When I was searching for a decent host for my sites I looked at around 100 hosting companies
and their proposed hosting plans. After a while, the pattern of deceit starts to emerge.
Although I'm sure it is cristal clear for anyone with half a brain and a calculator, it's apparently still
nuclear science for the average human being...

Here are some of the ones that piss me off the most:
(If you are looking for a host for your site, read on. I have added a small price guide and
dos-and-dont's in the end)

a) The averages game

Mr. Webhost no 1 offers you 150 Mb of web space with 10Gb of bandwidth for $20 a month. Don't
laugh, there's 1000 sites like this... You, Mr. John Doe, looks at this and it seems pretty
reasonable: It has the space you need and a good ammount of bandwidth which you will also need
because you run a popular site.

Unfortunately, what you don't know is that if you do use the 10Gb of bandwidth the
webmaster *looses money*.

Lets make some simple calculations.

First lets consider the server:

A good machine, lets say an intel 900Mhz P3, with 512 Mb of Ram and 100 Gb of Hard drive.
Lets assume this machine costs you $200 (yeah right) a month plus bandwidth.

At 100 Mb per account, the machine could take 200 accounts, so the expense in the server
would be $1 per account (assuming a full server!)

Now lets consider human resources. A small size web hosting company has to have at least 3
employees to provide 24 hour tech support, which most do (at least offer). Let's assume
each of those employees takes home $1500 a month. That's $4500 in manpower each and every
month. Let's assume a small company with 1000 costumers. That would mean $4.5 in expenses
for each account (of course, many hosting companies have a lot less than 1000 costumers...)

Finally, let's consider the bandwidth. Let's take a value of $1.5 per Gb. That's a small
ammount! Most pay much more!

Now lets get back to Mr. Doe's site.

+ $25.00 - What he pays;
- $15.00 - Bandwidth cost;
- $ 4.50 - Personel cost;
- $ 1.00 - Server cost;
========
- $ 0.50 - Webmaster's loss;

Note that I'm running the calculations at optimal numbers for the webmaster; Most servers
cost more and aren't full. Most bandwidth costs more (my dedicated server provider was
charging me at $2.00). I doubt you'll find a qualified technician for $18000 a year. And
I doubt many of the firms advertising these kinds of plans have 1000 costumers or can
survive the numbers until they do.

The webmaster's perspective is that most sites will only use about 10 to 20% of alocated
resources thus bringing in a decent profit margin. Fair enough.

But would you keep a site that pays the same and uses the same resource as 5 to 10 of the
average sites and actually costs you money? Not if you can kick it on some technicality...

Webmasters! Stop advertising what you aren't willing to give! Don't offer plans where you
loose money on the numbers! Heck, stop advertising plans where using half of the resources
is using to many!


b) the bandwidth game...

My second largest webhosting-companies-suck argument is the cost of extra bandwidth.

Simple, common day logic dictates that if you buy 1000 apples you can expect to get a
better price than if you buy 1. You can also in good faith expect to be able to purchase
ten apples for ten times the price of one apple.

Webmasters, however, have a distorted logic when it comes to bandwidth. Lets get back to
our little account above which offers 10 Gb for $25 - it's available on 6 different hosts
this very night btw.

If we consider the only thing being paid for is b/w (which it isn't, I listed some other
expenses in point a), this would mean that every Gb being offered would have a "sale
price" under $2.5. Of all the 6 sites, the one that was offering it cheapest was selling
it at $3.75 per Gb in blocks of five. The most expensive had each Gb at $6.

Now, could someone please explain to me the logic of these bufoons?? Oh, I know the answer,
mind you. It goes back to the averages game. But wouldn't it be much more logic to offer
an ammount of b/w which can actually be paid by the monthly fee and charge the extra b/w
cheaper?

Is it to much to expect for 10 apples to cost the same as 10 times one apple?


c) the gawdawfull ticketing systems

Has everyone forgotten about email?
Has everyone forgotten about email?
Has everyone forgotten about email?

Plus the software packages are expen$ive. Maybe you should put the money to better use. Like
improving service.

1) A basic guide to calculate how much hosting will cost you:

Take the bandwidth you need. Lets say 10Gb. Make sure this is the *real* number you need.

10

Multiply it by $3.5. (to cover the webmasters cost with a 20%-35% profit margin)

10 x $3.5 = $35

Add $4 for personel costs

$35 + $4 = $39

Add $3 for server costs

$39 + $3 = $42

Add $3 fixed profit (contrary to popular belief, hosts are in this to make money :)

$42 + $3 = $45

Let me tell you this rigth now: Any host that offers to host you this site for less is
assuming you will use much less resources than the ones being offered. Period.

