I don't know what kind of business plan some hosts out there have, but i hope someone here agrees that there are many hosts that are pushing the prices way too low.

I've read a hosting offer a few moments ago ...100MB Space, 1GB Bandwidth for what? Around $2.00 per month (for many hosts this will not even cover their bandwidth costs). :eek2: Oh yeah and of course a free domain name is included too. I mean come on ...there are people out there that seem to work for 100 clients for $100/month.

I don't see the reason of pushing the prices THAT low ...except of getting more customers that your competitors. But sometimes those hosts don't remember that their competitors with higher, more realistic prices will 'win' in the long run, because the 'cheaper-than-their-competitor' hosts will all sooner or later close down.

:cartman:

Completely agree Marc :agree:

Especially for those offering something like 10GB of bandwidth for $5 per month *lol*.

Well, it's up to them, if they want to close shop in 2 months :D

But really, there should be a law saying you can't offer your plans lower than let's say $2/GB.

But well, most consumers know the can't mix dirt-cheap with quality :)

Those hosts out there offering 1GB of transfer for less than $4 are either buying cheap and low-quality bandwidth at $0.90/GB or have no idea that they need to pay for the work time, taxes, maybe employees too and have no idea of running a business...IMHO.

I completely agree.

I think some of them are trying to play the odds, but history has proven over and over again the being conservative and realistic wins the long haul.

They figure most of thier clients won't use "unlimited" bandwidth or 30 Gigs of diskspace, but happens when someone does? Offer it long enough and someone will.

Its ridiculous.

Unfortunately, hosts like this will never cease to exist.
Sure, 90% of them will go bankrupt, but just as many, or MORE will emerge.
(SCARY, i know!)

I would think that most of these people starting hosts offering 1$ a month, are probably either young entrepreneurs, desprit for money and customers, or just have no business experience, and dont know what they are actually doing.

:rolleyes:

I totally agree. :)

Take Verio for example... their hosting packages are ridiculously overpriced (IMO), but look at the ammount of clients they've got... :D

Wouldn't this discussion be better served in the "Lounge" or "Running a Web Hosting Business" forums?

Originally posted by Synthetic
I totally agree. :)

Take Verio for example... their hosting packages are ridiculously overpriced (IMO), but look at the ammount of clients they've got... :D

I have a few sites on a Verio server and they never go down. Sure, it costs a little more, but you get what you pay for.

Yeah maybe ...Mods feel free to move it :D

Originally posted by Synthetic
I totally agree. :)

Take Verio for example... their hosting packages are ridiculously overpriced (IMO), but look at the ammount of clients they've got... :D

Overpriced ...but they stay in business. ;)

the same is happening for colocation and d-servers, when we ask 2.50 a gig, people complain, saying they can get bandwidth at 1.00 and less

the problem is, we can't buy bandwidth at that price .. and we lease the line ... how do other people do it ?

regardless of that, the problem is, customers look at you as if you trying to rip them off :(

Well, most if not all cheap or pay by the year plans are based on getting X amount of new signups each month....

But, if something goes wrong and those signups stop, their screwed.

Its more or less about volume rathern that quality..

Carlos, they may do that, but you have to remember, they probabbly have never tried to $1 a gb place and if they did they'd probabbly have a whole new attitude.

...and when your prices are low, it's hard to push them up...

Originally posted by Kiwi


Overpriced ...but they stay in business. ;)
Maybe not for long... Verio is in deep deep debt because they built too many data centers (same with Exodus). Give a company a lot of money and what do they do with it? Spend it all and then go bankrupt. :rolleyes:

Originally posted by MasterMindz

Maybe not for long... Verio is in deep deep debt because they built too many data centers (same with Exodus). Give a company a lot of money and what do they do with it? Spend it all and then go bankrupt. :rolleyes:


Verio Is not in bad shape at all yes they are loosing some money but whos not nowdays. Verio owend by NTT Communications I am not sure if you know who NTT is but they are a very large Communications Co operating in about 50 countries with very deep pockets.

NTT is larger than any US Communications Co. MCI, Qwest, Sprint, Level3 and so on.

Exodus and Level3 are in big trouble they do not have big backing like Verio or the money of say MCI so there future is not looking so good right now, and from what I have been told Qwest is looking in to buying out level3 and seeing how the founder of level3 was a big wig in Qwest there may be some truth to that.

All the big players are sticking to the High prices there thinking is if all the small guys go down then they have it made.
The smaller ones are offering cheap prices just to make up for some of the loss they are taking but cant afford to expand there networks for growth so its all most like prolonging death if the market dont change fast.


I have to agree with Kiwi the market is flooded with hosts right now offering the world for nothing but how long will they be around?

Just on this board alone I see cheap servers and hosting everywhere and eveybody wants theses services for nothing and some people do offer it. But not to long after they offer it and people jump on it you see the same people that wanted the cheap service back here yelling about poor service/support and so on.

I think the people that stick to normal prices will be here in the long run and the ones offering everything for nothing will fade away because of poor planing for the future. You never hear of the high price guys having bad support so there must be something to that.

Well, it doesn't seem like anyone else is going to; so let me take the other side :uhh:

You all seem to agree that, if a host doesn't charge a certain amount, they are destined to perish.
I know of some reasonably priced hosts that have been around a while and show no signs of leaving any time soon.

There is something to be said about volume pricing. It can be good for business and consumer alike.

I don't really see where someone selling $30 a year hosting is hindering someone selling $30 a month hosting. They seem to just attract a different client base :rolleyes:

I think the relatively inexpensive hosting companies are a good thing.
The consumers need them. And the industry needs them.

SoftwareRevue:
What is the profit margin of those host?
How much time that host will be opened earning $200/$1000/month?
how many customers they need to get $1000/month? How many time a guy will work for only $1000/month?.

