Hello,

how web host can be a cheap web host? as i have searched and found some copany provides 5 GB of Space with 150 GB of B/w with 50 MYSQL etc.. at around $7.00 Per Month.

and what should be the answer from other compnay who is selling same package at $50 Per Month?

Ashok

Greetings:

Please keep in mind that the price a company sells its services has zero relationship to pre-tax profit.

A company can be selling at a loss.

Thank you.

One word. Overselling.

They are overselling there service so that they can cram more customers onto one server and they are assuming that you will not use all the resource they sold to you. And when you try to use them they will probably (not always) find a way to terminate your service such as you use to much of the CPU etc.

The $50/month pakcage is closer to what the actual costs are then the $7 account.

You wil find that Company X has a server with a 80Gb HDD & 500Gb transfer each month.

The shared hosting industry is created by deviding this servers resources into smaller chunks and allowing clients to rent them per anum.

for example the above server could host 100 8Gb storage & 50Gb transfer plans.

The problem with some hosts is that they would sell 200! 8GB storage & 50Gb transfer plans, anticipating that none of their clients will use all of their space & bandwith.

If all clients do decide to use their plan to its full potential then all other clients service will be severly effected. This is "Overselling". Its not good, it delivers poor service but is generally damn cheap.

If you like cheap and unreliable hosting i recomend $7 hosting.
If you like reliable, well supported hosting i recomend $50 hosting.

Hello,

how web host can be a cheap web host? as i have searched and found some copany provides 5 GB of Space with 150 GB of B/w with 50 MYSQL etc.. at around $7.00 Per Month.

and what should be the answer from other compnay who is selling same package at $50 Per Month?

Ashok
Psss, i saw a even more cheaper host, those host was running on a server like Pentium4 or below, 1GB of RAM and lots of disk space. With a lower end server as such, their price will be able to cover their cost even not overselling the server(or maybe they do,only them and the gods know).

The cost of business in hosting is not constant. For example, the 50 dollar host could be using better peering and supply better connectivity for you. It's possible that the more expensive host has an elaborate and reliable backup system and the other one doesn't. Perhaps the other host is running a loss leader offering to gain customers and then jack up the price. Maybe the 50 dollar host is offering the same thing as the cheaper guy and making higher profits. In today's market you can't be certain of anything.

Followup: What's wrong with overselling. It's clearly established a foothold in the current hosting market. Phone companies have been using overselling as a strategy for quite some time. If overselling is properly orchestrated it can be a benefit to both the host and their customers.

Hi,

When Customer Says that XYZ host is providing hosting at $7 Per Month why you are charging So much i.e. $50 Per Months?

What should be our answer for such questions? This will be useful for all of us so i request all members to participate in this discussion.

Ashok

Hi,

When Customer Says that XYZ host is providing hosting at $7 Per Month why you are charging So much i.e. $50 Per Months?

What should be our answer for such questions? This will be useful for all of us so i request all members to participate in this discussion.

Ashok

The answer will be vary for each hosting company. I believe every host will have their own hosting value, which make them out stand among the others.

Some of them provide a 99.99% uptime (where the host had throw a sum of investment for their redundant facilities) or even a quality server/ network. etc

Just be honesty to your customer, why you're charging more (you would know better then the others), unless it is because for a higher profit margin.

My typical answer begins with "Because we'll be in business tomorrow, and the next day, and the next day, and so on..."

After the customer laughs about it, I then explain that we pay for all the licenses for the software we use (e.g., most people don't seem to realize that MySQL isn't free for commercial use -- if this suprises you, eMail them and ask how much a license costs for one server for commercial use), and so the feds won't be shutting us down for software piracy, ever.

After more laughter, I go on to explain that we have full nightly tape backups with tapes cycled off-site on a weekly basis, and that we also verify the backups on a monthly basis by actually trying to restore some randomly selected files. After all, backups are only useful if you can actually restore the data, no?

If the customer still needs more convincing, then I talk about upstream providers and why some are better than others and why it costs more to be connected to multiple backbones instead of just one. I also explain the problems with saturated networks that result from unpredictable events such as the infamous SlashDot Effect, thus the costs of overkill are justified (the SlashDot Effect, confirmed by bloated log files, hasn't slowed down our servers yet, and this is largely due to paying more for faster connectivity -- I'm a huge fan of overkill).

One of the biggest problems with el-cheap-o $7 hole-in-the-wall hosting company is the lack of telephone support. And of course, while talking on the telephone with your customer is the ideal time to present this fine aspect of your service!

> ... Just be honesty to your customer, why you're charging more (you would
> know better then the others), unless it is because for a higher profit margin.

