have many plans but have to be realistic and implement in due time. We are not striving to be the cheapest possible ISP and this will mean sacrificing in other aspects. Time will reveal all If I may say myself, I am very excited to see where the company is going because they're going about it in the best/wisest way - even if it may not appear like that at the moment. Watch this space!

Should you have any other queries or need any further assistance please let us know.

This doesn't excuse the inexcusable, but it is just about the best response I've seen from Web Africa so far. Clearly, the cocky macho brass at Web Africa are in need a woman's touch.

 

[Zyzzyva]

Unfortunately in this cut throat industry there are those that will come and go as has been proven time and again trying to offer a quick fix and make a quick buck only to fail after a few years. We have chosen this route to build a solid foundation and structure. Then in a few years we can expect a sudden growth spurt when another ISP disappears that used to be the talk of the town...

We also took in to consideration that our customers asked for reliability and value over price and have worked on our network accordingly. Unfortunately some peoples' "wants" changed upon seeing below cost pricing.

In that case Axxess's R28.50 reseller program must be subsidized by their marketing budget. I don't know why a big isp like Axxess would possibly do something so rash, boneheaded, and ultimately destructive to their long term viability. Hamba axxess, Hamba ...We all know R50 a gig is the bare minimum for sustainability.

//pulls tongue out of cheek.

On a more serious note though, i understand webafrica have some fairly high network roll-out costs and are probably having to charge a little more than they would have liked to pay it off quickly. They may realize that having a shiny network all paid off will stand them in good stead when all the new cables have landed.

That said, i'd rather spend my money with afrihost because they are a lot cheaper.

 

[InTheCube]

At the end of the day, the consumer is always looking for the best, cheapest deal. WebAfrica provides good support, but let's face it, most people will only use support once or twice to set up their adsl for the first time. That does not justify having to pay close to double for bandwidth (in the consumers minds). Sure WebAfrica might not be able to drop prices as steeply as consumers would like.

And for ISPs to say that anything below R40-R50 is below cost is complete lies! Afrihost are doing it (for quite some time now), and if R29 per GB is "below cost" then how do you explain R14.50 per GB? Are they just throwing hundred's of thousands of rands away each month? What about the R23 per GB from Screamer? What about R28.50 per GB for Axxess resellers? What about R20 per GB from MyISP? What about R29.50 per GB from Sainet? What about R14 per GB from GConnect? What about all the cheap 384K uncapped accounts bringing pricing right down to between R8 and R15 per GB depending on usage?

Is WebAfrica then saying that all these companies have no clue, are selling below cost, and will not be around in 2 years time, when WebAfrica will "snap up" their business???

As for the Freezone, free gaming bandwidth, and free Steam content server and other "value-adds", these are worthless to 95% of your customer base, if not more. There are only a small percentage of people who will use this service. Most people just want a simple low cost per GB account. When we get this, then WE will decide how we want to spend our GB, whether for streaming, gaming, downloads, etc.

WebAfrica needs to stop selling this story of how expensive their new network implmentation was, and how they can't drop prices. The competition are dropping prices, and if WebAfrica can't match them, forget beat them, then they will be relegated to the MWeb and Telkom heap of ISPs... This might not be so important to WebAfrica now, but in the months to come, they will see there subscriber numbers and revenue dropping as the myBB community, geek community, early adopters and IT people starting spreading the word...

 

[DVD007]

At the end of the day, the consumer is always looking for the best, cheapest deal. WebAfrica provides good support, but let's face it, most people will only use support once or twice to set up their adsl for the first time. That does not justify having to pay close to double for bandwidth (in the consumers minds). Sure WebAfrica might not be able to drop prices as steeply as consumers would like.

And for ISPs to say that anything below R40-R50 is below cost is complete lies! Afrihost are doing it (for quite some time now), and if R29 per GB is "below cost" then how do you explain R14.50 per GB? Are they just throwing hundred's of thousands of rands away each month? What about the R23 per GB from Screamer? What about R28.50 per GB for Axxess resellers? What about R20 per GB from MyISP? What about R29.50 per GB from Sainet? What about R14 per GB from GConnect? What about all the cheap 384K uncapped accounts bringing pricing right down to between R8 and R15 per GB depending on usage?