You must know that most of the time, that host are 1 guy based. So if that host need at least 200 new customers each month to get $1000, in 5 month that are 1000 customers and he still earn $1000 because that customers pay annualy.
How he manage the support? how could he hire somebody to help?

And don't forget that he need to pay the server, internet, food, electricity, etc.. etc.. etc...

He has on average 200 sites on each server bringing $300 per month profit.
Guess he needs about 20,000 customers in order to eat.
And 50,000 customers to eat well.

Level3 is not in as bad shape as you may think. Last I heard they get only half their money from communications, and the other half from their mining business.

Originally posted by SoftWareRevue
He has on average 200 sites on each server bringing $300 per month profit.
Guess he needs about 20,000 customers in order to eat.
And 50,000 customers to eat well. With 50,000 customers to support, he won't have time to eat. :spiny:

Originally posted by SoftWareRevue
He has on average 200 sites on each server bringing $300 per month profit.
Guess he needs about 20,000 customers in order to eat.
And 50,000 customers to eat well.

Have we gone through a period of hyperinflation? If 200 customers earn you $300/month, 20,000 customers would earn you $30,000/month ($360,000/year).

Seems to me that you should be able to eat pretty well off of $360,000/year.

Aloha

Marc

well yes they are getting low which in my book is OK let em suffer and die out
just like webdesigners (hack I mean copiers) that take great sites and copy em for $200
I just wrapped up a design when done it will be around $5000 but it will be worth it this to some webdesigners they would say well I would do it for $1000 or $500
well the president of that company would be like yeah get lost
so ride it out you will come out on top
I laugh at how much some people ping pong around

do you hosts have a name for those kind of people ???

I am skeptical of things that do not cost a fair price
granted I wear $2 slippers (a Hawaii thing) but for hosting issues and service nothing comes cheap

I used to fear that these $100 for a website designers would take away my business on the other hand they have given me some. People find out they get burned and then when you say it will be this much they say OK

so yes it is stupid but they are just killing themselves

I am going to have to disagree with you guys, their are lots of companies that are in it for the long haul that can go below $2/gb or even to $1/gig, for example http://www.techiemedia.com

You have to remember that the succesfull companies that can go low dont deal with the joe blow who only needs 2gb of transfer and 30mb of hd space. I probably went thru 2gb of transfer while typing this message out.

The people that you have to worry about are the people that advertise unlimited bandwidth, becuase that is just a load of crap. They are smokin the real good stuff if they expect people to believe that for $50/month i get to use all the bandwidth I want. Those are the type of ads that I think should be banned.

Well

I agree with most of you that the prices are getting quite low, and it is really effecting the whole market, but


I also think because I have a client who has done this, the reality is most customers use a small % of the packages you assign.

If you take the average customer, they might push 10-15mb of Space, and maybe hit 1gb of bandwidth. Suprisingly after reviewing accounts we have a ton of clients who dont even use 1gb of Bandwidth so the profit on those are obviously higher.

I think maybe 5-10% use what there allocated and or More.

Overall its a guesing game, if every customer from the start of this always used all there specs then where would this market be.
If every client you created used 200mb of SPace and 5gb of bandwidth, where would this be.

Joe

Originally posted by cperciva
. . . . .Have we gone through a period of hyperinflation?. . . . . .Damn calculator . . . . . Good catch.
I'll just leave now :cartman:

Kiwi - ....have no idea that they need to pay for the work time, taxes, maybe employees too and have no idea of running a business....

Thank you for sharing your minimum requirement of $4.00 per GB beofre the above rule applies. I do not own or operate a hosting company but have done some plans and projections up to see the profitablility of hosting business.

What I based my figures on was alot of research and the personal experience that I have gain over the years managing and runinng business, wtih my current position having me control a staff of over 20 and managing a $1 million + per year business. Based on such experience and from info provided by my two brothers (one still in univeristy for system admins) and the other a level 3 tech at the internet company that he works for. (level 3 being the person that helps you when the tech support supervisor can not help who well is above the normal tech person) I think that you can do it below $4.00 per GB and with good quality bandwidth.

Thank you for pointing out an error in my calcualtion. Please do not say what is and is not possible with such a point blank statement. :smokin:

Originally posted by Dollac
Thank you for pointing out an error in my calcualtion. Please do not say what is and is not possible with such a point blank statement. :smokin:

Err, you removed the "IMHO" from the end of Kiwi's comment. I don't agree with his figure either, but he did clearly indicate that he was only expressing his *humble* opinion.

Originally posted by Dollac
I think that you can do it below $4.00 per GB and with good quality bandwidth.

You can, but only by playing the averages game. There are many hosts here on the forums that are located in the NAC.net data center ...and the average cost for bandwidth is at around $3 per GB. Even if you could go as low as $2 per GB, you won't make more than $2 per customer. Lets say you have 100 customers ...you'll be only making $200 per month; again not including other expenses.

How much time will you spend on those 100 clients? At least 5 hours per day ...which comes down to 120 hours per month (excluding Sundays ...if you don't want to give your customers support on that day). Would you really work for $1.60 per hour?!! In my opinion, its a worse business plan than selling ice cream at the north pole.

Originally posted by SoftWareRevue
Well, it doesn't seem like anyone else is going to; so let me take the other side :uhh:

You all seem to agree that, if a host doesn't charge a certain amount, they are destined to perish.
I know of some reasonably priced hosts that have been around a while and show no signs of leaving any time soon.

There is something to be said about volume pricing. It can be good for business and consumer alike.

I don't really see where someone selling $30 a year hosting is hindering someone selling $30 a month hosting. They seem to just attract a different client base :rolleyes:

I think the relatively inexpensive hosting companies are a good thing.
The consumers need them. And the industry needs them.


