My company has been offering web hosting in our local region for a few years and recently began doing so for the rest of North America and Internationally. I consider our plans to be well priced and definatley feature filled. BUT in the past few weeks since visiting this forum I have been shocked at what some companies are offering, and am not even sure how they make money. Here is an example what one company post in the advertising section of this forum in reply to a hosting request:

- 350MB Web Space
- 75MB Mysql Space
- 75MB Mail Space
- 15GB Data Transfer
- H-pshere Control Panel
- Unlimited POP Email Accounts (Web based email included)
- Unlimited autoresponders and forwards
- Unlimited Sub Domains
- Unlimited ftp account
- Flash supported
- 5 MySQL Databases
- PHP4.12 with Zend Optimizer
- Frontpage ext
- Weblazier Stats
- Perl
- Private CGI-Bin
- SSH access
- Password Protection
- PhpMyAdmin Access
- SiteStduio (is a website creation utility which is considered one of the best in the industry)
- 30 Days Money Back Guarantee

No Setup Fee
Monthly Price: US$9.95


Is it just me or does $9.95 per month seem way to low for this package. $19.95 maybe, but $9.95! This is not the worst example - i have seen some offering comparible plans for $6.95 per month.

My company offers a $9.95 package, and it comes with 50MB, 5GB, 50 POP, and a lot more features ... but a total of 500MB of diskspace and 15GB, plus mySQL for $9.95!

I am a huge advocate for competive pricing, but companies offering this kind of plan for so low are going to compete us all out of business (again in my opinion).

I am also concerned about wether these companies can live up to their advertising? Or are they just oversellings themselves to the extreme.

Anyone else have any thoughts on this? Anyone who disagrees is welcome to post to :-).

A lot of companies are playing the bandwidth game. They know that 99% of their users won't even come close to using 1/3 of the offered bandwidth. Also if you haven't noticed, a lot of companies are using Cogent/Multihomed bandwidth these days. They pay something like $100-$150 per month for a server with 300-400GB of monthly transfer.

I'm pretty sure he knows these facts. But bandwidth makes only a small percentage of your costs, there are many other costs involved which will break the neck of too-cheap-hosters. I only mention advertising and wages.
BTW, I said "too-cheap-hosters", not "cheap-hosters". :)

Leeanne,

Rest assured you're not alone in finding some pricing on this forum 'suprising' to say the least. However as someone who's been around a while here you'll be happy to know that in a few months (if not weeks) time, you probably won't see many of those hosts still posting, or even online. They'll be replaced with a fresh set of names offering the world for nothing, only to be replaced themselves later on, and so on...

About all it really results in is a lot of unhappy customers milling around at the bottom of the pricing food chain.

Greg Moore

Leeanne,
You are not alone in noticing this trend. To be in this business profitably for the long haul you have to have a scaleable business and pricing model that will allow you to hire additional support staff as you grow. I am not looking to get rich but I have to be positive cash flow to survive and I have not figured out a way to offer quality/timely service and support at some of the prices I have seen posted. It is best to just walk away from the bidding wars, you will recover some percentage of the failures at a later date.

You will find that you will loose out on some new business to the cheapest guy on the block but that is only for as long as they can provide decent service. History has proven and I would also predict that many of these very cheap hosts will not be able to proved the level of service to support a demanding customers base once they grow significantly.

As a matter of fact I have seen several recent request over the past weeks from people looking for a new host because they are not getting the support they require. In some cases money is not the issue, they just want great up time and they want to be able to reach a knowledgeable support team quickly when they need help.

If you have a good solid business model and decent support plan that scales well at your existing prices then I would stick with it. If you offer great service and reliability your reputation will often be enough to gain the little extra premium that your prices may demand.

as somebody said in this forum
I prefer 10 customer paying $20 than 40 paying $5.
Its all about your bussines model, I think that you saw a lot of complains for companies that started sucefully and now they overcrawded they servers, and giving no support.
I suggest to take a look to this thread
http://www2.webhostingtalk.com/showthread.php?s=&threadid=19875
http://www2.webhostingtalk.com/showthread.php?s=&threadid=13258

Originally posted by akashik
Leeanne,

Rest assured you're not alone in finding some pricing on this forum 'suprising' to say the least.
Greg, while I'm sure you didn't mean to exclude the entire web, one only has venture off the forum to find 'unlimited everything' available for $1/mo. How could you go wrong? ;)

Here's another good thread about this.

http://www.webhostingtalk.com/showthread.php?s=&threadid=34152

Peronally I found this kind of offer more amazing...

