DreamHost Fiasco

dh DreamHost is a web hosting company that has been around for a while. The privately owned, California-based company is well known for generous space and bandwidth allocations, relatively good web hosting services, and for a laid back attitude. This week, though, has probably been one of the toughest weeks in the company’s history.

On Tuesday, the company’s billing system messed up (due to human error) and billed thousands of customers when their accounts weren’t even due. The amounts charged totaled in the millions of dollars and the charges caused some customers’ checks to bounce, debit cards to be stopped, etc. A lot of accounts were also shut down for non-payment when a payment wasn’t actually due for another year. In short, the entire issue was a big mess.

In addition to the mess and tremendous hassle of all of those billing errors, the real thing that DreamHost didn’t do as well as they should have (and what got all the media coverage) was the way they initially responded to the situation. They posted a ridiculously informal blog post (titled Um, Whoops) saying the issue was caused by a fat finger and essentially dismissing the seriousness of the whole situation.

By the book, the content of DreamHost’s first post was appropriate. They what happened, why it happened, explained what was going to happened, explained why it wouldn’t happen again, and offered to provide help for any problems. The content was fine, but the tone was inappropriate and uncalled for. 

As the media coverage continued, DreamHost realized they messed up and posted another blog post the next day. This post was what they should have done the first time. It was genuine, informative, and serious. The company offered some additional options and courses of actions for frustrated customers (including letting people back out of contracts early and receive a pro-rated refund). DreamHost explained some major modifications in their billing system and provided a much needed update.

The following day (Thursday now), another update and explanation was posted. It was slightly less formal than Wednesday’s “serious” post, but did not mock the event. More updates and statistics were provided and the issue is now basically resolved.

DreamHost did a good job in the sense that they quickly realized their mistakes and acted to fix them (both technically and with their communication). They provided frequent and honest updates. And from what they say, they got the actual problems sorted out pretty quickly.

DreamHost will hopefully have employees reach out to frustrated customers and media sources over the coming weeks, but I’m not sure this will happen. I don’t think the company has a PR department and I don’t think they have any sort of blogger or customer outreach program. If they don’t, now is a good time to get one.

This issue is something that will haunt the company for a long time and will cost them a lot of money. They’ve learned a valuable lesson. I’m pretty confident they won’t be making the same mistake again.

6 Responses to “DreamHost Fiasco”

  1. PaulSweeney said:

    Jan 18, 08 at 2:28 pm

    So, what business continuity messaging strategy have web companies put in place? email? blog post? Probably not good enough because the customers did not know “right now” that their was a problem. Our Enterprise customers know this (Financial services in particular), and have such plans in place. But “web based companies” seem to think that the old blog post and email will do. Not. Phone/ email the customer and personally deal with it. And remember its not a total disaster. If you have a service failure and deal with it effectively customer loyalty actually increases! VoiceSage provides automated messaging for situations just like this…..

  2. aka Chief Sales Servant » Seriously?!?! said:

    Jan 18, 08 at 7:52 pm

    […] Plenty has been said about the major mistake made by webhost DreamHost overbilled it’s customers in the amount of $7.5 million dollars. There has been a wide range of responses from customers, competitors and customer service experts. There is a great analysis of the goods and bads of this experience by Service Untitled’s blog. I’d like to put on my Adultitis diagnosis hat and put my two cents in. […]

  3. Service Untitled said:

    Jan 19, 08 at 12:14 am

    Paul,

    Thanks for your comment! When you have 10,000 customers that are upset, it’s hard for a small company to get in touch with all of them on a personal level. Blogs and emails work because they can be used to reach out to all customers fairly quickly.

  4. Livia Labate said:

    Jan 23, 08 at 4:34 pm

    If you are a DreamHost customer you’ll know that their newsletters and periodic updates have the same exact tone as that blog posting had. Though I agree that the seriousness of the issue shouldn’t be taken lightly (I was charged several hundred dollars unexpectedly), I think they responded appropriately. They are a service provider and therefore should treat their customers appropriately – at the same time, they have long maintained an informal if not approachable communication style with their customers, which is one of the reasons why I like them.

  5. Service Untitled said:

    Jan 23, 08 at 5:45 pm

    Livia,

    Thanks for your comment.

    Definitely. Their tone is consistent, but many people (myself included) did not think their usual, joking around informal style was appropriate in the particular situation.

  6. Service Untitled » 37signals understands downtime. - customer service and customer service experience blog said:

    Jan 24, 08 at 11:01 am

    […] 37signals is a smart company. Not only have they seen incredible success with their product line, but they run an extremely successful blog, have gotten more press coverage than most companies 50 times their size, and have a very good reputation. They also read other blogs and knew not to make the same mistake that DreamHost made when they had some issues with their service. […]