I agree to an extent. We do the occasional eBay marketing blitz, offering our midrange plan (200MB, 5GB) for $12.50. We do this because:

a) we can get our name out to people. Word of mouth, after all, is the most effective form of advertising around. And the more people see us on eBay, the more likely our name is to stick in their heads. Even if they don't bid on the auction, if they ever needed hosting they may be more likely to turn to us first.

b) these accounts cater to either the complete novice at web site management and design, who will most likely not use that much bandwidth and disk space, or the professional who knows what he's doing looking for a great deal on some space. He won't use our support as much.

The costs even out. Of course we couldn't support our entire business model on eBay auctions, but that coupled with some strategic moves in other markets enable us to penetrate a lot of areas.

Originally posted by JonathanH
...these accounts cater to either the complete novice at web site management and design ... He won't use our support as much...

:eek2:

I meant the two customers that are most likely to bid on the eBay auction are:

either 1) the complete novice, with less demanding resource requirements (support is higher, though)

-OR-

2) the expert who may have more demaning resource requirements but not need the support.

This has been our experience, at least.

There is something to be said about volume pricing. It can be good for business and consumer alike.

This one always kills me. People assume the buzz word "volume" can be applied to a service industry like web hosting. It can't! Web hosting can not be compared to Costco - which does volume. It could be like comparing a Costco store to a .99 cent Store (Those stores that actually have everything for $.99 or less). They sell a lot of $.99 crap because it is cheap. But it is volume? Consider Costco, and the few 100 stores they have. Now that is volume. Plus you are getting brand name products at costco.

Name me a host who has runs a business off "volume". The only host I can think of who can even come close to volume are the Verios, *****, Webhosting.coms, etc.... Look how much they charge.

Guess I was wrong about Verio... I could have sworn I read something somewhere that said they were losing around 2 billion dollars this year.

Speaking of bandwidth, I know a guy who can get a ds3 for $6k a month. Now that's CHEAP! 45mbps for $6k from a tier one provider? I'm almost tempted but I have no use for it now so forget it.

Originally posted by CRego3D
the same is happening for colocation and d-servers, when we ask 2.50 a gig, people complain, saying they can get bandwidth at 1.00 and less

the problem is, we can't buy bandwidth at that price .. and we lease the line ... how do other people do it ?

regardless of that, the problem is, customers look at you as if you trying to rip them off :(

They oversell. I asked one once if he would prove to me they contracted for all the bandwidth and space they sold. Wouldn't return any more emails.

The good thing about the sleazeballs - you can buy the customer base for less than it costs for advertising when they go under. Assume you will only keep 25-40% of the customers, though, because they are usually price shoppers too.

Tom

Originally posted by tom.oneil
The good thing about the sleazeballs - you can buy the customer base for less than it costs for advertising when they go under.


:D

I agree marc. Something needs to be done about this. Before hosting gets a black eye.

Originally posted by Synthetic
I totally agree. :)

Take Verio for example... their hosting packages are ridiculously overpriced (IMO), but look at the ammount of clients they've got... :D

Verio can afford to advertise everywhere.

I don't think you will be surprise what few millions can do to your customer base.

It's the nature of competition.
If we all had same prices then where does competition come in?

I agree with compition but not killing people out. Some of the prices are unjust.And most people should look over there business plan.:stickout

Lets face it ..98% of the hosting companies out there don't even have a business plan.

Originally posted by Kiwi
Lets face it ..98% of the hosting companies out there don't even have a business plan. Possibly they think they do because it was sent to them wrapped in a nice little bow by the provider that sold them the ready-made, point'n'click, make millions fast, dedicated box.

Honestly, many of them do not even know it was "hosting" they were getting into when they received the pamphlet that stated there was no technical knowledge needed. Just the ability to click the pretty little control panel buttons and sell unlimited packages.

It's not only the missing business plan but the lack of technical aptitude as well. Ignorance is bliss... reality bites, and it's going to bite each of them hard when it decides to rear it's fearsome head. :angry:

I have a buissness plan, only because thats how I got my money :)


Any how, I heard someone talk about ebay auctions for webhosting, so I decided to take a look

http://cgi.ebay.com/aw-cgi/eBayISAPI.dll?ViewItem&item=1273771754


Gotta love that.

Originally posted by davidb
I have a buissness plan, only because thats how I got my money :)


Any how, I heard someone talk about ebay auctions for webhosting, so I decided to take a look

http://cgi.ebay.com/aw-cgi/eBayISAPI.dll?ViewItem&item=1273771754


Gotta love that.
I love it... His eBay product description specifically states you can resell webspace & start your own hosting company, yet the "terms" you are directed to read state just as specifically that reselling will result in account termination. :D

Originally posted by Palm
It's the nature of competition.
If we all had same prices then where does competition come in?

You can compete by price, by features or by customer care.
To be cheap is easy, and many do so. A cheap host will grow his customers base faster than an expensier one, but he is also more likely to fail because there is already another host with low prices and another and another...

To be honest, some of the newer hosts really need to pick the minds of the futurequest debs out there. If you've not noticed, futurequest does a good business and has a solid customer base, yet their cheapest posted plan is $20/mo for 50MB of space, 5 gigs/mo (20 pops, 1 FTP account, etc.). -And they charge $40/mo for plans I've seen advertised here for $3/mo.

I made the mistake once of charging a client (referral from another client), $20/mo and he said he was glad, but expected it to be $30/mo. DOH! Sure I could charge $3/mo for the 3 MB of space they use (their traffic is so low I don't think it can be measured), but honestly, I don't have the time, nor the will, to do this for $3/mo.