Is WebAfrica then saying that all these companies have no clue, are selling below cost, and will not be around in 2 years time, when WebAfrica will "snap up" their business???

As for the Freezone, free gaming bandwidth, and free Steam content server and other "value-adds", these are worthless to 95% of your customer base, if not more. There are only a small percentage of people who will use this service. Most people just want a simple low cost per GB account. When we get this, then WE will decide how we want to spend our GB, whether for streaming, gaming, downloads, etc.

WebAfrica needs to stop selling this story of how expensive their new network implmentation was, and how they can't drop prices. The competition are dropping prices, and if WebAfrica can't match them, forget beat them, then they will be relegated to the MWeb and Telkom heap of ISPs... This might not be so important to WebAfrica now, but in the months to come, they will see there subscriber numbers and revenue dropping as the myBB community, geek community, early adopters and IT people starting spreading the word...

Agreed, Even if all these companies fail, I still got cheap GB for a period.

 

[Bumzilla]

I want cheap reliable gigs now now now!!! That is not WA at the moment. Once you are competitive, I don't mind switching back I got lots and lots of patience. I learnt it the hard way when I came back to SA from USA in 2004 and found SA was still mostly on dial-up compared to my T1 line in the apartment I was living in. Was so depressed that I avoided the net for 6 months and that cured my craving.

 

[cavedog]

So they reckon that IS will fail. I'm sure IS has been in Internet even before webafrica existed? If IS can offer a product that allows for unlimited speed/download after hours for R899 or R999 respectfully then what is webafrica's problem?

And their Oneprice accounts are far for the leaders. Telkom which is cheaper includes local bandwidth. Does webafrica include local? Uhmm let me see NO! For the exact same price R249 as webafrica I can get 50GB of local. So how can webafrica make a statement that their pricing on the complete packages are the leaders?????

http://saol.com - Summer Slam Package = R249 = 3GB international + 50GB local + 384k line
http://www.do.co.za - Do broadband 2 = R258 = 3GB international + 20GB local + 384k line
http://www.webafrica.co.za/adsl/complete/ - Complete 2 = R249 = 3GB international + no local + 384k line

Webafrica FAIL with these packages too.

 

[Fulton17]

I also replied - not the most generous reply I might add - to WA "wonderful" pricing and recieved a long email from sales telling how great their pricing was and how I was supporting a loss leader.

I agree with above posts - I do not even know or care about freezones etc. I want good value for money and Afrihost gives me a good product at a fair price with good support.

Sorry WA but time to wake up and smell the roses

 

[guest2013-1]

At the end of the day, the consumer is always looking for the best, cheapest deal. WebAfrica provides good support, but let's face it, most people will only use support once or twice to set up their adsl for the first time. That does not justify having to pay close to double for bandwidth (in the consumers minds). Sure WebAfrica might not be able to drop prices as steeply as consumers would like.

And for ISPs to say that anything below R40-R50 is below cost is complete lies! Afrihost are doing it (for quite some time now), and if R29 per GB is "below cost" then how do you explain R14.50 per GB? Are they just throwing hundred's of thousands of rands away each month? What about the R23 per GB from Screamer? What about R28.50 per GB for Axxess resellers? What about R20 per GB from MyISP? What about R29.50 per GB from Sainet? What about R14 per GB from GConnect? What about all the cheap 384K uncapped accounts bringing pricing right down to between R8 and R15 per GB depending on usage?

Is WebAfrica then saying that all these companies have no clue, are selling below cost, and will not be around in 2 years time, when WebAfrica will "snap up" their business???

As for the Freezone, free gaming bandwidth, and free Steam content server and other "value-adds", these are worthless to 95% of your customer base, if not more. There are only a small percentage of people who will use this service. Most people just want a simple low cost per GB account. When we get this, then WE will decide how we want to spend our GB, whether for streaming, gaming, downloads, etc.

WebAfrica needs to stop selling this story of how expensive their new network implmentation was, and how they can't drop prices. The competition are dropping prices, and if WebAfrica can't match them, forget beat them, then they will be relegated to the MWeb and Telkom heap of ISPs... This might not be so important to WebAfrica now, but in the months to come, they will see there subscriber numbers and revenue dropping as the myBB community, geek community, early adopters and IT people starting spreading the word...

