Today I saw a post for dedicated windows servers for $35 a month. It wasn't a cheap server either as it had a higher end AMD processor and 100GB of BW.

I want to know how they can sell servers that cheap knowing full well they are going to take a loss. They have to be losing money because the server itself would cost more than that per month and that is not even taking into consideration the bandwidth cost.

Is there something I am missing even if it is a unmanaged server?

How can someone that is fairly new to the business compete with this?

jason

Originally posted by blackmesh
How can someone that is fairly new to the business compete with this?

jason

Simple. You can't, the industry is too competitive and entry is getting harder all the time for startups. You have to try and offer something they don't which is also becoming a lot harder as a lot of the main players have their fingers in all the pies so to speak.

Disruptive Pricing

Ask the CEO of Gateway...he'll explain it rather well...

There's prices for those who know what they want, prices for those who need a certain level but cannot afford everything and then there is disruptive pricing which is put in place to entice those who do not understand what they want but flock to the great deal which disrupts the industry overall and keeps Gateway on the buyer's minds...

With hosting, the business minded big boys are offering plenty of 'disruptive deals' in an attempt to shut out those who are unable to take the losses. There are also those charging for the services required to satisfy those who understand what they require. What makes hosting far more 'disruptive' than the hardware wars is that we also have people, who do not yet have the required business sense, trying to compete with the disruptive big shots resulting in an enormous amount of low cost deals. Those w/o the funding to keep up with the unrealistic demands will fall by their own self inflicted wounds and those with the business minds and funding will pick up the slack.

In the middle we have 'everyone else' of course and they are going to continue to compete with each other on a somewhat even playing field and this is what keeps the clients safe from any serious problems in the areas of being charged too much or receiving too little for the long term.

Well said, Deb.

If you're going to offer ridiculously low pricing, it should be part of an overall plan. Sometimes I seriously doubt that even larger companies actually have a plan when they offer Dual Xeons with 1000GB of transfer for $40/month (okay, not sure I've seen those).

If something isn't worth your while, you shouldn't assume that it's a good idea to attempt to offer a product or service at a certain price just because the "big boys" are doing it. This behavior has already lead to consumer skepticism in web hosts (so many go out of business or provide terrible support because they get in over their heads, or continually sell at a loss).

-Russell

Personally I say good luck if someone wants one of these type packages.

When you sell hosting as a commodity (and those that do are causing the problems) you loose, the entire industry looses, and most importantly most clients loose.

We sell it as a value added service to individuals or businesses that are willing to pay your prices. Offer services and products that make them willing to pay fair prices. Then treat them like gold. Have 24/7 live phone support, answer their questions, return phone calls asap, etc.

Take care of their needs so they can go about their business.

Like one insurance agency we deal with called and said they get a cheaper service... I asked them what they do when one of their clients call and say that -- they said they are not getting the same service. They said that when they have a claim the competing service will not be there for them. I said exactly. He said I see your point and asked to prepay for his service for the next year.

Very good comments. It just makes me concerned that even though I provide very good service to our customers, it gets increasingly hard to find new ones. Even with word of mouth, banners, search engines, and every free posting we can do working for you, it seems like an uphill battle all the times. It takes almost a year for the companies to go out of business that offer these undercut prices if they do at all. I just didn't know if I was missing anything or not.

Not to spin this into another direction but how do you dissuade potential customers (that you do not talk to because they just visit your site) to make the right choice and pick a higher priced service over the $35 dollar host.

I do thank you all for responding to this as it has been weighing heavily on my mind for the last month or so.

jason

What makes hosting far more 'disruptive' than the hardware wars is that we also have people, who do not yet have the required business sense, trying to compete with the disruptive big shots resulting in an enormous amount of low cost deals. Those w/o the funding to keep up with the unrealistic demands will fall by their own self inflicted wounds and those with the business minds and funding will pick up the slack.

Just reminds me of the old DSL wars. Same thing. Of course Baby Bells did in the resellers, I feel the RSs will do in the "other" guys competing in the extreme low end.

My favorite guys are these:

"How do you compete by seeling at or below cost?"

"Simple. Volume".


Kills me. Volume is Walmart, not some guy selling 100 servers.

Originally posted by UmBillyCord


My favorite guys are these:

"How do you compete by selling at or below cost?"

"Simple. Volume".


Kills me. Volume is Walmart, not some guy selling 100 servers. So simple, yet so hard for people to completely grasp. Reminds me of one of the oldest stories......

Guy drives to the mountains, gets a truck load of apples....pays 25 cents per apple....drives home......sells them for 20 cents each and sells out in less than two hours. So he's ready to head back to the mountains for more. His friend asked, "How are you going to be profitable paying 25 cents and selling them for 20 cents?" He replies, "I'm going to make it up with volume!"

Won't work selling apples....won't work selling web services.

I wouldn't go as far as saying that about web services. Web services is much more global than just web hosting. Web services are usually software that you pay for x amount of usage. Online advertising is a form of web service, and you can make in with volume there. So are legitimite music stores - they're a type of web service, and at $0.99 a song, it's possible to make profit.

Web hosting, on the other hand, cannot be made up in volume because the price per item increases with every new item.

Originally posted by blackmesh

Not to spin this into another direction but how do you dissuade potential customers (that you do not talk to because they just visit your site) to make the right choice and pick a higher priced service over the $35 dollar host.

The truth is: you can't. Some people will always look at price as their leading factor in making decisions. A glance through random threads here at WHT almost every day will be telling, as some people move from one ultra-low cost host to another, always wondering why they really can't have everything for nothing. The question for the host is whether they want to join the throng trying to sell what will be a loss leader, or manage their business without those outside influences that in the end will not serve them well.

On another note, I would not take WHT as a barometer of the hosting industry as a whole. It's a rather thin slice which has become more tilted to "how low can you go" as time has passed.

I haven't seen the advertisement, so I can't really comment on it - Can you post the URL here? I know that there are a few hosts clearing out older stock (Between 500Mhz-800Mhz) Linux servers for $35/month, but I don't think it would work like that with a newer server, with Windows on it... Older boxes however, that have had their hardware costs payed off long ago (and don't have Windows on them) can be profitable (if you have enough extra bandwidth and space).

-Josh