Since when is a "higher profit margin" dishonest? Aren't you in business to earn profit, in addition to the other undoubtedly excellent reasons?

My customers know that I'm not the cheapest deal in town, but they're pleased with the quality of service I provide so they feel the price is fair (otherwise they'd switch to someone cheaper -- I've had a few of these over the years, and I' don't miss them).

When you charge the right price, you can have the right number of customers and provide better service. Sure, you may have fewer customers due to your pricing, but your customers are getting far better service from you because they know you have fewer customers due to your higher pricing.

Never feel guilty about charging reasonable rates. I believe that $7/month for hosting is completely unreasonable because the customer can't get as good a service, and you have to work harder to realize profitability.

Too much focus on price is what I believe breaks a lot of here-today-gone-tomorrow cheap hosting companies financially.

Compare it with ADSL, you can get a 3mbit connection for 40euro /month with 1:25 overbooking or get a 1:1 1mbit corporate line for 1000euro /month with SLA and stuff.

If you don't care about reliability, then that's fine. But if you do, then consider these questions...

What is your CIR (Committed Information Rate) with ADSL though? Typically ADSL providers make no minimum speed promises, and many who do don't/can't actually implement it.

Can you get a block of static IP addresses (keep in mind that they're only truly "static" when they're not assigned by DHCP)? Normally you can't, and for the few who do they typically don't support static -- the common "line" (sorry for that pun...) that the local telephone company here uses as an explanation here is "it's static, but it's dynamically assigned." In reality it can only be static or dynamic; it can't be both.

Will your ADSL provider set up reverse DNS for you, or SWIP your block of IPs to be registered to your company with your DNS servers so you can set up the IN-ADDR.ARPA zone in DNS yourself? This is very important when sending eMail because many mail servers terminate inbound connections for IPs that fail certain reverse lookup validity checks.

When a prospective client mentions cheap hosting or makes pricing the most important issue I usually throw them for a loop by turning the tables on them:

"So, I understand a cheap price is the most important thing for you? I would suggest then that even paying that $XX/mo for hosting is too expensive and you are probably overpaying!"

Prospect - "What do you mean?"

"Well, it's only logical that when you only care about the price the best price is free. You can't do better than free hosting and I suggest you pursue that."

Prospect - "But I don't want ads on my site..."

"Ah, so you do value some things more than just the lowest price. well...."

Obviously, not in these words or tone, but it gets the client thinking about quality and value instead of just price. Then can go into the specifics of what we offer and what it is a good value, etc. etc.

Hello,

Thanks. Thanks a lot.

This will be useful for all of us so i request all other members PLEASE to participate in this discussion.

Ashok

You wil find that Company X has a server with a 80Gb HDD & 500Gb transfer each month.

The shared hosting industry is created by deviding this servers resources into smaller chunks and allowing clients to rent them per anum.

for example the above server could host 100 8Gb storage & 50Gb transfer plans.


You might want to divide your results by 10 ;)

But on the other hand, servers are getting cheaper to. You can get a few (2/3) TB's with a 80dollar server.

That will make you able to offer 20 x 100GB bw plans for 4 dollar (Without making profit) Charge them 5 dollar and your making 20dollar per month

But on the other hand, servers are getting cheaper to. You can get a few (2/3) TB's with a 80dollar server.

Who told you that your dedicated server provider isn't overselling?

Some wont, if you are smart you ask them. I know its easy for them to say no, but after 1 month you will find it out tho

after 1 month you will find it out tho

You will not, if you'll use 150-200GB out of allowed 2000-3000GB, as most of shared hosting servers (at least what I am using) do. I'd say that even 200GB is on the high end... ;)

200 GB per month is "high end?" I consider that to be mildly busy. At this rate web server logs are usually recording a steady stream of roughly 5-15 hits per second.

"High end" is when you have to either turn off web logs altogether because log rotation happens too frequently (and it's difficult to justify hundreds of TBs of disk space to store them), or you have a dedicated group of servers that just handle logging and store the information you need in a database (to eliminate the redundancy and waste that's inherent with raw log files).

I recall an article I read in a technical magazine many years ago that described a problem Google.Com has -- in a data centre with thousands of servers, when it comes to upgrading to faster CPUs (this was one of the examples), they have to also consider if the additional costs for electricity that these CPUs will consume is justified. With just a handful of servers, these issues aren't normally considered (although I've noticed that some larger co-location facilities also track and charge for electricity).

Although a fascinating problem to have from the perspective of dreamers on the outside, it's one that makes my description of the logging problem seem far less significant.

