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  1. #1

    How they make profit with such low price?

    understand that the VPS hosting is very competitive now a day. How's the provider can make profit with such low price such as

    chhost.net (free cpanel + low price ?!!)
    delimiter.us (large resources?!!)
    ......

  2. #2
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    Some companies are just 14-year old kids who rent
    one server. All their bills are paid my mom and pop.
    Next step is to oversell until the server falls over.

  3. #3
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    Delimiter always made me wonder, due to the fact they include DirectAdmin ($5 license) on a $10 server, plus they were offering it for $6 a month ago. So therefore they were only bringing in $1 - transaction fees for the VPS.

    I mean, think about it, there are two options here if the price is ridiculously low:

    1. They are not a real company
    or
    2. They are overselling their servers

    RAM is cheaper these days so I can understand lower pricing, but some of it is just insane.


  4. #4
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    Some companies (especially new ones) simply under charge to gain clients then raise their prices later on. Its a known fact in the business industry. You call it hook and bait advertisement. Lure them in with nice prices then raise the price or offer ridiculously high add ons to cover your losses.
    If you're the smartest person in the room then you're in the wrong room

  5. #5
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    Caveat emptor - buyer beware. The odds against you enjoying success with that type of deal are thousands:1. It's a no-brainer that you should ignore such enticements completely. They will bite you in the backside faster than a Jack Russell terrier and twice as hard.

  6. #6
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    For new companies and even old ones making a loss for a short period is a valid business theory, call it an investment.

    I have worked with data centres that do Ł1 first month deals on services that at cost price will be over Ł40... the whole point in them is to get a client that will hopefully stay with your company.

    Just the same as paying Ł200 on a advertisement but instead you could give 20 people a free VPS for a month and hopefully the clients will stay with you for the long term.

    Other companies will make money by selling a large volume of services for a small profit, its better to sell 100 vps's and make Ł1 per vps than it is to sell one that makes Ł40?

    Also yes some companies out there do oversell, guess I am just trying to point out there are some other valid reasons.
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  7. #7
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    Quote Originally Posted by RedRat-Chris View Post
    Caveat emptor - buyer beware. The odds against you enjoying success with that type of deal are thousands:1. It's a no-brainer that you should ignore such enticements completely. They will bite you in the backside faster than a Jack Russell terrier and twice as hard.
    Do you have experience with this host or are you just making an assumption?
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  8. #8
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    Quote Originally Posted by cpoalmighty View Post
    Do you have experience with this host or are you just making an assumption?
    It's just a general rule of thumb, as such, and not specifically aimed at either of the companies mentioned in the first post. You are right to pull me up as I did not make that clear.

    However, "assumptions" are a perfectly valid tool in risk assessment. "Gut feelings", "intuitional perceptions" and such like are often absolutely spot on and, in any case, mostly supported by experience. It was not for nothing that the saying, "Beware of Greeks bearing gifts.", came about although, I have to say that the poor Greeks get the short end of the stick re this saying since the same could be applied to members of any country.

    @ZanyHost: That is a good point and, I agree, it is quite true that these marketing devices are used extensively and legitimately, often by perfectly reasonable providers. However, they tend to be used with restraint and in a time-limited manner that "makes sense" to both the buyer and seller in that one can understand the logic and believe in the possibility that they are credible, when they so often are not. Hence, Caveat emptor! A tried and tested convention of wisdom since time immemorial and far more reliable than any amount of BS from those whom may deceive us.

    But these massively bloated, throw away deals, generally, are the sweeties of babes and have a high rate of going completely pear-shaped.

    Interestingly, threads like this one are often made by "forum posters" to promote certain companies. I am not saying this one is though.

    There is little replacement for basic common sense.
    Last edited by Mach4-Chris; 11-12-2009 at 02:13 PM.

  9. #9
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    Quote Originally Posted by RedRat-Chris View Post
    It's just a general rule of thumb, as such, and not specifically aimed at either of the companies mentioned in the first post. You are right to pull me up as I did not make that clear.

    However, "assumptions" are a perfectly valid tool in risk assessment. "Gut feelings", "intuitional perceptions" and such like are often absolutely spot on and, in any case, mostly supported by experience. It was not for nothing that the saying, "Beware of Greeks bearing gifts.", came about although, I have to say that the poor Greeks get the short end of the stick re this saying since the same could be applied to members of any country.

    @ZanyHost: That is a good point and, I agree, it is quite true that these marketing devices are used extensively and legitimately, often by perfectly reasonable providers. However, they tend to be used with restraint and in a time-limited manner that "makes sense" to both the buyer and seller in that one can understand the logic and believe in the possibility that they are credible, when they so often are not. Hence, Caveat emptor! A tried and tested convention of wisdom since time immemorial and far more reliable than any amount of BS from those whom may deceive us.

    But these massively bloated, throw away deals, generally, are the sweeties of babes and have a high rate of going completely pear-shaped.

    Interestingly, threads like this one are often made by "forum posters" to promote certain companies. I am not saying this one is though.

    There is little replacement for basic common sense.
    I got pulled up by admin for using assumptions the yesterday. 2 more infractions my way
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  10. #10
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    New companies would probably start off lowballing the price, taking loss initially. Eventually as they grow, raise the prices. If the host want, can offer existing good standing clients to stay on grandfather price plan. This is also not uncommon.
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  11. #11
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    Quote Originally Posted by cpoalmighty View Post
    I got pulled up by admin for using assumptions the yesterday. 2 more infractions my way
    Ironic that! The first thing any bank or investor will demand is the "assumptions" behind your decisions. Entrepreneurial "gut feelings" are as valued as so called "facts". Appearances are often deceptive and this can only be perceived by closing one's eyes.