Now I'm *not* talking about the 'get them in' starter plans, (example: Tina, affordablehost), this is not it at all. I'm talking about the hosts who advertise a $7/mo plan with no possiblility of upgrade, since it includes everything (especially unlimited space and bandwidth). Not only will your customers think that they can get it all for this amount, but you're gonna have one hell of a time convincing them they've outgrown their plan and that they now need to upgrade to a rather limited dedicated server for $200+/mo.

Just don't make the same mistake I did.

Chicken I don't think you can compare FutureQuest and the new companies that are opening up.

In regards to prices i think in some ways hosts rip off some people.

Lets face it most customers use little to know resources at all.

Even at 10$ per month that companies charge, are they even using 10$ per month worth of service.

I think though you pay for what you get, some customers really dont do anything with there site, and in some ways are over paying.

Now on the other side of the coin you have sites that use alot and underpay. I guess there really isnt a median

Joe

New companies will always have to offer prices at a very low price if they want to get customers, i myself have prices that are too low, im only doing this to get some initial customers so they can find out how good the service and support is. Once i have a reasonable customer base i will increase the price for new customers so i can make a living.

If i offered my hosting service at the same price as the more established companies then i would simply get no customers at all, they would chose the established company every time.

Just my 2 cents.

I do not agree with you SplashHost.
We startered in May.. and now we have around 150 customers.
We don't have low prices, we never will have low prices. Even our prices are higher than some estrablished companies.
We need to charge more than established companies because they have thousands of customers, they get enought profit to pay support staff.

Once i have a reasonable customer base i will increase the price for new customers so i can make a living. Be careful here... raising prices is _not_ a pretty site. FutureQuest had to do it quite a while ago and it was a terribly rough situation to get through. Running a "Grand Opening Special" or "For a limited time only" or anything of that nature allows your customers to know you are doing this for a reason but to offer "This for That" and then change it midway is only asking for trouble. The clients you attract at X price are looking to spend X amount on their hosting services.

I do realize that you have stated you would only raise the cost for 'new customers' but from experience that's not as simplistic as it sounds. Different clients at different rates depending on the date they signed up coupled with the joy of having clients that are repeat buyers now having to figure out why site1 costs less than site2 and wondering why you are not giving them site2 at the same price as site1. So now you either be firm and risk loosing the client or bend the rules further to accommodate their lower costs. I'd dare to say there is not a host here that enjoys _Billing_ and to complicate it is usually a bad idea.

Chicken I don't think you can compare FutureQuest and the new companies that are opening up. Sure you can. FutureQuest made mistakes in the beginning just as other new companies will do now. If nothing else you can look back on our own mistakes and decide if there is something to be learned/prevented from them which gives you a starting edge on those of us who started when there wasn't near as many examples :P

IMHO it's important to observe the way other hosts handle various situations and how their clients react to the decisions made as this is how you can learn and improve within your own network.

Jedito Said: We need to charge more than established companies because they have thousands of customers, they get enought profit to pay support staff Bingo!

A common problem is these newer hosts offer high amounts of "features" for low costs because they have very few clients on the servers and a strong need to grow. These hosts do not see the affects of giving a whole lot for little cost because their server still has plenty of room. -- Once they grow up the reality sets in that these high-featured low-cost accounts are painful. They have not really put together a good solid plan for how they will handle these accounts once they grow. Even worse, they have not made enough money off of these accounts to afford new servers and upgraded networks. So you have a host that felt they had to offer it cheap to grow, but failed to consider what they would do once they did grow.

Jedito on the other hand makes a statement that says "I understand I have costs...I understand those costs include MORE than just bandwidth...and I understand that it's the clients that will need to cover those costs via their monthly payments. The statement continues to imply that Jedito cares enough about his clients to ensure what they are paying is not only fair but realistic which they _will_ appreciate in the end.

Just some thoughts...

Jedito, im glad to hear you have managed to get 150 clients without having low prices, but i wouldnt say that was normal for a start up host.

Deb, i know there may be trouble when we increase prices for customers, existing resellers will be able to upgrade at the old rate which is only fair, and if a virtual hosting customer wants a plan at an old rate then we will probably bend the rules for them.

Originally posted by Jedito
I do not agree with you SplashHost.
We startered in May.. and now we have around 150 customers.
We don't have low prices, we never will have low prices. Even our prices are higher than some estrablished companies.
We need to charge more than established companies because they have thousands of customers, they get enought profit to pay support staff.

That depends on what you consider low. I would consider your prices low myself. What I consider not low are plans starting at $14.95 at the lowest and usually around $20.

I don't know if is not the normal.
Some customers even ask why we have this "low" prices (??)
Some people just not trust in host with low prices.

General example going by the high-side of the middle package costs as listed on your sites ("your" being hosts participating in this thread but remaining general in nature for conversations sake).

A host notes about 150 clients and another host that states many will not achieve that many so easily at "high prices".

The middle "high-price" being an average of $20.

150 Clients multiplied by $20 a month == $3000 gross revenue.

A single employee that would have to operate the business, the servers, the tech support, the billing, the sales, the legal issues etc etc etc making only $15 per hour and working only 40 hours per week (making it all that much more difficult for him/her to offer 24/7 services) would cost the company $2,400 a month going simply off of the equation $15 X 160 hours a month.

$3000 gross revenue minus $2,400 tax-free payroll leaves us $600 to work with.

So now we have $600 a month to put toward the other requirements of the company which include the hardware, bandwidth, personal connectivity (assuming we are working from home at this point), etc.

Two things come to mind when I see the above logic.

1) Possibly I'm buying my bandwidth and hardware from the wrong providers and my employees are expecting way too much from me as far as pay is concerned. Rest Assured I'll have a talk with them now!! *evil grin*

or

2) Many are going to have to take a _serious_ look at what they are doing, which is what this thread is about. Look at your numbers... the one thing that never lies is the numbers.... Do they make sense?

