There are two types of overselling hosts. One, logical oversellers, who overesell not above a few GBs. Two, who offer plans so impractical, that 10 accounts could fill their server, but they oversell in the belief that their clients couldn't use so much space.

What should be the limit of overselling? Is it legally threatening to the producer? Could it harm the consumer in most cases? Would it attract a buyer, or send him away to some logical and reasonable host?

Two words: Risk management.
Practicly you have to provide what you promise.
You know IF everybody uses their resources to it's limits, your company will collapse. But you also know that it PROBABLY won't happen, unless you're the most unlucky man in the universe ever.

Extreme overselling might be a turn off for customers, as they are knowledgable these days. So they know they cannot get 500GB space and 5000GB BW for $5/mo.

Reasonable amount of overselling will attract the customers and will be profitable as well.

World economy is based on overselling plan.
Japan, for example: If everyone pull their money from the banks, Japan will be no more because banks and government doesn't have enough money. But it probably won't happen.

Are we talking about shared hosting or reseller here?
There are 2 kinds of stories here with shared and reseller.

If you sell resellers accounts WITH overselling enabled then it's not a good idea to use overselling (almost at all) because people tend to use as much as they buy. They will oversell themselves and then you need to have space to for them to grow. In this case you may oversell space and bandwidth ONLY if you are ready to add the space and provide the additional bandwidth when the time comes.

If you sell reseller account WITHOUT overselling enabled then you can oversell yourself without much trouble.The final client will never use 100% of the space (depending on the plans your client has the average final client will use like 50-60% of the space). So it would be safe to oversell like 25%-30%

If you sell shared hosting and you have big plans (>1 GB space) people will not use it all. The (my) average client uses no more then 500 MB and some of them use just 10-20 MB (that's because they have just the website and not a very big database or they don't keep the emails on the server but rather delete them after reading them). In this cases you can go and oversell up to 50% (but I would not advise to oversell that much really).

In shared hosting it depends on your business model. If you have BIG plans and your market is personal websites then you can oversell big time. If your market is let's say small business and corporations then the overselling margin cannot be that high (they tend to use the space with DB and emails even if the website doesn't take that much space). Usually corporates have their own servers so it's only isolated when they use shared. But small business use shared most of the time.

But you have to remember that it you have to provide what you sell and you have to be ready for that no matter if you oversell or if you don't.

I hope this helps.

taht was of immense help. i am moving into shared hosting and im just gonna go trim my plans...

I wont say nothing but DON'T!
Overselling is a very high risk for your company. You won't be able to deliver the promised product to clients. things will get slow and ruined very fast without your control to fix it.... Simply dont do it for your and your clients favor.

Dear Karmahost,

I would not recommend overselling, we are even double buying i.e. we are buying/peering the needed bandwidth twice over different physical routes.

e.g. a customer signs for 10Mbps, then we buy/peer for 10Mbps at route 1 and route 2.

This of course increases the pricing but at least you can provide a more decent and reliable SLA to your quality customers.

Best,

Karmahost,

I believe in underselling. That allows me to deliver more than the customers actually asked for. Think about it for a second. A customers signs up with you because he likes your service, not because you are cheap. In return you keep a very reasonable low number of shared accounts on the machine and as a thank you can "upgrade" the hosting package after some time without almost any additional cost ;-)

Best regards

Use logic basically. Overselling can be okay, but be ready. Don't let your systems get overloaded or your customers will suffer. It is okay to sell a little bit more than what you have but have a well-written TOS to let customers know what to expect. Also, be ready to upgrade, because if you are giving out a lot, your going to run into customers who are going to want to use a lot.

And btw, banks do not oversell, they invest. That is a big difference, banks don't sell at all actually and they can't give out more money than they have. Sure they don't have it all at the bank but they have the worth in investments, that is how they generate profit and interest.

@ all
I see that overselling is somewhat regarded as being related with poor performance on the server(overloading the server) and that is not true at all.
One single account with 1 GB space (or even less) and a few poor written scrips can destroy a server.
It does not take 1000 accounts to make a server crawl. One is enough. It's correct to say that if you have less accounts there is a smaller probability that you will not have a client that uses to much resources (cpu and memory) BUT this is not the way it should be handled. Because someday one client like this comes along if you are overselling or not. They should be told that they are using to much for a shared host (they are no matter if they are on a overselling host or not) and they should be helped to optimize the script or move to a VPS / Dedicated if they really need to.

Valentin, if you are overselling (please don't understand by overselling something like crazy-overselling- 10 $ / year for 100 GB space / 1 TB traffic) then it's most likely you have lower prices and more clients and you can afford a new HDD and double bandwidth faster to upgrade the hosting package for free.

It's all about business plan and business model.

PS: We are not overselling in case some of you wander.