PIII 933Ghz
512MB Ram
300GB bandwidth
$89/month

or

AMD XP1700
512 MB Ram
300GB Bandwidth
$119/month

I simply couldn't work out how they offer dedicate server that is so affordable. Let me do some maths...

Colo space: $25-45
300GB Cogent bandwidth: $60
$30 per mbps but you would need at least 2 mbps capacity to handle 300GB of bandwidth.
Hardware depreciate: $35 - 45/month over 18 months period.


I wonder who is making more money. :)

Originally posted by Jedito
as somebody said in this forum
I prefer 10 customer paying $20 than 40 paying $5.
Its all about your bussines model, I think that you saw a lot of complains for companies that started sucefully and now they overcrawded they servers, and giving no support.
I suggest to take a look to this thread
http://www2.webhostingtalk.com/showthread.php?s=&threadid=19875
http://www2.webhostingtalk.com/showthread.php?s=&threadid=13258

Actually, as a Web Hosting Provider, I'm thrilled to death to see the type of crazy "loss leader" web hosting packages advertised everywhere.

Seriously. :-)

Why? Because when the customers sign up for these plans and realize that with that Wiz Bang hosting plan they get little to no support, an overcrowded server and possibly even really slow bandwidth, they start to look for someone better.

I can't even count how many customers we've gained like this. You can always tell them when you get them. After we answer the second or third support ticket within a couple of hours, we get that email that says something like:

"Wow, you guys are fast. Host XYZ we used to be with would take days just to answer or emails, let alone actually solve our problems!"

No, I'm not patting my own back, or self-promoting, this happens to us everyday. And I bet with a lot of the other really well known and well run hosting companies like Site5.com, IntelligentHosting.com, and others.

Service and support are everything in this business. Someone else is always going to be cheaper, have faster servers, more disk space, more (or unlimited) bandwidth, a prettier web site, etc. What makes the difference, and what keeps customers from jumping ship is good service and taking care of there needs.

We couldn't provide 1000 customers paying us $1/month good service. But, with 50 customers paying us $20/month, we can do a great job. When we get the next 50, 100 or 200 clients, we'll be able to pay for additional support staff to help provide these new clients and our existing clients with the same level of support.

Bottom line, companies who sell for less don't last. Its not a competitive edge for long. Customers begin to realize that for a slight increase in cost, they can see a high level of increase in service and support.

Take care,

Brian

I'll have to agree with those who have posted thus far: setting a realistic pricing model not only gives the security of you yourself knowing that the business is sustainable, it also gives visitors the sense that you understand that being a loss leader is not as in vogue these days as it might have been in the dot com boom.

From time to time we receive email from people asking why we don't offer plans like ABC Company does, where their site is right now. ABC Company offers them 50G of transfer and huge amounts of disk space for $15 per month, but their service is poor, the servers are overcrowded (or down constantly), and so on. We typically tell them that it costs money to run a company well and continually hire support staff. I'm always tempted, though, to ask them why they would want to find another company just like the one they're trying to leave. There is a correlation here that people sometimes miss because their focus is too much on price alone and too little on why some companies are around a lot longer than others.

I bet that offering plans that cheap generate a lot of traffic to those companies, I wonder if it would not be beneficial to offer 5 or 10 of these plans on each of your servers to get some name recognition. If you did this I wonder if you would not have people saying stuff like "The special promotion I got is no longer in effect, but they have a plan for $19.95, and these guys are top notch."

Maybe a way to compete with the bottom feeders, only difference is you will still be around in 6 months.

Just some thoughts.

Originally posted by Eiv
Peronally I found this kind of offer more amazing...

PIII 933Ghz
512MB Ram
300GB bandwidth
$89/month

I simply couldn't work out how they offer dedicate server that is so affordable. Let me do some maths...

Colo space: $25-45
300GB Cogent bandwidth: $60
$30 per mbps but you would need at least 2 mbps capacity to handle 300GB of bandwidth.
Hardware depreciate: $35 - 45/month over 18 months period.

Yes, that's by far a bigger mistery to me than all the cheap virtual accounts! Your calculation even didn't count in some more costs like support, advertising and so on! And for $45 * 18 months you won't get a good server.

Originally posted by Eiv
Peronally I found this kind of offer more amazing...