Disclaimer -- I'm not sure what the current rates for managed services such as Alabanza offers are right now so maybe many of you really are just getting a _GREAT DEAL_ and I'm clueless :P

or maybe just putting more sites per server?

Originally posted by SplashHost.com
or maybe just putting more sites per server?

= slow servers.

Originally posted by SplashHost.com
or maybe just putting more sites per server? Even with this concept, can someone enlighten me then? How much is one server costing these days? The numbers I posted are only giving the company $600 a month to survive on. How are they surviving on this amount of revenue? Merchant fees, Server Costs, Bandwidth, Backup, Taxes, etc... Where are they getting it from that it costs less than $600/monthly? Additionally I guess this brings us back around to how can they possibly offer the feature set of so much disk space and bandwidth with only one server to provide for all of those accounts?

Sorry, I don't see it.

Originally posted by JeremyL


That depends on what you consider low. I would consider your prices low myself. What I consider not low are plans starting at $14.95 at the lowest and usually around $20.

yes, you're right.
Maybe I'm missing the point when I saw host offering the same that I offer for $16.95, for just $7

ok, im out of ideas on how they can do it, sigh

except for the hosts in india, where you can higher a full time worker for $250/month ( i think)

So how do

Hostrocket and AletiaHosting do it?

They have kicking deals such as

200 MB of Space
10 GB of bandwidth for $9.99?

I'm paying staff out of my own pocket trying to compete with them as well. Its hard but its possible.

Originally posted by Synergy
So how do

Hostrocket and AletiaHosting do it?

They have kicking deals such as

200 MB of Space
10 GB of bandwidth for $9.99? I think we should probably avoid pointing out this or that host as one could ask the same question of the deal showing for the host shown in your own signature.

_If_ we do _not_ have the answer to “how”, then the odds are that it is a bad business plan to run with. If we _can_ find the answer, then many of us need to drop our backbone providers and employees for these other mysterious providers :)

But sometimes those hosts don't remember that their competitors with higher, more realistic prices will 'win' in the long run, because the 'cheaper-than-their-competitor' hosts will all sooner or later close down I think what needs to be done, as was noted in the threads beginning is reevaluate what our own business plans are and decide if they make sense for the long haul.

If your goal is to sell-out then possibly cut-throating the prices and jamming the accounts on the servers like sardines is the right thing to do. On the other hand, if your goal is to stay in business then maybe now is the time to reconsider your pricing structure and changing it to something more realistic for the benefit of both you and your clients.

Originally posted by SplashHost.com
or maybe just putting more sites per server?

Or perhaps more servers per employee? Managing a single server should not be a full-time job; ideally apart from the occasional security patch it shouldn't be a job at all. And as for support... IMHO if your average client needs over an hour of support each month (which is what the hypothetical 150 clients / 40 hours per week works out to), you really need to find some more intelligent clients.

Aloha
my thoughts as I am not a hosting company but a design company
that is bringing my own host in-house so to speak

I was with Vservers for a long time still have a few accounts there that will soon be moved.

I say you get what you pay for

I will pay more for a host that is honest and is there for support issues and will answer them in a friendly curious manner that helps.

I had tried cheap hosting packages and found most lacked on support and professional courtesy.

also found that reading these boards people trade hosting plans more than there clothes.

it seems to me I always see people jumping from one to another and these people are always looking for cheap hosting and wanting cheap plans they also say to good offers from good hosts

"Well I can get brand X for $3 when yours is $20"

then in 2 months they are on the board "I need a new host brand x sucks"

just my thoughts from a true end user point of view

Originally posted by cperciva


Or perhaps more servers per employee? Managing a single server should not be a full-time job; ideally apart from the occasional security patch it shouldn't be a job at all. And as for support... IMHO if your average client needs over an hour of support each month (which is what the hypothetical 150 clients / 40 hours per week works out to), you really need to find some more intelligent clients. This single employee was doing a whole lot more than tech support. Do not forget that there was only enough money to cover the cost of a single human being to handle everything well beyond that of servicing the clients. How many servers this person also cared for in addition to the many other duties s/he would have just depends on how many servers s/he could afford to purchase with that $600/month revenue. As far as the amount of time the clients require for support that too is volatile as it's not always whether or not you have the ten minutes to answer their question but whether or not you will have the ten minutes available at the moment they decide to ask the question. We all have slow times where there may not be an email to answer but how many of us are paying someone to sit there waiting for that email to arrive anyway, in honor of true 24/7 technical support? Regardless of the persons duties we do all agree that at least one human would be required to operate a business. That business's revenues minus that human's income is what remains to purchase the goods for resale that make it a business. Are the fees high enough to cover the cost or not? I believe that is the question being posed and in many cases they do not appear to be.

Hmmmm but then again, possibly one human isn't required and that may be the secret we have been searching for huh? :dunce:

Deb, I think you missed my point. To make it clearer: Providing webhosting to 150 clients will not create a full-time job. If you want a full-time job, you're going to need more than 150 clients.

I've seen a number of people who have entered into webhosting first by managing a few sites for their friends, then by reselling space to others, and only after they had 100+ clients did they quit their "day job" and dedicate themselves to webhosting.

Providing webhosting to 150 clients will not create a full-time job. If you want a full-time job, you're going to need more than 150 clients. I can agree with that to an extent but at that point, knowing many are still in school or have a full-time job outside of hosting, where does the 24/7 support come in? Again putting the offers to the test, how often do we see hosts advertise 24/7 support when there is no possible way for them to offer it?