Also, always, always, always leave extra room on the bandwidth allowance to grow beyond what you are using now. Extra b/w beyond the alloted *WILL COST YOU AN HARM AND A LEG*

2) The I have a site that takes a heck of a lot of blah blah blah and need a host for $10

Either a), forget it, give up, if the site with that much need for b/w and space can't pay
it's costs chances are it's not worth keeping;

Or b), have a heck of a deal to propose to the webmaster in the form of dozens of new
clients he will get for hosting your site and make good on your offer;

Or c), have a host which is as enthusiastic as you about the subject of your site and is
willing to host you for free - it's rare but ocasionally happens...

! THERE ARE NO MIRACLE HOSTING SOLUTIONS !
! EVERY WEBMASTER AND HOSTING COMPANY HAS COSTS WHICH HAVE TO BE PAID BY YOUR BUSINESS !
! IF THE NUMBERS AREN'T RIGHT AND FAVORABLE TO THE HOST, 99% WILL FIND A REASON TO KICK YOU FOR USING THEIR EXPENSIVE RESOURCES !


feel free to add more :)

+ $25.00 - What he pays;
- $15.00 - Bandwidth cost;
- $ 4.50 - Personel cost;
- $ 1.00 - Server cost;
========
- $ 0.50 - Webmaster's loss;

Looks like a profit of $4.50 to me. ;)

At the risk of bordering on "advertising", I would be happy to create a custom account for you at the price of $10/100MB diskspace, $3.50/GB transfer, and $10/mo for service/support which I would be happy to do via email.

Seriously, though, prices are about the averages. In my business plan, I have calculated the cost of maintaining x number of accounts per month (the number of accounts I realistically believe I can have by a determined time in my plan). I then calculated the income I would need to cover all business costs (including server costs, bandwidth, software, personnel, hardware, my own salary). My prices, then, are a reflection of being appropriately profitable, while remaining as competitive as I can. It would be nice if more people were willing to pay $50/mo for services offered elsewhere for $10/mo, but it just isn't going to happen.

On another note, American customers (my primary target) don't want honest pricing. The truth is, most of the sites out there are small. All they need is 30MB space and 200MB transfer. But, in the land of "Super Size", we want everything big. Family sedans sport racing stripes and spoilers. We get tucks, reductions, and implants. We buy V-10, 1.5-ton trucks to go grocery shopping. Sure, I only need 15MB and never use more than 40MB transfer & 5 POP accounts in a month, but that 400MB, 15GB, 100 POP account just looks better.

Finally, I understand there are hosts out there who advertise large bandwidth limits & then find excuses to knock off customers who actually use those amounts. Personally, I find this despicable. If you offer it, give it. But, a dynamic website with hundreds of concurrent users probably shouldn't be using shared hosting, either.

Enough said.

The thing that you forget is many hosts DO count on the averages game. If you are above average, than on_average_ there will be 10-20 that do not use the same amount of bandwidth that you use. This means that even though you do use your entire bandwidth allotment, there are many that do not.

I consider this a cost of doing business. Personally, I price the costs of accounts at the price that it would cost me if they used all of their resources. I consider this a very good deal for all of my clients, and most of them (90%) do not use what they are alloted. This way, I do not lose money on accounts that max out their resources, but make money on accounts that do not.

<Note: My costs per account are extremely less than you "assume" above...>

I believe that ALL hosts use the averages game. Nobody has 100% of accounts that use all of their alloted bandwidth. This simply does not happen.

I really do not know why you are complaining. Hosts know for a fact that on average customers will use very little of their alloted resources. They then discount the price to the end user (you!).

I do not see any problem with this what so ever ( to an extent... obviously 10 gigs for $1/ month is ridiculous....) . I personally give all of my clients the same support. It does not matter if they are using 10 megs/ month or 10 gigs / month. I realize that even though my "high - end" users are costing me the most money, they are also necessary in this business. I have accounted for them in my business plan, and know that my business can stay afloat while still providing top notch support to them.

While 10 Gigs per month for $10 seems ridiculous to you, it may not be so ridiculous to your host. ( I know that I can afford it!). If I was you, I would simply check out my prospective host and check their response times for emails, etc. If you find a good host that has good support, but is cheap.... I would not hesitate one second to get an account with them.

Regards,
-matt

Originally posted by mpope
Nobody has 100% of accounts that use all of their alloted bandwidth. This simply does not happen.

What about reseller accounts?

Originally posted by Kiwi


What about reseller accounts? Are you saying resellers use a 100% of their bandwidth?? :confused:




:D

I don't have the experience that many (if not most) here have, but I find your argument very unconvincing from a purely business standpoint.

If you don't price based on averages (with some "cushion" to be conservative) but instead provision for full disk space and bandwidth usage, you will undoubtedly have:

1) Seriously underutilized servers, costing you money for nothing.

2) Prices that are out of the market range.

Of course people buy more service than they need. The incremental cost the the user to "super size" (as one clever observer put it) their hosting plan is well worth not having to worry about running short of bandwidth or space.

Sure, most hosts will allow you to upgrade your plan fairly easily, but if you run over accidently you will often face stiff surcharges. Plus, there seem to be some hosts whose approach to your apparent violation will be to simply shut you down. Who needs the hassle?