    If, when out walking towards the minefield surrounding Osama's base camp, you come across a sign that reads, "No mines here!", your "gut feeling" might just save your life.

    I notice that you have no recorded infractions. That "fact" prompts further "assumptions" that might be useful.
    Last edited by Mach4-Chris; 11-12-2009 at 02:46 PM.

  12. #12
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    It's one thing to use low prices to gain customers. Customer acquisition is very expensive and if done correctly a loss leader can be cost effective. The only worrying aspect is that too many hosts start out using this method and either manage it poorly and go out of business or its a scam from the get go.

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    There was a thread recently about profit-per-node... some people out there are only hoping to make $100-200/mo "profit" (revenue minus server/colo costs)... that is just not enough to sustain once you factor in taxes, employees, etc.
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  14. #14
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    Yes WiseOne. That's a very good point and much akin to what I was alluding to. Unless someone is charging a realistic fee it is proportionately less likely that they know what they are doing. Signs like these point towards higher risks.

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    Quote Originally Posted by RedRat-Chris View Post
    It was not for nothing that the saying, "Beware of Greeks bearing gifts.", came about although, I have to say that the poor Greeks get the short end of the stick re this saying since the same could be applied to members of any country.
    I think you'll find there's some historical precedent for that expression.

    But on topic, "making assumptions" doesn't seem like the right wording to me - you can estimate for yourself what your host's costs should be if they're buying the kind of hardware you'd like to be hosted on, employing the kind of technicians you'd like to be supported by, etc. Your estimates may not be perfect but if the prices are dramatically out of line you have good reason to assume that you won't be getting what you wanted.
    Chris

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  16. #16
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    That's a pretty reasonable assumption. And thanks for reminding me about the Trojan Horse bit. It was in there somewhere, just lost in the dust of my ancient archives.

  17. #17
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    Quote Originally Posted by TheWiseOne View Post
    There was a thread recently about profit-per-node... some people out there are only hoping to make $100-200/mo "profit" (revenue minus server/colo costs)... that is just not enough to sustain once you factor in taxes, employees, etc.
    I agree 100% with this. The fact is that history proved us right in this mater. So many small and big company just went down without warning because not charging enough. There are 100s of examples in this forum only, with customer winning about not being able to recover their data.

    Consider also this: there is also hosting for FREE on the market. Does it means that hosting has no value at all? Certainly not...

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  18. #18
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    This is a very interesting topic, however when making assumptions you should have at least a little experience with one of this cheap companies (and not kids).

    My questions are, is burst.net a kids company ? (assuming you all have see their prices for VPS servers)
    Is burst.net will die in a while or it will raise prices ?

    (these are rhetorical questions and the answers are of course "no" to both of these questions)

    Assuming a company will die because of too low prices is a poor practice that some use it to calm them selfs up or just to throw a few words that everyone will like here.
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  19. #19
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    Quote Originally Posted by Cristi4n View Post
    Assuming a company will die because of too low prices is a poor practice that some use it to calm them selfs up or just to throw a few words that everyone will like here.
    We do not make any assumption here, look in this forum and see what other users have experienced, and check for yourself that this is the reality, unless the company is really big and can make money with numbers. And when I say big, I'm thinking about something like number one in its country, not just few servers. When you have that critical size, then you can afford to lower margins.

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  20. #20
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    Sure, I have seen a lot of companies going down because of too small prices, or was it because of too small prices ?

    Assuming I will go on with this, is burst.net going to go down ? According to you they won't since they are a big company and will sustain that VPS part with money because the openvz part will not make a profit, right ?
    But a big company usually has complex management and things are analyzed in advanced so burst.net analyzed this and got to the conclusion that they must offer very cheap VPS servers even if those servers will not bring any money to then and instead they will actually loose money ?
    I don't think so.

    Regardless if it's a big or small company, the biggest problem the way I see it is the management and not the 10$ 512MB VPS that can be considered too cheap. That is why, a person that has worked with a company that offers cheap services will know how things really are and probably will tell you the same.
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  21. #21
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    The companies offering these kinds of prices invariably disappear 6 months down the road - it's seen all to often on WHT.
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  22. #22
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    my question again. Burst.net will disappear in 6 months ?
    Do not confuse a kids company with a real company.
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  23. #23
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    Quote Originally Posted by hostgrazy View Post
    understand that the VPS hosting is very competitive now a day. How's the provider can make profit with such low price such as

    chhost.net (free cpanel + low price ?!!)
    delimiter.us (large resources?!!)
    ......
    Haven't used chhost.net, so can't comment on them.

    However bear in mind delimiter's Core i7, 8 GB DDR3 RAM, Hard discs 2 x 750 GB SATA-II HDD servers cost them just 49 EUR/month (plus an initial one off setup fee of 149 EUR)
    Plus, I have no idea if they oversell or not, but if they did they could easily make profit at those prices.

  24. #24
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    Hey wait a minute while examining chhost.net charges for cPanel and it's not free.

    But anyhow yes alot of companies go down not because of low pricing but because the person or people running them don't know how to operate correct and once a few things hit the fan they duck.

    Practical hosting companies provide the services they offer and grow steadily after some promotion because they provide what they say.

    Like with us were launching a new hosting company but we actually provide what we preach and know how to do what needs to be done as we have been in the business 8+ years.

    As well watch out for oversellers that is always bad news, whenever I see something unlimited I run like you know what
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  25. #25
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    Quote Originally Posted by Cristi4n View Post
    my question again. Burst.net will disappear in 6 months ?
    Do not confuse a kids company with a real company.
    mate y r we discussing about burst.net over here companies have various ways to make profits and burst might increases prices in future who knows ?? They use veportal which means lesser budget compared to virtuzzo or any other platform,

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