I admit the whole 24/7 deal affects me only because I remember working the opposite shift as my husband and life being extremely difficult, prior to being able to afford more staff, in an effort to offer the support hours that we chose to advertise, So maybe I'm just a bit hostile at those who compete with the same offers but are not able to actually follow through. :mad:

<EDIT> and only after they had 100+ clients did they quit their "day job" and dedicate themselves to webhosting. I failed to mention I can also see a great deal of logic in this post. I, in haste, just showed my own personal anger concerning the 24/7 support issue. It is true that many companies start off in the red and often times have to support that company with funds earned in other ways. And that in itself may/might/maybe explain how my original equation could actually be turned into a reality and one that could also turn into a successful host as time goes on.
</EDIT>

Originally posted by Deb
I can agree with that to an extent but at that point, knowing many are still in school or have a full-time job outside of hosting, where does the 24/7 support come in?

It sounds better than saying, "10-18/5-7 depending on what parties are happ'nin' this week" ? :D

Originally posted by Deb
I can agree with that to an extent but at that point, knowing many are still in school or have a full-time job outside of hosting, where does the 24/7 support come in?

In many cases, it doesn't. Of course, who *serously* believes such claims anyway? I remember back when /. had a router meltdown they phoned up the Cisco support techs and one of them telneted in and started fixing things for them within a few minutes; everyone was absolutely amazed at the level of support they received. That's what you get when you sign a $15,000/year support contract.

Personally, I don't think that most people (ie, those not running the slashdots of the world) need 24/7 support anyway. If a server is down then of course it should be fixed ASAP; but for questions like "what's FTP?" I don't see anything wrong with people waiting even an entire day to get an answer back.

Of course, I'm something of a BoFH so I may be rather biased against luser support compared to most people.

If a server is down then of course it should be fixed ASAP; but for questions like "what's FTP?" I don't see anything wrong with people waiting even an entire day to get an answer back.

Of course, I'm something of a BoFH so I may be rather biased against luser support compared to most people. LOL, though many of us could agree I think those that are trying desperately to get their pages uploaded in time for their "most important project" yet have run into a snag because they are "Stock Brokers" and not "Technicians" that support is vitally important.

Additionally if the server is down... how does this person with their "day job" or "school classes" explain to their teachers/bosses that they have to take time off to deal with their "other job" ? Ouch.

Gosh I'm being pessimistic today sorry about that. I'm not trying to "down" anyone in particular but rather trying to understand the whole concept behind these cut-throat prices and/or open the eyes of others who may not yet.

and uhhh Chicken...do you know of any parties you're not telling us about? :beer:

I saw many people mentioned that having high prices at the beggining of the company opening it will help them in the long run, but I don't see a long run if they start offering service for $24 with no features. Some host get this special client which signs up 100 people some don't.

Agree and Disagree with you Palm. You'd be surprised what people, who care about their sites, understand. Many site owners are more intelligent then we give them credit for. We're not talking about charging too much for not enough but instead simply charging a fair price for a fair deal and adding top notch service to it. If I tell you I can sell gallons of milk for two cents each you will probably assume I'm selling sour (or stolen) milk but on the other hand if I tell you I've got a cow that just wont quit and I can get milk to you at a buck a gallon then you may believe it. The difference is having enough funds to actually support the cow and purchase the containers that store the milk. Someone with a child that requires drinkable milk will know the difference and will act accordingly.

I don't think there is such a thing as a fair price.
You select a price which you think will get a customer base and will lead you to have a good base. But you must do good in the beginning if you want to succeed in the future. You can't start of with a bad reputation and high prices.

There is one point that I don't remember reading here (been reading off and on) that should be mentioned.

Support costs versus Plan costs.

I am a firm believer in good quality support, whether it be knowledgeable tech support or friendly customer support. People who pay money deserve it, just like you expect to be treated nicely and by someone intelligent when you visit a computer store or car dealership and plan to spend some money ($ isn't the focus, it's the item you are purchasing).

When you sell a plan for $5-10 a month and provide things like $1-2/gig and $0/100 megs of space, you attract many bargain shoppers. MANY bargain shoppers. You also attract young customers that don't know a whole lot about some things and will need help. You also run the risk of overselling your resources, people actually using them, and losing money on it (or earning _very_ little compared to costs).

My point is:

$10: 5gig 200meg
100 customers to support (they all fit on one server with server reaching capacity soon, potentially high loads)
$1,000 income.

$25: 5gig 200meg
40 customers to support (they all fit on one server with room to spare, potentially lower loads)
$1,000 income.

With the $25 model, you are spending less time on support and more time on other functions like improving services, advertising, or development, which all give the potential for more customers. You also have the ability to treat customers better because you have more time to answer their emails or phone calls and you won't feel rushed.

From experience, what I have found to be one of the top needs of customers is good support. Even if they don't use it much, they want to know that if they do need support, they will get it. The most common question we get from potential customers is our response times. People who are treated better remember you more and will also refer you to their friends. The same can be said for just about any business out there. I know there are several businesses that I go to _just because_ of their support and helpfulness. Often times they are more expensive, but I would rather pay the few extra bucks to get good service than save a couple bucks that I will probably lose to the couch anyway and get shotty (no I didn't hit the o on accident:)) service in the end.

Hence, when your $25 a month model finally reaches 100 customers, you are more likely to have built a pretty darn good foundation and business is likely to increase rapidly from there. As long as you can handle the growth well, just keep going. You are also likely to be more stable financially, so you can handle expansions a bit easier.

Any ideas? It's not just about making money. It's about providing quality service _and_ making money. :)

I'll throw my .02 in here as a businessman and a geek.
We got out of the hosting business because of the cutthroat pricing. There is no way I can compete with a hobbyist with a reseller plan when I have salaries, insurance and real bandwidth costs.
We do very little hosting anymore - we run a colo facility, a colocation business, a retail ISP, virtual ISP services and are building a wireless DSL network. We have looked at the managed/dedicated server market and reseliing hosting plans, and our primary reason for staying out is I don't want to compete with my customers.
I have noticed we lose most colo customers because they underprice their hosting/services and then can't sustain the business model.
I'll share a secret - the reason the big boys get so much is because thats what it costs to run these things.