The Overselling Discussion over and over but I think that the term "Overselling" should be changed to "Overload". For example; have you ever flown on an airline? Do they oversell the seats on their flights? ALL the TIME; however, they will never overload their flight (the plane cannot physically handle an overload). See the difference?

Another example, have you ever been to a doctors office? Here is a good example of Overloading at the extreme; most doctors will overbook ("Oversell") their appointments because they know that there will be cancellations, etc. The problem occurs when there is no cancellations and now you have Overbook (Overload).

In my opinion, if you do not oversell your products and/or services, how can you stay in business? If you overload your employees, services or production of products; how can you stay in business?

The answer is marketing your products and services with a proper growth management in place.

Here is my final example; I saw a commercial on TV; a guy was looking over their production reports and looking afraid he went to his partner and told him "...at this rate of growth we will have to buy more inventory, hire more people and maybe build a new addition... if these sales continue..." His partner looked and asked "...isn't that the goal... Growth?"

Having a proper management system in place to act with the growth is NOT overselling its good business. Overselling without a plan in place is Business Failure.

I wont say nothing but DON'T!
Overselling is a very high risk for your company. You won't be able to deliver the promised product to clients. things will get slow and ruined very fast without your control to fix it.... Simply dont do it for your and your clients favor.

Complete and utter nonsense. We've been overselling, to a reasonable degree, for close to 10 years. Its not a high risk, if you don't oversell too much. To not oversell means wasted profit and higher pricing for your customers, for the same level of service.

So, what would happen if everyone on the servers started suddenly (after 10years) using ALL of their allocated resources? Pigs would fly by as hell froze over. ;)

--Tina

Complete and utter nonsense. We've been overselling, to a reasonable degree, for close to 10 years. Its not a high risk, if you don't oversell too much. To not oversell means wasted profit and higher pricing for your customers, for the same level of service.

So, what would happen if everyone on the servers started suddenly (after 10years) using ALL of their allocated resources? Pigs would fly by as hell froze over. ;)

--Tina

Great point Tina; that's what my point was; I guess too many examples. Overselling is part of business. Ask Henry Ford and the reason he designed and built that Assembly Line. (here I go again with examples - sorry)

you need to find a nice balance between revenue and risks.

@ all
I see that overselling is somewhat regarded as being related with poor performance on the server(overloading the server) and that is not true at all.
One single account with 1 GB space (or even less) and a few poor written scrips can destroy a server.

What does that have to do with overselling?

One customer monopolizing the server resources must be resolved regardless of overselling. They arent buying cpu resources.

If your server costs you $100 a month to run, and your customer is paying $5 a month, then he shouldnt be allowed to use more then 5% of the cpu/memory regardless of how much space or bandwidth he has.

Being in the data backup business. I have heard of so many places over selling their space. Now if you want to be a person to have to explain to the customer the actual reason as to why they cannot upload anymore files. Be my guest. That is a situation that I would never want to be in.

How hard /expensive is it to add another 1 TB HDD ? It can even be done with 0 downtime.
What cannot be done without downtime and implies usually a big cost is getting another CPU. This however comes from overloading the server not overselling the space.

Being in the data backup business. I have heard of so many places over selling their space. Now if you want to be a person to have to explain to the customer the actual reason as to why they cannot upload anymore files. Be my guest. That is a situation that I would never want to be in.

Why would you have to explain to a customer why they can't upload anymore files? Unless you're overselling to a CRAZY amount, this won't ever be a problem. Add another drive or move the customer to a different server. No big deal.

--Tina

We recommend that you don't oversell unless you are willing to accept the risk. By providing your clients fixed bandwidth and storage amounts you are technically on the line if you cannot deliver. For our shared environment we monitor and manage storage, ,I/O and bandwidth and do have chosen an amount that works with our total capacity. Our difference is that if we see patterns of underutilized resources we make our best effort to utilize them. Many hosts will get a dual xeon with a high transfer limit or un-metered pipe and not understand why they can't scale up under high load. We plan for overselling before the server goes in the cab. We have on-site upgrades for most of our owned equipment and our bandwidth can scale as needed. The key to overselling is managing it from end to end. The telco's are masters of overselling capacity. If you manage how and what you oversell and use the technology at your disposal to increase your net efficiency you yield better margin for a controlled amount of risk. My view if you can't cover the costs involved if all clients used oversold capacity you shouldn't be oversold in the first place. Thats just my $0.02

We recommend that you don't oversell unless you are willing to accept the risk. By providing your clients fixed bandwidth and storage amounts you are technically on the line if you cannot deliver. For our shared environment we monitor and manage storage, ,I/O and bandwidth and do have chosen an amount that works with our total capacity. Our difference is that if we see patterns of underutilized resources we make our best effort to utilize them. Many hosts will get a dual xeon with a high transfer limit or un-metered pipe and not understand why they can't scale up under high load. We plan for overselling before the server goes in the cab. We have on-site upgrades for most of our owned equipment and our bandwidth can scale as needed. The key to overselling is managing it from end to end. The telco's are masters of overselling capacity. If you manage how and what you oversell and use the technology at your disposal to increase your net efficiency you yield better margin for a controlled amount of risk. My view if you can't cover the costs involved if all clients used oversold capacity you shouldn't be oversold in the first place. Thats just my $0.02

Very, very well said.