PIII 933Ghz
512MB Ram
300GB bandwidth
$89/month

I simply couldn't work out how they offer dedicate server that is so affordable...

Basic Server Cost: ~$500/once
Modem for Server: $20/once
Hosted on a Dial-Up Account: $12/mo

:dgrin:

What do you all think about RackShack? RackShack is making it possible for any Joe and his dog to start a cheap web hosting business without overselling. Most people are looking for quantity over quality unless they get burned a few times, and that depresses me because I want to start a quality web hosting company, but how many people are willing to pay for quality? :(

Bandwidth its an small piece of your expenses at the end, +$300/per server it wont make a big diference in your balance, but you have to pay at least $12/hour for a tech doesn't matter where you rent, lease, colo your server :)

That's true, but it's easier to sell a web hosting account with 25 GB of bandwidth for $25 rather than a web hosting account with 10 GB of bandwidth for the same price, but how many people would be willing to purchase the 10 GB plan for better quality service and support? That's what I mean by quantity over quality. It seems everyone wants everything for almost nothing these days. If that's the case, why should I bother? :confused:

Did you saw Verio prices?
I think that they have more customer than those dirty cheap host.;)

Yeah, but they're a very large hosting company. I'm not sure if people would be willing to invest that much in a smaller web hosting company. They host some pretty large names, and they seem to be more business oriented. Usually businesses are willing to pay more for reliability.

Usually businesses are willing to pay more for reliability. :idea:

--

It's almost natural for new businesses to undercharge and it's dangerous because it makes it difficult for the "new business" to ever make it to an "established business" status.

It's far more difficult for a "new business" to obtain a loan from a bank because "new businesses" are likely to fail for many reasons. The banks have known this for many years but the businesses seem to continue complaining about the bank's thoughts on the matter and oddly enough more businesses fail within the first 3 to 5 years than any of us like to fathom. And they fail for the reasons the banks figured they would....

With "Internet Years" moving along at a much faster pace than "Traditional 3D Years" and the hosting industry being what it is, it's not uncommon to see new hosts fail in one to twelve months with the most common reaons being that the owner failed to consider the long term needs.

It pains me to read many of the posts on these forums by potential hosts making comments about how cheaply they can build this or that. One such post a while back spoke of finding a lot of building space for "cheap". With the rent so "cheap" they could fit "rows and rows" of cabinets within it. The concern was obvious -- If they need cheap rent, how in the world will they afford "rows and rows" of cabinets? At no time was the consideration for the enormous amount of power or humans that would be required brought into the picture. The common answer to these types of things is "Well we just build as we get more accounts to pay for it" and they say this just after the comments like "We'll lower our prices in such a way that everyone will want to host with us." By lowering their prices to these ridiculous amounts they never earn the money to "grow"... soon after we begin to hear about xyz host being in the Intensive Care Unit with a life expectancy of 60 days or less... :(

If you're considering getting into this business --- STOP AND THINK FIRST!! <<== Best advise you can get and amazingly a huge number of hosts do not do that much.

I've dared more than one host to turn their computers off for a while and grab an old fashioned piece of paper and a pencil (those are the wooden stick looking things with lead inside... press pencil to paper and neat things happen!). Forget about all of your competition and definately forget about all of the comments you've seen on WHT! Write down your expenses.

1) Cost of Server

2) Cost of replacement server (because if you aren't prepared #1 will blow up)

3) Cost of Space to put server (collocation fees/power/ whatever it is you pay)

4) Cost of Backups or anything else to protect server (if not included by your collocation provider etc)

5) Bandwidth... Don't be silly here..think long term...

6) Cost of Having a Human Available for that server 24/7/365 (don't low ball yourself here...you'll regret it - If you MUST lowball at least pay that human minimum wage and no less!)

7) $500 to $1,000 - Just tack it on.

===============================================

Total Amount of Above == Z

Now for the tricky part...

X * Y >= Z

Where X = Number of Accounts, and Y = monthly amount you charge each account.

If X times Y does not equal or exceed Z you're in trouble.

Once you have determined how many accounts you need to generate enough revenue to satisfy the above equatation rethink about the server you have. How much disk space, CPU, Bandwidth etc and decide how you will need to divide it up between the accounts (Don't forget your own space to run the OS etc).

The above is the general idea... you can (and should!) get as detailed as possible. Most are shocked at the numbers they come up with as the math reveals that the market value for hosting is far higher than many hosts were planning on... If you're looking for a 'quick fix' do as the rest and build your prices based on the prices you see in WHT and quick it will be. If you're looking for a "taste of the business" then go for a reseller's account and learn w/o putting yourself at great risk. If you're looking to get into this business for the long term..turn off your computer and turn on your brain.