Purchasing or leasing hardware to run a web hosting company is much less expensive than would be expected. In fact, an entry level server with hosting software and connectivity run for as little as $69/month. This type of server is capable of hosting hundreds of sites depending on how resource intensive they are. Once the server is in place, the variable cost of hosting one more web site is essentially $0. Thus, the profit margins can be enormous. This type of hardware could easily host 150 web sites, if not more, and at $25 per month for each client web site, this server alone would pull in monthly revenue of $3750. The $69/month as well any other costs (support, credit card processing, marketing, etc.) are dwarfed in comparison to the revenue.

Hosts charging $50 for the same plan must differentiate themselves by providing varying customer support levels, pricing options, uptime guarantees, etc. For this to work, customers must be willing to pay higher prices for the added value.

I think you have missed the point. Cheap web hosting is $1 to $3/month.

You also, of course, have not included any costs for marketing, advertising, and promotion. Just buying keywords on Google or Yahoo PPC (the common approach for cheap hosters) can cost more than the revenue brought in.

Now add customer service, overhead, taxes, etc. and you will start to see the real slim or non-existent profit margin.

I'm sorry, but I just don't get it! Why does every kiddie or one-server guy think they can be the lowest-cost hoster?

Yes, I believe low-cost hosting can be profitable but only on a large-scale which takes a big investment up-front and ongoing expense to draw in the many clients needed to keep it afloat.

Just like in the retail world where there is only room WalMart as the "low cost" retailer and little room for hundreds of WalMart wannabes, in low-cost hosting there is only room for a few big/well funded companies.

Yet that doesn't mean hosting is a dead-end. For every Walmart, there are thousands of successful regional chains, small boutiques, or local stores. It's just a matter of choosing your battles and not trying to go head-to-head against someone you can't beat.

Translation: Just because GoDaddy or 1and1 are very visible leaders in the low-cost/cheap hosting doesn't mean that's the business to copy and try to compete against with your single leased $69/month server.


Purchasing or leasing hardware to run a web hosting company is much less expensive than would be expected. In fact, an entry level server with hosting software and connectivity run for as little as $69/month. This type of server is capable of hosting hundreds of sites depending on how resource intensive they are. Once the server is in place, the variable cost of hosting one more web site is essentially $0. Thus, the profit margins can be enormous. This type of hardware could easily host 150 web sites, if not more, and at $25 per month for each client web site, this server alone would pull in monthly revenue of $3750. The $69/month as well any other costs (support, credit card processing, marketing, etc.) are dwarfed in comparison to the revenue.

Hosts charging $50 for the same plan must differentiate themselves by providing varying customer support levels, pricing options, uptime guarantees, etc. For this to work, customers must be willing to pay higher prices for the added value.

But on the other hand, servers are getting cheaper to. You can get a few (2/3) TB's with a 80dollar server.

That will make you able to offer 20 x 100GB bw plans for 4 dollar (Without making profit) Charge them 5 dollar and your making 20dollar per month
what about transaction fees?

clients who cancel?

adveritising budget?

staff payment?

billing software?

support software?


;)

I personally prefer the term inexpensive as opposed to cheap. Cheap makes me think of shoddy or poor quality alternatives. The price point as to what is considered “cheap web hosting” is obviously open to interpretation.

The point of my post was to illustrate that the barriers to entry in shared web hosting are relatively insignificant. The capital requirements and switching costs are both very low. Certainly the biggest cost is advertising and attracting a customer base. Maybe if you told me this was the steel or defense industry, then I would agree that it is very difficult to enter due to the substantial resource investment required.

Simply being a big and well-funded company, as you suggested, has little to do with a successful low-cost strategy. Southwest Airlines started out as a small player with little funding in the crowded airline industry, but nonetheless pursued a low-cost strategy by flying out of smaller and less utilized airports and by not providing meals on flights. This allowed for the quickest turnaround times in the industry, thereby allowing them to utilize their assets as efficiently as possible. These primary factors gave Southwest Airlines a significant advantage over competitors. Such a great advantage that SWA’s perceived value (as demonstrated by its 13.56B market cap) is greater than any other U.S. airline.

I think you have missed the point. Cheap web hosting is $1 to $3/month.

You also, of course, have not included any costs for marketing, advertising, and promotion. Just buying keywords on Google or Yahoo PPC (the common approach for cheap hosters) can cost more than the revenue brought in.

Now add customer service, overhead, taxes, etc. and you will start to see the real slim or non-existent profit margin.

I'm sorry, but I just don't get it! Why does every kiddie or one-server guy think they can be the lowest-cost hoster?