--Tina

Well..My feeling is that overselling is dishonest. You are lying to the customer and the gamble could draw them into the problem. I understand about memory, cpu, bad scripts, etc. Those are things that can be dealt with and the customer will understand the problem. But any MORON should be able to figure out that a company cannot stay in business with some of the RIDICULOUS offers that I see floating around.

I offer up front honest plans. If every one of my clients decided to upload to their capacity there would be NO downtime in regards to space because it would be there for them to use.

Thats just my opinion...

Why would you have to explain to a customer why they can't upload anymore files? Unless you're overselling to a CRAZY amount, this won't ever be a problem. Add another drive or move the customer to a different server. No big deal.

--Tina

Sometimes that is not always an option.

Sometimes that is not always an option.

That's not a problem as a result of overselling - that's just poor planning.

--Tina

What do people here mean with overselling? If u mean overselling on capacity, then il understand (for example u sale 20 servers on a gigabit line which all have 100 mbit port and pay for use of 10 mbit per server).

But oversale on pricing is VERY bad i guess, for example u pay 10 euro per mbit and u sale 100 mbit servers for 700 euro. This means when your client uses the full 100 mbit u lose 300 euro on your client.

Overselling on infrastructure - i agree, this is possible
Overselling on pricing - disagree, very bad

The problem here is that other hosts lead you to oversell. It's very hard to make a new customer with a 100MB DS / 1gb BW for $10 dollars per month with all the competency selling for the same price a lot more (even 1 gb of disk space).

So, my advise is that you have to oversell if you want to stay.... but be careful, your server IS your business... don't lose it with extremely ridiculous plans.

I think overselling is just like an elastic band if you force it to the xtreme it would break and if you know how much energy it can sustain you rule it.

The problem here is that other hosts lead you to oversell. It's very hard to make a new customer with a 100MB DS / 1gb BW for $10 dollars per month with all the competency selling for the same price a lot more (even 1 gb of disk space).

Our solution to that is price the service you deliver not the commodity you sell. When our clients pay 4x the standard shared rates for our most basic package and get service that is dependable and a body that they can call if there is a problem it becomes less about price and more about how reliable your service is. Those who ask why we charge so much usually go elsewhere. Those who need reliable service and are responsible pay for performance. They also pay on-time too.

moving clients around, etc is not always a feasible solution for clients - if you must oversell, then use technology to minimize your risks - use clustered environments, share scalable storage arrays, etc...

nothing wrong with overselling if done correctly - but, also nothing wrong with underselling and providing excess capacity - depends what customers you are after....

Are we talking about shared hosting or reseller here?
There are 2 kinds of stories here with shared and reseller.

If you sell resellers accounts WITH overselling enabled then it's not a good idea to use overselling (almost at all) because people tend to use as much as they buy. They will oversell themselves and then you need to have space to for them to grow. In this case you may oversell space and bandwidth ONLY if you are ready to add the space and provide the additional bandwidth when the time comes.

If you sell reseller account WITHOUT overselling enabled then you can oversell yourself without much trouble.The final client will never use 100% of the space (depending on the plans your client has the average final client will use like 50-60% of the space). So it would be safe to oversell like 25%-30%

If you sell shared hosting and you have big plans (>1 GB space) people will not use it all. The (my) average client uses no more then 500 MB and some of them use just 10-20 MB (that's because they have just the website and not a very big database or they don't keep the emails on the server but rather delete them after reading them). In this cases you can go and oversell up to 50% (but I would not advise to oversell that much really).

In shared hosting it depends on your business model. If you have BIG plans and your market is personal websites then you can oversell big time. If your market is let's say small business and corporations then the overselling margin cannot be that high (they tend to use the space with DB and emails even if the website doesn't take that much space). Usually corporates have their own servers so it's only isolated when they use shared. But small business use shared most of the time.

But you have to remember that it you have to provide what you sell and you have to be ready for that no matter if you oversell or if you don't.

I hope this helps.

Very good post.

I think overselling is ok but only by about 5% of what you can offer in real terms. As said its all about risk and how many users do you have who use all there space etc? If they do then they will be wnating to upgrade to the next account.

-Dan

I stopped reading after page one. Here's why:

This is an ongoing debate with the same arguments being made both ways.