Also, I might be mistaken, but some of your numbers don't look realistic to me.

Just my opinion from a user perspective... :alien:

Originally posted by LFonseca
a) The averages game

Mr. Webhost no 1 offers you 150 Mb of web space with 10Gb of bandwidth for $20 a month. Don't
laugh, there's 1000 sites like this... You, Mr. John Doe, looks at this and it seems pretty
reasonable: It has the space you need and a good ammount of bandwidth which you will also need
because you run a popular site.

Unfortunately, what you don't know is that if you do use the 10Gb of bandwidth the
webmaster *looses money*.

Just to echo what everyone already said, they'd only loose money on this package if everyone used the full amount of the package, which they don't. You aren't paying for actual usage, nor are you paying for the full amount of what you might use.

Even if you do use the full amount of your package, you can thank the other lower usage sites for lowering your price. Nice of them to do that for you eh? It can be summed up as, most people paying for amounts they don't need/use, and a few paying less than what they need/use. If you want to see packages that are more accurate (in terms of charging everyone before they use anything), see adult hosting prices.

The fact of the matter is that it doesn't matter what industry you are in, overselling is a normal, accepted business practice. It's not just web hosts that do this.

Ever go into your local grocery store and have to wait in line at the checkout counter? That store is overselling their capacity to check customers out. They have to - if they didn't, they'd have to have one cashier for each customer that walks through the door - no one could possibly do that. Web hosting is no different.

Ever go to a video store to rent a movie? Did you look around, and count the number of customers there? On a recent day at Blockbuster there were a good 30 customers in the store when I was there. Does Blockbuster stock 30 copies of every movie on their shelves? Of course not - they couldn't possibly do that. They are also overselling their product - they don't have one copy of every movie for every customer who walks through their door. They're overselling. Web hosting is no different.

Ever telephone a company and get put on hold? Why do you think that happened? Because the company didn't have enough people answering phones to handle every call that could possibly come in at any one time. They're overselling their telephone capacity. They have to. If they had to hire one phone rep for every single customer who called in, they'd be out of business. Web hosting is no different.

Every month Staples sends out millions of catalogues to businesses nation-wide. Do you think that Staples has millions of telephone operators standing by to take orders? Of course not - they know that not everyone who received that catalog will call in to place an order, and those that do call in won't be calling all at the same time. It could happen, theoretically, but the odds are very much against it. So they have maybe a dozen or two operators on-duty. They're overselling their capacity to accept orders. And no one questions that.

Overselling is a legitimate business strategy. Everyone does it - from the McDonald's restaurant that has 2,000 customers daily but only keeps 500 grilled chicken breasts on-hand to fill orders for the Chicken McGrill. McDonald's knows that the vast majority of customers isn't going to order a Chicken McGrill (or whatever you call it), so they don't keep thousands of them on-hand. They're overselling that product. And it doesn't matter.

If web hosts didn't oversell, they would be stuck with thousands of dollars in totally unnecessary expenses. If you've got a 45 mbps of bandwidth provisioned at a cost of $15,000 per month, but you're only using 3 mbps, you're spending about $14,000 per month that you don't need to be spending. It just doesn't make sense.

Now, those hosts out there that will close an account that uses everything they provide, don't equate that as being the norm. That's a horrible practice. Legitimate hosts do understand that some customers will indeed use everything - and that is absolutely fine. If we lose a little money on one customer, that's ok - it was our decision to price the plan below our cost, if we lose money it's a cost of doing business.

Realistically I think most hosts price their accounts so that if a customer uses everything offered to them, the host doesn't really lose much money. They might not make any profit on that account, but you don't determine profit and loss on a per-customer basis (if that was the way the world worked, construction companies would never accept a contract to build a school or a police station or a highway - because those jobs often turn out to be loss leaders) - you measure profit and loss across the entire operation.

Overselling is a fact of business - any business. It's not something that the hosting industry invented.

Jason

Originally posted by Jason Ellis
. . . . . . .Overselling is a fact of business - any business. It's not something that the hosting industry invented. . . . yup ;)

Originally posted by Kiwi


What about reseller accounts?

Do the average game with resellers acount ( 1 big space to resell space and bandwidth)
Is just insane and stupid!.
The reseller will use that bandwidth and space sooner or later.

Originally posted by LFonseca
Now, could someone please explain to me the logic of these bufoons?? Oh, I know the answer,
mind you. It goes back to the averages game. But wouldn't it be much more logic to offer
an ammount of b/w which can actually be paid by the monthly fee and charge the extra b/w
cheaper?

Is it to much to expect for 10 apples to cost the same as 10 times one apple?
The hosts that charge $10 for 20 gigs and charge $6-8/gig aren't always doing it because of the numbers game. If each customer used 9 gigs, the host would lose money and no customer would be buying a single gig at the inflated price. They are probably placing the price so high to keep people from exceeding their limits without upgrading the account.