True, but I've done a bit of research into what it takes to run your own network and even though there's a lot of debate around the "speed based" vs "selling 1 gig, paying for 1 gig" model I'd say that you have to consider the human element in this as well. I'm pretty sure staff salaries for running/implementing and maintaining this network might be a small fortune compared to the actual cost of the lines itself. And I won't be surprised that THIS is the reason for the prices not to drop below the R44 mark in the bundled packages.

Take Afrihost, they only need support staff and a radius server somewhere to do their authentication (maybe a programmer or an admin or two that know what they're doing) and I'm sure they already had those in place (except for the radius server) before venturing into the ADSL market, so their current staff overhead was already covered by their hosting business. And instead of spending money on advertising, they subsidized bandwidth usage as a start because they KNEW they would be able to push volumes through enough to warrant even a further discount with IS. In the end it was a gamble on their part to do that which they could have lost out on, hence marketing it as a special.... but with the staff overhead already being compensated for with their hosting business, and the marketing budget spent giving people what they wanted, it's a gamble that paid off and allowed them to be this cheap.

Something I think (and is starting to understand) that Web Africa doesn't have the luxury of BECAUSE of their own network. Might be wrong about that though, just speculating.


*edit* What I want companies to realize (and take away from this) is that the more volume you push the more money you make the more profit you get in. So if your markup is 30-40% but decide to only work on a 10% markup, because you're cheaper than your competitor, people would use your product instead, and even though you have to sell more to make up for that markup difference, it is relatively easy to do when your price beats the rest of your competition to a pulp. Especially if your company has been around for longer than 10 years (which I believe Afrihost have been)

 

[Dan C]

So they reckon that IS will fail. I'm sure IS has been in Internet even before webafrica existed? If IS can offer a product that allows for unlimited speed/download after hours for R899 or R999 respectfully then what is webafrica's problem?

And their Oneprice accounts are far for the leaders. Telkom which is cheaper includes local bandwidth. Does webafrica include local? Uhmm let me see NO! For the exact same price R249 as webafrica I can get 50GB of local. So how can webafrica make a statement that their pricing on the complete packages are the leaders?????

http://saol.com - Summer Slam Package = R249 = 3GB international + 50GB local + 384k line
http://www.do.co.za - Do broadband 2 = R258 = 3GB international + 20GB local + 384k line
http://www.webafrica.co.za/adsl/complete/ - Complete 2 = R249 = 3GB international + no local + 384k line

Webafrica FAIL with these packages too.

Have to agree to some extent.

I read the cybersmart deal today and it sounds attractive .. until of course i read the T&C.

Now if IS can come up with something similar to their uncapped product where u can get say 10x more cap over weekends AND after hours it will be great.

 

[Abe]

*edit* What I want companies to realize (and take away from this) is that the more volume you push the more money you make the more profit you get in. So if your markup is 30-40% but decide to only work on a 10% markup, because you're cheaper than your competitor, people would use your product instead, and even though you have to sell more to make up for that markup difference, it is relatively easy to do when your price beats the rest of your competition to a pulp. Especially if your company has been around for longer than 10 years (which I believe Afrihost have been)

There is a big difference between the two. Afrihost had no ADSL clients so 10% profit on them is something that they never had before. WA have 30000 clients and a cut in price has a major impact on their bottom line, especially in light of the rest of your post (labour costs etc) and the network infrastructure that they have to pay for. Perhaps if they started a second "reseller" and put the discount business through there it would be a different matter but as I see it, chopping 50% off your bottom line which is what most forum members here were expecting/wanting could close them down.

IMO, this new pricing is a concerted effort on the part of IS to take a big chunk of the market, even if they have to do it at a loss (and I think they are). They may have got a good deal on SEACOM and can also use their satellite link as a backup if SEACOM goes down, which no other tier 1 providers can do. If a couple of providers are left by the way side, I don't think IS will be too upset.

 

[acidb]

Now if IS can come up with something similar to their uncapped product where u can get say 10x more cap over weekends AND after hours it will be great.

