Web Hosting Talk : Web Hosting Main Forums : Running a Web Hosting Business : How Do The Cheap Guys Do It?

[sbrad]

This is always a point of contention on this board, but I would like to have some dialogue about how some companies offer their services so cheaply.
For instance...I just saw a web hosting company that offers "unlimited" bandwidth for $1.50 a month. Now, knowing that nothing is "unlimited", and this is obviously some sort of ploy...how does this work out for anyone? For crying out loud...their monthly charge is what I pay for 1 GB of bandwidth. And that doesn't leave any room for the many other costs associated with being in this business.

I'm not trying to start a flame war here, and by using the word "cheap" I'm not talking about anyone's level of service, but price only. What do these guys have that I don't? If I could see any way to do this HONESTLY and still make money, I would. But there has to be SOME sort of profit involved if I'm going to be involved in any business.

Any thoughts?

[JKLIVIN]

Some have Venture Capital money, some are willing to take some losses early in the game, so to speak, to get their name out, and client base up, and some are just in it for a quick buck, and then will be gone shortly.
If they sound too good to be true, they are.

[Dynohost]

I totally agree with those comments.

Although Im probably biased as Im a partner in an internet hosting business, a lot of these low, low priced companies go belly up after not too long.

As has been said, they come onto the scene and try their best to make a name for themselves via low prices, unbeatable offers etc, but then leave customers in the lurch with lousy tech support ( because they cant afford to sustain the staff etc ) and poor reliablity, etc etc.

I do think that some of the lower priced hosting companies on the web, including ourselves, do offer tremendous value for money.
Personally speaking, the reason we can offer the low prices that we do is because we own our own data-centre and hardware and also have some very good agreements in place.

As the last chap said.........if theyre sounding too good to be true, they probably are, so avoid like the plague.

Regards,

Nick Martin

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[Dollac]

Just because they are cheaply priced does not mean that they are bad, I am not saying all are good, just all are not bad. The following information on running a server and selling hosting is based on information that I have directly recieved. I do not sell hosting I was wondering how it was done and what the cost to run one was so I did a little research.

Dual Pentium III 1 Ghz
1 GB RAM
60 GB RAID 1 Hard Drive
Dual 10/100 Ethernet
Cost: $2,325.00

Co-location Monthly Fee: $290.00
IP Addresses Monthly Fee: $0.63
Bandwidth per Mbps: $230.00

So you spread the cost of the server out over 12 months of fees and break it down into account as follows;

Diskspace: 150 MB
Bandwidth: 5 GB
With all the goodies (ie. IP Addresses)

You can fit 350 of these on the server and still have serveral GB's to spare. So on adding it all up that is 52,500 MB of Diskspace, 350 IP Address and if everyone uses the max allotted Bandwidth, 1,750 GB of Bandwidth (6 Mbps). Total cost of this to the hosting company would be around $2,085 or $5.96 per account.

Of course if you lowered you cost if all the customers used only 3 GB of Bandwidth per month that would lower the per cost of site to $4.64. The cost per GB when buying Mbps gets better the more you buy. For example;

1 Mbps (70% load) = $1.04 per GB
5 Mbps (4 Mbps 100%, 5th 70%) = $0.77 per GB

I also realize that 1 Mbps is $230 per month and that 5 Mbps is $1,150 per month, a little pricey so you hunt around do not take the first good deal to come along I have recieved information from on company that would sale me 50 GB for $25, yep that is $0.50 per GB.

So that is the long version of how I think that they can afford to do it and still maintain a profit.

[GISinc]

One thing they have to worry about. Anyone who offers unlimited bandwidth, either has to pay for it from somewhere or gets it free from someone. If it's free, my point is moot.

But it's a gamble for that hoster when they get the first site that has the traffic to use a whole T1. It's impossible to support. Only the prayers of the faithful would allow that hoster to skate on the promise of unlimited bandwidth for very long. Sooner or later, they will get burned.

But at that price, they can afford to drop the heavy ones, because it's only a couple of bucks per month and they'll get tons more that won't use much and gladly pay the small fee.

Now you're dealing with somone who cares less about customer satisfaction and treating everyone with integrity.

GregO