Im amazed at some of the things I see posted here in the wht ads sections. Is it just stupidity and piss poor management or are people just trying to be famous? Let me explain:

We first saw dedicated servers take a drop from their $400 and up figures to $sub 200....and then $99 , and now Im seeing $49 servers.

Now I call this pricing either really ignorant (as in not educated in hosting enough) or just stupidity. Everyone that starts a business does so in hopes to at least make a living out of it and some even pray for fortune and fame. I could sell just a fraction of our daily shared orders and make more than one of these $49 dedicated servers. Put all our orders from just one day together for shared hosting and it would translate to dozens of the $49 servers.

So my question is, what business owner would spend $600-$800 per server, sell it at just $49 per server a month while the competition is banking profits numerous times higher than that ? ...... ok so you find people that are doing that, fine, but what's the point? Why even bother to spend $600-800 for a $49 account ?

Im sure this thread will be filled with those that want to argue the business model of a million gig of bandwidth and a Nasa super computer for $49 month ..... and Im hoping to hear from you ;), but I for one just don't understand what the point is of even doing that. Maybe some of these people just didn't do well in math, even though basic addition is a grade school subject. (1+(-2)=?)

Me? Well, we will stick our business model and much larger profits....we didnt manage to stay in business by selling at or below our own costs. For now I say, woohoo, go for it guys. Run your business with zero or no profits, we'll still be here to catch the fallout when the business goes bust!

Agreed 110%.
But currently for every cheap host going out of business two new hosts arise...

Everyone and their grandma is in hosting, or wants in the hosting business. Its a business that is wrongly viewed as a neighborhood lemonade stand avaiable for the world to see rather than a company. Here's why we have these guys charging dirt cheap prices:

They get in the hosting industry, starting with little money. They just want to start the run of the mill hosting company, with nothing different. (Hell you can order one from rackshack, their ad does say "Start your own hosting company today!") They see they aren't getting orders, so they look at their competitors, and decide to make their plans lower in price: the easiest way to make a plan more attractive. They are just doing this for pocket money anyhow, making 5 bucks per dedicated server/month is 5 bucks they didn't have before. And hey, its in a datacenter elsewhere where someone is taking care of it, I'll just live my life and watch the 5 dollars add up.

The above opinions apply more to the shared hosting market, but you get my drift. Look at Earhost. Unbelievable Pricing, everyone signs up and gets screwed... in the end the owners run away with a lot of money. Sticking 2500 accounts on a server meant for 400 isn't good for the clients, but making $2 a month off of an account multiplied by 2500 adds up.

:rolleyes: Sorry it wasn't too much of an organized thought, be glad you aren't in my head :D

Originally posted by Rewdog


:rolleyes: Sorry it wasn't too much of an organized thought, be glad you aren't in my head :D

LOL

I'm going to suggest something from a purely marketing standpoint that may or may not explain the concept (at least partly): a loss leader. In other words, something that's thrown out at a cheap price (usually at cost or less than) to entice visitors and customers into buying a more expensive product (or to make up the money on the back end.) Now I'm not suggesting that everyone does this (and I'm sure there are those who do it for a quick buck). I merely suggest this as a possibility for anyone who may be in it for the long term and looking to draw an initial client base. (As a designer, when I prepare quotes, I will often prepare a stripped-down at-cost quote and a comprehensive for-profit quote just to make the quote that I'm really after them accepting seem that much better.)

Are there any hosts that do this? Just wondering.

Yes, most people know what "loss leaders" are.
Grocery stores do it all the time. Grocery stores succeed because while you buy the product at below price that you came for, you also buy other things that the stores does make money on.

Hosts run by "Start your own hosting company today!" people forgot about part 2. They rent the servers by the month, but charge customers by the year, and after they overload their servers with many "loss leaders" they start to lose money.
Then well, we've all seen the plug get pulled.

Honestly, a $49 server scares me. I wouldn't sell it, or buy it.

That's the issue at hand with loss leaders though. Generally speaking there's other products all around it that the customer will usually grab as well when they pick up their coffee at below cost.

Product lines are pretty limited with hosting, and people often are just looking for that one thing in the first place. Also, hoping to make it back on an upgrade path isn't a great idea either as people often pick what they need and are happy with that (quite often they over estimate what they *do* need so never need to upgrade at all)

Some people use low pricing to get their name out there, but at what expense? Every week you see businesses that come along and get buried. All they end up with is no money and lots of irate ex-customers. Meanwhile all the 'expensive' hosts continue to plod along, increasing their customer base and making a nice profit along the way.

I think there's a serious misconception that everyone wants to pay bargain basement prices for anything. The reality of the situation is there are many people who won't pay bottom dollar, because they expect trouble by doing so. They pay a premium price for a premium service, and do it happily.

Greg Moore

And most of the people that pay for the below cost hosting don't buy upgrades...The people that pay above cost do.

Originally posted by ATST
Yes, most people know what "loss leaders" are.

Sorry there. It's just that I'm so used to people not knowing what it is every time I say it that I just explain the concept by default. (It's just easier that way.)

And as it pertains to the specific issue of web hosting, I do agree to a certain extent that there is only one product line: however, the permutations and combinations of service offerings within that product line (server configurations, packages, etc.) within that line are limitless. Thus, what I was trying to get at was that some hosts may offer one package as a loss leader in order to entice a customer at some point (either at initial time of order or down the road) to upgrade to a product which is more suitable to their needs, which could be sold at a greater profit to the customer by the web host.

I'm not saying that everyone (or anyone for that matter) who offers hosting is doing this; I'm merely suggesting the concept as a possible explanation for such an action on the part of a host. I'm just as much in the dark as it pertains to the action myself.

The industry is filled up with people tyring to make an overnight profit which really terms into a HUGE loss long term.. Too many idiots getting involved. (One single 14 year old starting a business and taking a loss every month)

A great way to host sites - Get a cheap host, wait for it to go out business then jump to the next....Be a leecher! :D :stickout

it seems like everyone wants to jump on the hosting wagon promises of money and fame i think? ya right i bet you one out of 100 hosts make it more then 2 years....