The reality is, it's all about management of your servers. Overselling can be done, if done right. No host should oversell without clearly thinking it through, and having a plan ready to be implemented should you find yourself running low on either disk space or bandwidth.

For some, this is more headache than they're willing to deal with.

My recommendation? If you want to oversell, and have a higher profit margin as a result. Start off slow. Oversell, but not to extremes like you can find many hosts offering (eg 500gb/1tb @ $39.95/yr)

My emergency plan includes my use of cPanel. By starting slow, I gathered a nice sized client base. Profits rolling in, and servers stable. Should a server need a larger drive, no problem. However, my preferred method is to simply cluster an additional server with the server that is going to need the upgrade. Then move over some accounts that don't require a dedicated IP.

This not only removes the disk space problem, but also increases stability on both servers while lowering disk space used, and bandwidth.

Though this plan should not be considered until you're a well established company with a good amount of consistantly growing income. If you don't have that, server costs will be far more than if you simply upgrade a hard drive.

In a way, I oversell, and the end result is better performance and greater stability.

NOTE: I have yet to have to use the plan mentioned. Though I have moved clients around via DNS cluster simply for better performance and greater stability. Not due to overselling problems.

In short, overselling is fine in my opinion. You just need to learn how to do it properly in a well managed environment. There IS such a thing as overselling wrecklessly.

In simple words, i am against of overselling. This would ruin the entire new comers and there would be too much domination.

it depends on the customers you're after.

Are they prepared to pay good money for hosting? Then don't oversell, theres no point.

If they aren't willing to pay what the hosting is worth, what kind of quality will they be expecting? Some clients honestly don't mind downtime, others will be on your butt the second a site goes down for more than 20 seconds.

Will they use all the space? Are their sites demanding or low-key?

Overselling we do not do it. I have been involved in many purchases of hosting providers and some of them did over sell there service with packages such as “unlimited” Disk space. It is never a fun conversation telling a customer what they were sold is not feasible sometimes customers just do not understand why you can not give them 500GB of space for $5.95/Month.

We have a very simple rule we sell what we have and nothing more. Now with that said our shared, VPS servers are Reseller servers are all very under utilized but if we have an 80GB data drive in a shared server and offer a 1GB of disk space package we only put 80 of those packages on the server. Could we fit 100 or even 500 sites on that server sure but it’s not worth it to run the risk of a customer getting an error stating the server is out of space. We also limit to any shared server 400 sites regardless of the resources available on the server. Don’t put all your egg’s in one basket one think I know for a fact a server is going to crash, it might be tomorrow it might be in 3 years but it will eventually go down.

This is one of the reasons we can get premium rates for our shared hosting.

In my opinion overselling is not a good idea.

Again it's all about management. The only way a server would run out of disk space is if you're not managing it routinely. If you never work on your servers, you're surely not going to know that it's low on disk space.

But again as well, knowing your hardware and resource usage may be more effort than some hosts are willing to get into. And "might" have a lower profit margin as a result.

The point was made that some people are willing to actually pay for what hosting is worth. Though for me, the fastest way to gain reputable hosting, was with properly managed overselling AND great service.

Overselling and bad service are NOT related in my eyes.

If you aren't able to expand your server, or don't want to cluster, then don't oversell. I mentioned cPanel previously, as the clustering allows for moving accounts from one server to another with no downtime. Leaving me with nothing to explain to the customer. No explanations of why they can't upload more files, or why they have to wait for their site to re-propagate.

Most people talks like overselling is a bad thing, which is NOT.

Overselling is about risking yourself, not your customer.

Promising 500GB disk and 1000GB bandwidth for $5/mo and not actually providing it, and using some fineprints in your hundred pages TOS to justify what you do is NOT overselling, it is basicly LYING. Again, even if you oversell, you HAVE TO keep your promises.

It is a proven fact that 90% of your customers will not use even 50% of their allowances. So you can serve 10% of resource intensive minority. Overselling is balancing your customers over your servers. That's it. Nothing bad about it. You will earn more, and your customers will have your services a lot cheaper.

It's really basic marketing. People want more for less. (ie wal-mart) They don't always care about their NEEDS. Hence the impulse buyer displays at every store you go to. (eg; candy, gum, trading cards, tabloids)

You don't go there looking for it, but you find it and it grabs your attention. So you buy it.

Same goes for hosting. Client knows they need 50mb for a personal website, and a photo gallery for their family. But holy crap! You'll give me 10 times as much space for the same price as the host that only gives me 100MB?? I'M BUYING!

And a year later, they finally hit the 40MB mark...

People just want more, more, more for less, less, less.

And that is where hosting becomes more competitive. As more hosts show up offering insane (and never ever needed) amounts of resources, for a lower price, they begin to look like a much better deal than the hosts offering a more realistic solutiion.

Though overselling in a realistic way is a fantastic buy, when coupled with amazing support/service.