The fly-by-night hosting companies and resellers give this business a bad name for now, but I predict this market will shake itself out in another 24-36 months and we'll get back into it again.

Tom

100 customers to support (they all fit on one server with server reaching capacity soon, potentially high loads)


What specification of server are you talking about here? I had a cobalt raq3 that was handling about 350gb of transfer every month, there were about 75 sites on the server some were using cpu intensive scripts like ubb's. The speed was still reasoable.
So how many sites should you put on Dual 1ghz p111 with 2gb ram and 10,000rpm scsi drives?

Originally posted by SplashHost.com


What specification of server are you talking about here?
It was a hypothetical situation. The numbers aren't the important thing; the concept is. :)

The same server that can be bogged down by 10 accounts can run beautiful with 1000 if they are the right type of websites. It is all dependant on the sites on the servers really... the # of sites on a server shouldnt be a set number, it should be determined by an experienced admin who monitors the servers daily for performance changes.

-Brendan

Originally posted by HRBrendan
The same server that can be bogged down by 10 accounts can run beautiful with 1000 if they are the right type of websites. It is all dependant on the sites on the servers really... the # of sites on a server shouldnt be a set number, it should be determined by an experienced admin who monitors the servers daily for performance changes.
Agreed! Although I was aiming more at the # of customers to support rather than the # of customers that can fit on a server. The only reason I mentioned the server capacities was to try to illustrate that with a bit higher in pricing you can still earn good money, potentially lower your support costs by supporting less customers, and still have plenty of room on your server for other "average" customers.

You people should stop comparing how multimillion dollar hosts to small hosting firms as there is a HUGE difference:

Biggie hosts: (39.99 to 49.99)

-CFM
-ASP
-MIVA
-ODBC
-ORACLE
and a lot more

Small Hosts: (9.99 to 29.99)

Basic Linux
MySQL
PHP

So in order to survive the compeition, small hosts must beat other's pricing. Do you expect people to pay the same without the corporate requirements?

You people should stop comparing how multimillion dollar hosts to small hosting firms as there is a HUGE difference:
...
Do you expect people to pay the same without the corporate requirements? Speaking only for myself, I expect people to receive everything they pay for and I feel the people should expect the same. Whether they pay a large or a small company is irrelevant in regards to whether or not the company is able to give them what they pay for. Too often hosts are advertising more than they are able to offer and only hardship will come of that for both the 'people' and the 'host'.

Heh it's not the size that matters but what you do with it

Originally posted by Synergy
Do you expect people to pay the same without the corporate requirements?
Yup!

Here's why I think so:

Who are the biggies? Some that come right to mind are Verio, *****, Communitech, ValueWeb, and more than a dozen others I can't think of.

What are the biggest complaints that people give me when coming to our services? Lack of courtesy, lack of knowledge, slow responses, lack of informative responses, etc...

Who goes to the Biggies for their fancy pants features? Most likely experienced professionals. Not many inexperienced people want to tackle Cold Fusion and Oracle. I wouldn't touch them with a ten-foot pole and use the quick and easy PHP+MySQL combo instead. I wont be supporting massively large databases, so it's alright. :) Chances are if they are experienced, they won't be needing too much support from the host and will look elsewhere.

Why pay smaller hosts the same amount for "less fancy" features? For the support they get. If their CGI won't work, the host fixes it. If their SSI isn't working right, MySQL problems, programming issues, installation of extra modules or features, just about anything technical, the host provides some assistance. If the server has problems, email not working, sites down, the host looks into it (should apply to the Biggies too). If the customer has questions, the host responds intelligently.

In the end, you get two hosts, Smallie and Biggie. They both charge $30 for a 5gig 300mb plan. Smallie offers PHP and MySQL support and features, as well as some other normals like FP Extensions and whatever. Biggie offers the big-boy stuff like full blown Cold Fusion and Oracle with ODBC along with the other normals.

Customers of Smallie get their emails responded to in under 24 hours intelligently, often times not needing a "huh?" reply. Customers of Biggie get their emails responded to in under 72 hours, often times with responses like "Visit this site for more info" or "We cannot upgrade our PHP from 4.0.1 to 4.0.6 for you" (since most biggies also support PHP) which doesn't leave the customer with much of anything to work with.

Maybe it's just me, but by emails our support department gets, by posts that I see here and on other Forums, and by my own personal experiences, people want good support and an intelligent person to speak to. If I go to Best Buy and I ask someone about a fancy pants Home Audio system and they don't know what Dolby Surround really is, I just say "thank you" and leave and go to Circuit City, or to a smaller Audio store who knows what the heck they are doing.

But that's just me. :)

This isn't a rant against Biggies or against el-cheapo hosts. I'm just trying to illustrate the importance of support, and that it is hard to do when you offer rock bottom prices for high levels of resources (per my previous long post). I'm not saying impossible! Just harder than it should be.

Originally posted by Synergy
So in order to survive the compeition, small hosts must beat other's pricing. Do you expect people to pay the same without the corporate requirements?

In my opinion, you shouln't start any business without a perfect business plan and the necessary financial resources to compete with your already established competitors.

Who says these low prices to start with arent in new hosts business plans??

If there are no business plan there are no business to start with.

Originally posted by SplashHost.com
Who says these low prices to start with arent in new hosts business plans??

Extremely good point! :) I think Deb and one other person discussed that earlier about starting relatively cheap and slowly increasing the prices to actually make money. If it's a well thought out plan and it is executed well, it should work. :)

Originally posted by SplashHost.com
Who says these low prices to start with arent in new hosts business plans??