My 20 cents for what it's worth...

Originally posted by Deb
If you're looking to get into this business for the long term..turn off your computer and turn on your brain.

One of the best writings in the past about this topic.

Personally, I think Futurequest Deb's been sniffing the floppies again. My suggestion is to base your hosting site on unlimited bandwidth for $1/mo. (http://www.1dollarhosting.com/hosting.shtml).

*takes a deep whiff of the floppies himself* -ahhhhhhhh :nuts:

Originally posted by Deb
:idea:

--

It's almost natural ...
Once and again, you're so right...

Originally posted by Jedito
as somebody said in this forum
I prefer 10 customer paying $20 than 40 paying $5.
Absolutely. I have just over 100 accounts and the average account is US$30/mth. I don't know how those hosts get on who offer their $25/yr plans. :rolleyes:

Don't ask me how you make money after support costs etc with them. I assume that it's mainly newbies who buy those cheap accounts anyway and there's a lot of hand holding there.

I certianly won't get rich but it's a very nice living. :D

I think a big problem is people are so da*n cheap. They see Don freakin' Lapre infomercials and think they can make millions with a website - but they aren't willing to spend $250 for it. They go cheapy host and lose one sale a month they'll lose more than $250! People will piss-and-moan for $1 savings a month to get a whole $12....when they could have spent that time on their site and made it more appealing and made $500 through additional orders.

The problem is, how do you find customers willing to pay $30 per month for web hosting? I know there are many customers out there willing to pay for quality service and support, but where do you find those people? Most of the consumers on this forum want cheap cheap cheap unless they've been screwed enough to realize that they're usually getting what they pay for, so most people figure it's easier to get 6 customers paying $5 per month than 1 customer paying $30 per month, even though in reality, in the latter case they'd be better off in the long run, plus they can offer much better services since they'll be able to afford the time.

Originally posted by ToastyX
The problem is, how do you find customers willing to pay $30 per month for web hosting? I know there are many customers out there willing to pay for quality service and support, but where do you find those people? Most of the consumers on this forum want cheap cheap cheap unless they've been screwed enough to realize that they're usually getting what they pay for, so most people figure it's easier to get 6 customers paying $5 per month than 1 customer paying $30 per month, even though in reality, in the latter case they'd be better off in the long run, plus they can offer much better services since they'll be able to afford the time.

Hey, ***** have 20.000+ customers :), you can always get one of them.

We should make a road from *****s support page straight to 'Webhosting Special Offers' here :D
That should boost up the business a bit

Originally posted by ToastyX
The problem is, how do you find customers willing to pay $30 per month for web hosting?

Everywhere. There's a large market for clients on all levels of the pricing tree. WHT is probably not the best example for an industry average, but rather a specific mindset of customer. There's a lot of very savvy people that come here looking for hosting and in some cases will push the price down pretty hard. Why? They know they'll get it because some new host is starving for clientele. They may not be banking on the host to go 'tits up' in a month or two but it's a risk some people are willing to take.

Now, programmers, home businesses, graphic artists, web designers, retail businesses (the list goes on) will generally be ready to pay a little more for their hosting with the assumption that it will give the host a wider profit margin, and therefore buffer them somewhat from unforseen issues that might arise. Whether that assumption is proved right or wrong will depend on the management plan of the host of course.

As for finding these customers, I think quite often you'll find them in places that aren't packed solid with other hosting companies. ;)

Greg Moore

Originally posted by ToastyX
The problem is, how do you find customers willing to pay $30 per month for web hosting? I know there are many customers out there willing to pay for quality service and support, but where do you find those people? Most of the consumers on this forum want cheap cheap cheap unless they've been screwed enough to realize that they're usually getting what they pay for, so most people figure it's easier to get 6 customers paying $5 per month than 1 customer paying $30 per month, even though in reality, in the latter case they'd be better off in the long run, plus they can offer much better services since they'll be able to afford the time.

They're everywhere. The world is a much bigger place than WHT. This forum is sometimes like people trying to buy a Porsche with the spare change they've found in their sofas when the dealer doesn't see anything wrong (in a business sense) with offering all the fabulous extras without raising the price. What those people wind up with might get them where they need to go for awhile, but it won't be a very enjoyable ride.