Yes, I believe low-cost hosting can be profitable but only on a large-scale which takes a big investment up-front and ongoing expense to draw in the many clients needed to keep it afloat.

Just like in the retail world where there is only room WalMart as the "low cost" retailer and little room for hundreds of WalMart wannabes, in low-cost hosting there is only room for a few big/well funded companies.

Yet that doesn't mean hosting is a dead-end. For every Walmart, there are thousands of successful regional chains, small boutiques, or local stores. It's just a matter of choosing your battles and not trying to go head-to-head against someone you can't beat.

Translation: Just because GoDaddy or 1and1 are very visible leaders in the low-cost/cheap hosting doesn't mean that's the business to copy and try to compete against with your single leased $69/month server.

A company only can be a low-cost provider if it has the resources and capabilities to support this strategy. Web hosting businesses run by an individual most likely do not have these resources and capabilities.

If I was starting a web hosting business today, I would target my business to the small and local business owners looking to establish a web presence. Local business customers searching for web hosting are generally not very price sensitive. They are also frequently willing to pay a premium to have a personal contact at a hosting company who is ready to make the oftentimes complicated web hosting industry more understandable. This is one area where bigger and more established hosting companies cannot compete as well.

In addition to that, customers looking for "the cheapest hosting deal they can find" are nothing but trouble -- they constantly waste your time because they almost always have unreasonable or unrealistic expectations, and they completely lack loyalty; even if you tell them "no telephone support," a few will even pay a lawyer top dollar to look up your information in the corporate registrar so they can phone you at home when they have a problem if they are unable to reach you via telephone numbers posted in various WHOIS records.

I don't deal with these types now, and I'm much happier for it. I used to, and when I look back on those days I regret the time I wasted when I really should have told some of them to just "go to hell." Oh well, it was a learning experience.

Focusing on good customers who value your services, and are respectful and honourable in their dealings with you, is the sensible approach that will reward you well. Your idea to focus on local businesses is correct, and by providing good service you'll find that word-of-mouth advertising will happen naturally.

Sir Randolf made an excellent point. If prices are too cheap, it tends to bring in people who want everything for nothing, including support.

Actually, they don't want "everything" -- they want a lot more than that. =)

Yahoo business hosting, netfirms and etc are overselling like hell, afaik their service is still very reliable. how to explain that?

Yahoo business hosting, netfirms and etc are overselling like hell, afaik their service is still very reliable. how to explain that?
They can afford to pay a one-off cost of a highly trained sysadmin to optimise their servers far more than an ordinary hosting company can. Plus, the sort of people who go for them are typically those with little internet experience and so are likely to put ~1MB of company files on there which'll get accessed a dozen times a month.

A 13 year old kid will probably also have a ~1MB site that'll get accessed a dozen times a month but they'll chuck some music files and crap on there just because they can. Hence, overselling is more limited.

A 13 year old kid will probably also have a ~1MB site that'll get accessed a dozen times a month but they'll chuck some music files and crap on there just because they can.

13 years old kid probably will also host the script written by himself which accessed a dozen times a month will make your Apache hang exactly a dozen times a month. :rofl:

Trusting anyone to run scripts on your system is a risky thing to do unless you know how to configure them to run in a sandbox without taking down your entire system (e.g., in the back-end the script is passed to a virtual machine or a separate server that, in the event of crashing due to a messed up script, won't cause major problems for your main system).

Even for a set of scripts that you officially provide to your customers (which they don't have access to modify in any way), these should also be executed (in the case of ModPerl) or interpreted on a separate machine if they're written by third parties (including, especially, open source projects) to limit the security risk on the main production systems.

Cheap hosts typically don't have these types of safeguards in place, which is probably one of the reasons they suffer more down time.

Disappointment , costs a lot more!
It's that simple...

My advise is to go with a high end web host. All these web hosting companies who offer 10GB space for a couple of dollars are completely mad, you will not receive a good service, or a service that will be there to stay. $50 is very cheap for a good hosting account, there are many highend hosting companies around, httpme (http://www.httpme.com)and hostistic (http://www.hostistic.com)are a couple that spring to mind.

$50 might be cheap or might be expensive.

Certainly, a few bucks a month isn't going to get you quality, but I suspect everyone here has an opinion (different!) on what price point is typical for quality shared hosting accounts.

My advise is to go with a high end web host. All these web hosting companies who offer 10GB space for a couple of dollars are completely mad, you will not receive a good service, or a service that will be there to stay. $50 is very cheap for a good hosting account, there are many highend hosting companies around, httpme (http://www.httpme.com)and hostistic (http://www.hostistic.com)are a couple that spring to mind.