I have a feeling this isn't too far off

 

[guest2013-1]

There is a big difference between the two. Afrihost had no ADSL clients so 10% profit on them is something that they never had before. WA have 30000 clients and a cut in price has a major impact on their bottom line, especially in light of the rest of your post (labour costs etc) and the network infrastructure that they have to pay for. Perhaps if they started a second "reseller" and put the discount business through there it would be a different matter but as I see it, chopping 50% off your bottom line which is what most forum members here were expecting/wanting could close them down.

IMO, this new pricing is a concerted effort on the part of IS to take a big chunk of the market, even if they have to do it at a loss (and I think they are). They may have got a good deal on SEACOM and can also use their satellite link as a backup if SEACOM goes down, which no other tier 1 providers can do. If a couple of providers are left by the way side, I don't think IS will be too upset.

Yep, exactly what I'm saying, Afrihost could "afford" to only be happy with 10% because their core business already covered most (if not all) of their cost. So when they entered the market their overheads were basically just the additional cost of the radius server. But with WA they already have a number of staff appointed based on what they can afford (which is based on how much money they bring in each month) and having to then spend MORE money on salaries to get their own network up and running (even though technically they'd be able to drop prices lower than Afrihost) they can't afford to because that would cut away most of the profits HOWEVER, what I said in my edit still holds true, and I think Web Africa is just too scared (terrified?) that if they do drop pricing that their cash flow would be in the toilet and they won't be able to recover from it.

To me the opposite would be true and if they drop the pricing people would more than likely buy MORE (as been stated many times over re: people's spending habits when this was discussed in the other thread) and would more than likely be more inclined to recommend them over any other ISP, which means more clients sign up. etc.

I reckon if shares weren't sold last year March, Matt would have pushed ahead with such a change because he knows what I say holds true, but unfortunately it's a question of keeping the shareholders happy now as well as have a year-on-year profit instead of loss.

Oh and quickly touching on the issue of "value added services". What makes me a bit uneasy with Web Africa's price drop & their ventures of value-added features to the accounts (most of which won't be used by the mom & pop market they claim they're after, but in fact, gamers), is that they're spending money on game servers and steam server and downloading/mirroring the steam server (quite a few terabyte of content), something that doesn't appeal to their claimed target market, yet, saw necessary to spend money on the infrastructure to get up and running? It appears to me they wasted their money (which could have been used to cover salaries with a nice drop in price) if their target market are mom & pop operations and not the "gaming ISP" Matt mentioned they want to be on their forums.

It's all a bit up in the air. I understand their CAPEX situation but, as mentioned, why spend money to concentrate on value-added services for a target market you're not even aiming for price wise?

I'll leave you guys to think about that for a while

 

[InTheCube]

I'll leave you guys to think about that for a while

I agree with you, mostly. WebAfrica spent their money in the wrong place. They obvisouly didn't do a cost-vs-benefit analysis of all these Value Added Services (VAS). Maybe spending on a new network (whatever that means) wasn't such a great idea at this stage either. Now they're going to be losing a lot of customers very soon. Their subscriber base will definitely drop (unless they do something drastic), and then they'll have to start cutting costs, like staff, staff salaries, etc...

It seems WebAfrica were asleep in the last 6-12 months and had their heads burried deep into this idea of a new network (whatever that means).

In any case, I still find it hard to believe that they dropped the prices by such a meagre amount. Nobody was expecting them to beat Afrihost or even match them (OK maybe just a bit), but we were hoping they would at least come pretty close. It's not like bandwidth costs are not coming down. IPC costs are down, international bandwidth prices are down, and these continue to fall.

If WebAfrica drop their bandwidth prices by 50%, it WILL NOT result in decreasing their revenues by 50%. ADSL is not their only product. They are big into Web Hosting as well, and are among the best in RSA.

The way I see it, here's where they went wrong

1. spending way too much money on Value Added Services, when everybody is just looking for a cheap per GB service
2. targeting the wrong market - gamers - which is a very niche, small market.
3. investing in their own network (whatever that means) at the wrong time
4. not watching/following the market closely - this is easy, all you have to do is read myBB and it's forums
5. being too greedy - while costs are falling quite a bit, they want to delay price drops in order to line their pockets
6. pissing off their Resellers

 

[Gatecrasher]

Just the idea that they can schedule their price and product changes far in advance in a market that changes rapidly by the day is pure arrogance. A classic case of "Nero fiddling while Rome burns."