Is it possible to stay out of price wars in the budget hosting market? So many small companies are offering the world for $2/month...what makes someone choose to pay something closer to $8-10/month in the budget hosting market, rather than going for the cheapest option?

Remember that WHT does not represent the entire hosting market. Lately I feel like the "serious" *cough* hosts are outnumbered by the hosts that pop up, don't have a website up yet but are posting an offer in the advertising forums that make your tows curl.
In the requests forum people post requests for 20 GB transfer and 1 GB diskspace for below $ 5.- (and lo and behold, watch in amazement as the offers roll in!)

Then look in the main forum where people complain about their host taking their money and run and the circle is complete :D

Why do people choose hosts that offer accounts for $ 20.- per year? I dunno. Well I could say they are just a tad dumb but being a webhost myself that would sound unprofessional. Let's just say they are ill informed about how much it costs to keep a server running ;)

Depending on the level of *dumbness* those clients go through 1 - 20 or more $ 2 hosts. Some figure out soon enough that they cannot get a reliable service for that price while others wonder around the bush with that staring look in their eye wondering why on earth they always choose the wrong host. It takes them longer to see the relationship between price and reliablity (note: reliablity, NOT quality. Expensive is not always better)

Some just never catch on. You will frequently find them complaining on the main forum about their host being gone while at the same time you'll see another request in the ads forum for a host that can supply phone support, 20 GB transfer, 1 GB diskspace, unlimited this and that for $ 20 per year, preferably cheaper.

But most will eventually end up paying a little more and they will choose your service instead

Support!

It also depends on the source of your traffic. If you are going to compete here on WHT, you have to keep prices pretty low. However, if you take a look at the requests forums over a long period of time, hosts come and go...there are probably only about 10% that reply that have been around more than a couple months. Those that are still around are not pitching there services for 10/year...for the most part.

One business model that seems particularly successful is focusing on a local market.

people will gladly pay a premium for reliability, a company with an established track record, and above all which offers excellent service!

Definitely support and reliability. I know quite a few people who wouldn't think about hosting their site(s) with a host in that range.

The perception of having an inferior product may be unjust - you can get crap at any price point. But I have yet to see a business survive long selling services at such unrealistic prices.

You *may* make a quick profit by counting on a surge of new accounts because of the price, but on the flip side, you're probably encouraging fly-by's and your support costs are probably going to be higher also.

Experienced customers, - those who tend to buy more pricer packages will want stability and reliability and they don't see that with hosts that are in that low-low price space. Again, you may have a great service, but perception and execution are everything.

I'm also starting a new hosting company. My prices are probably in the mid-range. I'm not pricing myself too low. I'd rather lower prices than raise them.

<rant>
One thing that I see that is overlooked by new hosts is system administration experience. This is an area where a lot of new hosts get into trouble quickly. Just visit the Rackshack forums for a day. A lot of people may balk at their unmanaged servers, but most of the people balking are those that couldn't buy a clue. Yeah, Rackshack has other issues too, but too many people don't understand what they're getting into when they purchase an unmanaged server.

Systems administration is not an easy job. You can't just go to Borders and buy a book or sleep at a Holiday Inn Express and expect to be a SysAdmin god the next day. Ain't going to happen. People should spend just a little more time getting to know how to properly keep their systems up and running.
</rant>

It's possible, and all common sense will dicate that you do just that. If you want some homework to do, just check through most of those bottom feeder hosts, and find out how long they've been around. Then check back in a few months, and check to see how many of these brand new hosts are still online selling at those rates.

Greg Moore

Originally posted by akashik
Then check back in a few months, and check to see how many of these brand new hosts are still online selling at those rates.


Not to defend the "pile-it-high-and-sell-it-cheap" practice, but I don't think it's price alone that sends these hosts down the drain. You still need to know what you're doing, have the time to devote to it, etc. You can make anything work if you try hard. These flash in the pan hosts are characterized by being lazy, greedy and don't give a rat's ass about anyone but themselves. Running a business or offering a service is secondary at best. That's why they fail.

If price alone determined success, then I'm trying to figure out how this donut shop up the street from me can be as successful as it is selling 30-cent donuts and $1.00 cups of coffee. They don't even make their own donuts, but buy them from a jobber. They've got five employees behind the counter at any one time plus a free-standing building in one of the most expensive real estate markets in the U.S.

It isn't just price, it's commitment and know-how.

You guys have to realise that people can run a hosting biz form overseas and the small monthly fees may be big bucks in their currencies.

I live in New Zealand and every 1usd equals 2.2nzd which yeah makes it very worth it.

I live in New Zealand and every 1usd equals 2.2nzd which yeah makes it very worth it.
Wow. I know where I'm taking my next vacation.

What about your fixed costs - ie dedicated server or colo? Looks like the NAP for New Zealand is Netgate and international bandwidth isn't cheap. So I'm assuming servers would have to be located outside of NZ. Even with the nice exchange rate, you still have fixed costs in another currency. I guess you could do it if you kept tight controls on your expenses.

Originally posted by vSector
You guys have to realise that people can run a hosting biz form overseas and the small monthly fees may be big bucks in their currencies.

I live in New Zealand and every 1usd equals 2.2nzd which yeah makes it very worth it.

That still does not make it possible to offer the prices that you see around here. Servers are still in the US and that means you are paying double the cost for a server in NZ $$.

Most of the host offering silly prices are kids living at home with mom and dad or hobby host that do not have to make as much per server as host in it for a living. That is the same reason you see the hobby host come and go they can't make it on what the are selling it for. Look back a few months there is always the host of the month around here. As soon as problems strike they fall apart as their pricing does not allow for anything but perfect conditions.

Do not use WHT as a guide line for hosting prices, it will drive you nuts, it is not real. I almost fell into the trap myself of believing the pricing here was the market standard, but then I found my customers else where and I have no problems getting full price for my hosting services.

Originally posted by gnuguy
<rant>
One thing that I see that is overlooked by new hosts is system administration experience. This is an area where a lot of new hosts get into trouble quickly. Just visit the Rackshack forums for a day. A lot of people may balk at their unmanaged servers, but most of the people balking are those that couldn't buy a clue. Yeah, Rackshack has other issues too, but too many people don't understand what they're getting into when they purchase an unmanaged server.

Systems administration is not an easy job. You can't just go to Borders and buy a book or sleep at a Holiday Inn Express and expect to be a SysAdmin god the next day. Ain't going to happen. People should spend just a little more time getting to know how to properly keep their systems up and running.
</rant>

And all this time I thought it was all the Holiday Inn's I had slept in. Dang I better buy a book:D

I agree it is amazing how easy this business is until Apache crashes. :bawling:

Originally posted by Monte
That still does not make it possible to offer the prices that you see around here. Servers are still in the US and that means you are paying double the cost for a server in NZ $$.


I wasn’t meaning that it makes it possible but what I mean is that it does makes a big difference and should be included in the conclusion of hosts being profitable or not.


Originally posted by gnuguy

Wow. I know where I'm taking my next vacation.

What about your fixed costs - ie dedicated server or colo? Looks like the NAP for New Zealand is Netgate and international bandwidth isn't cheap. So I'm assuming servers would have to be located outside of NZ. Even with the nice exchange rate, you still have fixed costs in another currency. I guess you could do it if you kept tight controls on your expenses.

Sorry my post was very short and maybe did not explain my thoughts very clearly. I was mainly talking about resellers(or people that co-locate) because they are the ones selling 20$ per year account. You will never see a host that has their own datacenter selling at that price. Anyway, I was referring to people that resell eg rackshack servers while living abroad.