I said that you shouldn't start any business without a business plan and substantial financial resources ...and offering high-end services at a low cost will create an ever higher risk of failure.

Who says these low prices to start with arent in new hosts business plans?? Not I :) But I would dare to say that the results of those companies who have not thought through their strategy outside of simply advertising "all that" for a lower price are showing that they haven't by not following through and/or proving that it fails. Only the host knows for sure. What we know is from our own experiences and from forums such as these that are inundated by site owners in dismay over the loss, slowness, or corruption, of their web sites. Another issue is the many co-lo facilities that are filled with empty racks/cabinets which continue to consolidate their multiple locations into single ones just to try and fill the space (but that's an entirely new thread that I think will pop up sooner or later). Hosts can argue the concept of offering more than they actually can to no end but it wont change the facts.

There are hosts that start off with too low prices and dont intend to raise them, these hosts will fail. There are hosts that start off with low prices and intend to raise them, but dont know when to increase the prices, these hosts will also fail.

If they fill up a whole server with cheap plans, then they wont have enough moey to buy another one, thats when the problems start.

As long as the host knows when to increase the prices and sticks to the plan, they should be successful.

Originally posted by SplashHost.com
As long as the host knows when to increase the prices and sticks to the plan, they should be successful.

So when will you raise prices? When is the perfect time to do it?

So when will you raise prices? When is the perfect time to do it?

There isnt a set time that you should do it, it will vary from company to compancy depending on their costs and the prices they sell there plans at etc..

Just look at the type of customers the el-cheapo attracts. They attract customers that usually require more work, complain more and will change without a moments notice.

The customers that pay a host $25 a month have the sense that their site is going to run 24/7 without a hiccup. They just presume that paying more will mean that their site is always going to be up.

Another point is that a customer paying $25 per month has probably had their site professionally designed and the designer usually uploads the site, updates it etc. The customer paying $2 a month has no money and has probably made his own site. He updates it himself and probably has no idea what they are doing and require more help.

I can see a shake up in the marketplace soon and you'll have less $2 hosts but they are always going to exist because people will start them up thinking they can make a buck.

I myself would rather run a quality service with reasonable prices and make an honest living. I know there are other hosts out there charging half what I charge and I tell customers that they could go there but they are too scared :)

I had to tell customers to go to a different host (even argued withone of them) who supported ASP because we're not going to have ASP for a couple more months. btw I sent them to a crappy web host so they could experience a crappy service.

A note to smaller hosts, when I first started out, I did all the numbers and thought I'd be making a fortune in no time if I could get some customers. But as the number of customer you have increase, the cost of other things also get higher. I only included the cost of the server when I first started but I think the server fees only take into account for half your expenses.

I've been able to grow from the smallest host with just my own account started on my mom's credit card to a host with nearly 1000 sites turning over a couple hundred thousand dollars while doing fulltime university. I've got to the point where I've had to hire someone for tech support because the load is too high. I have someone who is going to take over account and billing and another person to do development hopefully by the end of the year. I will have also finished uni in about 10 weeks.

Another point about being a higher priced host is that you can actually spend money on advertising. How much do you think a $2 host can spend compared to a $25 host? Who can afford the full page magazine ads or magazine inserts and other promotions?

Cheers,
Nigel

Well said Nigel.

Nigel: A note to smaller hosts, when I first started out, I did all the numbers and thought I'd be making a fortune in no time if I could get some customers. But as the number of customer you have increase, the cost of other things also get higher. I only included the cost of the server when I first started but I think the server fees only take into account for half your expenses.

Well Said! Thats exactly what happened with me. I got some customers, but I had to beef up my support so I bought a support script and what not. Things just keep adding on ya know?

It will be a problem but not quite seriously.

In my opinion, the quality of services is related to the payment of customers. The people will choose the things they want.

A lot of people dont make sense about what they are going to do. Sometimes they just got an idea and want to work out. They are looking around for the lowest cost so that they will not lose too much. How can you expect them to pay more than 10 bucks per month? Also, they will pay for higher cost hosting if they are confident of the future of their business. I thought most of people understand the situation they are in.

Base to these customers, the hosting market will need some small companies to deal with this part.

The small companies can put more accounts in one server as many as the server can load. It will be ok I think. For example if they got a server with p3 933*2 & 1G ECC & 2*10000 Rpm SCSI, it will be able to load around 1000 G per month if they pay for enough bandwidth. If they got the plan for 2G transfer, it will be 1000/2=500 accounts. That's a lot. I dont think the scripts will be a problems because if the customer run a UBB and VBB they will need more bandwidth and pay for the scripts.

Most business will consider about the normal services for customers. However, what's the point. If your server get many times down per month and you should to buy another one. It will be smart to work out the whole system and push all the things easy to use and manage at the beginning. They just need to keep the server run well and reply every email they get. It's not hard. Most customers will not worry about their websites seriously. They will satisfy with your services if you fix problem within 48 hours and response them very quickly. They will be ok unless they lost contact with the company. I will be happy just my provider reply every email for me within 24 hours.

In conclusion, the small business will never be kicked out from the hosting market because they catch parts of customers and got a clever situation. They will take risks for their slender hopes but never give up.

This is a very difficult discussion to examine accurately though. I've seen both big companies and small companies who either overprice, or underprice their plans who fail. Same goes the other way. For example, Tera-Byte is one of the world's largest and cheapest hosts. Why? Because they have a brilliant marketing team.

No matter how you price something, you will always run into people who know how to make it work, and people who don't.

If you offer 10gb/month for $5/month, and you know that the average client on that particular server will only use 1 or 2 gb, you have room to compensate for the clients who use more.

It's all about how smart the person running the business is. ;)