Comments for Webmail.us Acquired by Rackspace - Subscription Model Does Work

Webmail.us Acquired by Rackspace - Subscription Model Does Work

2007-10-01T20:29:25Z

Webmail.us, a business web email service, has just been acquired by leading web hosting company Rackspace for an undisclosed sum. We last covered Webmail.us in August last year as part of an overview of the web email market. At that point Webmail.us provided email hosting services to more than 23,000 small-medium businesses. Currently, over a year later, Webmail.us provides services to more than 72,000 businesses and 600,000 users. Also recently Webmail.us made the Inc 500 list as the #217 fastest growing private company in America.

Webmail.us already had a successful partnership with Rackspace - their entire email hosting infrastructure is hosted by Rackspace and Rackspace is their largest reseller. CEO Pat Matthews has a post about the sale, noting that "the market is really going to open up, leaders are going to emerge, and followers are going to fall behind." He said that Webmail.us decided to sell to "make sure we're positioned to be the leader in our space" (which is business web mail).

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In November last year we wrote about Webmail.us as one of the most compelling success stories for Amazon Web Service- it uses Amazon S3, The Simple Queue Service and the Elastic Compute cloud to run its operation. Probably the best thing about Webmail.us though, in my high level view, is that it's a great example of a web 2.0 startup which earns good revenues via a subscription based business model. CEO Pat Matthews, who I met at the 2005 Web 2.0 Conference (and Webmail.us was also one of Read/WriteWeb's very first sponsors, back in mid-2005), made the following comment in October 2005 to a post that questioned the sustainability of web 2.0:

"Companies like mine (Webmail.us), Typepad, 37 Signals and even Salesforce.com all do charge customers a monthly or yearly fee for services. In my opinion, this is the soundest model although in many cases it presents challenges with the exponential user base growth some of the free companies experience. But I think most of the companies I just mentioned are indeed trying to build businesses, not features to flip."

Of course, Webmail.us has just been "flipped" in October 2007 - but it's taken 2-3 years of slow but steady user and revenue growth. So in many ways Webmail.us is a web 2.0 success story, even though not at the scale of a Zimbra or JotSpot. Congratulations to Pat and team for a job well done.

Comment from Pat Matthews on 2007-10-01

2007-10-01T21:20:22Z

Thanks for the post, Richard. However, I'd like to make a couple of clarifications. First, we've spent seven years building a strong business with real customers, revenues, profits, employees, etc. And moving forward, we‚Äôre going to continue to build an even stronger business as a part of Rackspace. Likewise, our entire staff and leadership team will remain focused on building the world's most trusted provider of business email hosting. In other words, we're not flipping! :) And while we're [maybe] not as successful of a *Web 2.0* story as Zimbra or Jotspot, I believe that over the long term we'll be as successful, if not more successful, of a *business* story... which is what matters to us.

Comment from Richard MacManus on 2007-10-01

2007-10-01T22:04:46Z

Thanks for your comment Pat. Just to note that I used the word "flipped" flippently ;-) I think you have done a tremendous job over the past 7 years, building the business up.

Comment from Bruce Judson on 2007-10-01

2007-10-02T06:38:54Z

Great post. It's terrific to see businesses with real revenues succeeding. It's unfortunate that the new definition of success is often to quickly build a business with no revenues and then hope for a quick acquisition--which is obviously not the case here.

Your articls discusses the already existing and strong relationship between the the two companies. One additional point that may be relevant: it looks like they both serve the medium sized and small business market. I wonder if there is not an additional strategy here to build a company that can provide multiple, quality services to these customers. This may be one of the real opportunities on the Web today, that no one has (yet) fully realized.

Bruce Judson
Founder, Search Free Apps
http://www.SearchFreeApps.com

Comment from Tom Greenberg on 2007-10-02

2007-10-02T19:51:27Z

Of course the subscription model works! There are many CRM vendors who are making big money offering software-as-a-service such as Salesforce.com, Netsuite, Salesboom.com and few others.

Comment from webonics on 2007-10-02

2007-10-02T21:37:43Z

Congratulations to Webmail.us! I can offer some personal insight into this organization. At my last job, I was a Sr. Web Developer at a small business and was responsible for all company IT. Last year, the email provided by our web hosting was being constantly bombarded with SPAM despite using SPAM filtering (SpamAssassin - what a joke). One day in July 2006, we were hit with a mass-SPAM of 18,000 messages that caused our mail to lock-up and all our company email as well as hosted clients' email became unavailable until we paid our host a large fee to rebuild our mail. At that point, I made the decision to consider outsourcing our email to a dedicated email-hosting provider. I considered Zimbra, BlueTie and Webmail.us after hearing about their offerings on R/WW and TechCrunch. Ultimately, I decided to go with Webmail.us because of the reasonable pricing matrix and most importantly the overwhelmingly positive customer testimonials on their site. I setup our email and the experience was night and day. Our SPAM issue became nearly nill with very little false-positives. Our webmail client was more sophisticated and provided web2.0 features reducing pagination between functions. We received regular communications from Webmail.us on both new features, system issues and projects in development. We received support for Blackberry and other mobile devices that we didn't have available with our prior hosting. As the weeks went by, new release after new release kept making our email better and better. A mobile site for non-smartphone access was added, new calendaring features and the integration of other components like tasks made it a more complete email client-killer solution. Many of our employees and clients abandoned their Outlook and Thunderbird clients to solely manage their mail and calendars through the webmail interface. There was only one time that we experienced an outage. Pat sent out emails to affected clients with regular updates. The staff at Webmail.us is amazing..they do have the recipe for success for a web 2.0 company..which is the same as a web 1.0 company..be customer-centric. I can't say enough positive things about the company and its dedicated team of professionals. Now, I work in a large enterprise and often wish my email issues with MS Exchange could be as easily resolved as they had been with Webmail.us.

Rackspace made a brilliant move to acquire such a fantastic company.