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  1. #1

    Pricing gone crazy! What the....

    Can somebody tell me what is going on out there?

    $4.95 - $9.95 for 1000Mb????

    here's my logic: on an 80gb HD only about 74 is available after the server is set up and hardened. So if you're not going to max it out, only about 65- 70gb is available to sell. That means that these guys are either overselling the server or they are hosting 65 people per server. So at $9.95 per gb, you're making about $650 but having to pay about $180 a month for the server. Am I missing something?

    I'm starting to see this more but I do notice that many of us are still charging $19.95 and up for the same thing.

    Do tell because I am lost in trying to figure this one out. If not for volume, how is anybody making money? and are you also in the $4.95 - $9.95 price range for 1000Mb?

  2. #2
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    Overselling... that and maybe they have bigger harddrives and such... but mostly overselling.
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  3. #3
    so then that means they're betting the customer won't use all the space and what happens when people actually do start using the space?

  4. #4
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    Originally posted by LadyHost
    so then that means they're betting the customer won't use all the space and what happens when people actually do start using the space?
    Then either they start moving people to a new server or upgrading the current one to compensate... or they start getting bad posts and start losing customers.

    Overselling is key to full utilization of your servers, but you do have to watch it. We decided for our situation, we would rather not oversell our servers and deal with that problem, and just generate less revenue per server, than to have to watch them closely as they fill even AFTER we have stopped adding new accounts.
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  5. #5
    Understood but somehow the whole overselling concept just seems wrong.

  6. #6
    Oversubscribing (not overselling) has been around in the ISP days since the Internet was born. The consumers don't realize it but it actually helps them by reducing the prices to an acceptable level.

    The fact of the matter is that the majority of customers use nowhere near what they are alotted. As long as the provider can deliver what they promise to their customers, I dont see what the issue is.

  7. #7
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    Originally posted by LadyHost
    Understood but somehow the whole overselling concept just seems wrong.
    It is if you don't properly manage it, because then you have overloaded servers which crash/go flakey and nobody has any fun.

    If the average hosting client only uses 50% of their space and bandwidth, would you not agree that you could 'safely' consider selling 125% of your resources instead of just 100%, to fill out your server a little more and maximize your per-server ROI?
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  8. #8
    Originally posted by LadyHost
    Understood but somehow the whole overselling concept just seems wrong.
    i guess most of them just oversell, at 70% of server usage, once its over they will just get a new server and migrate them.

  9. #9
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    And I would venture 50% is a little high. We have a reseller with 60GB bandwidth who uses 8GB... and it seems similar across the board.
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  10. #10
    Ok so maybe I'm just misunderstanding the concept then.

    Overselling is a somewhat temporary strategy to boost revenue by volume and then you just go from there depending on your business plan?

    Ok, now that doesn't sound so wrong. I was thinking it was just an arbitrary stuffing of the servers so you get maximum dollar and the customer just takes the hit since they rolled the dice on the plan in the first place - as far as service goes.

  11. #11
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    Overselling is the name of the game.

    The trouble is, these companies are being entirely stupid about growing their profits. If you give a customer 1 GB of disk space, and on average they only fill up 400 MB of it, they why on earth should they ever need to upgrade?!

    $9.95 should be your entry level plan, and then build in a reason to upgrade. One way we build a reason to upgrade is to limit disk space on the cheaper plans so that as they fill the space up, they have to upgrade. That means more $ for the hosting company. A successful business absolutely HAS to be built on a growth model, or it will not succeed in the long run. That's just Business 101. There's no other way for a business to survive.

    Well now hosting companies are giving away disk space like it is an intangible and limitless. It's stupid, because it isn't limitless, it's a finite commodity. Plus the analysis above is very conservative because there isn't enough space allocated to logs. Logs are huge and the longer the server is online, and the busier the sites are, the larger the logfiles get.

    This whole thing is absolutely ridiculous, and as you can tell, really has me annoyed right now.

    Bailey
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  12. #12
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    It's not really temporary. It can be done properly and not have service effected.

    Say you told out all the space on your server with 50 1gb reseller accounts.

    Now say they are only using collectivly 20GB of space, and have been for the past 3 months.

    Would you continue to under utilize the server, or would you bring the server closer to full utilization (not stuffing, but cautiously adding more users on the server, making sure you don't end up in a severly overloaded situation).
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  13. #13
    Originally posted by bithost(NET)
    Overselling is the name of the game.

    The trouble is, these companies are being entirely stupid about growing their profits. If you give a customer 1 GB of disk space, and on average they only fill up 400 MB of it, they why on earth should they ever need to upgrade?!
    Bailey
    Bailey, I'm with ya'. That's why I asked how anybody is making money this way if you are constantly going to have to worry about each user on each server and gauge and guess on a daily basis what people are going to do with their accounts.

    It seems like more stress than is necessary to manage the environment.

    I'll stick with my own model. It works and its not too cheap and not too pricey.

    BTW Bailey, my start-off plan is $8.95 for 75Mb and no cgi.

    LH
    If the web closed at midnight, what would YOU do?

  14. #14
    Originally posted by WebOnce
    It's not really temporary. It can be done properly and not have service effected.

    Say you told out all the space on your server with 50 1gb reseller accounts.

    Now say they are only using collectivly 20GB of space, and have been for the past 3 months.

    Would you continue to under utilize the server, or would you bring the server closer to full utilization (not stuffing, but cautiously adding more users on the server, making sure you don't end up in a severly overloaded situation).
    Let's see, $19.95 x 50 = $997.50
    Honestly, I'd buy another server, but I might put "a few" customers (like 5 or 10) on there before I do..

    I can't see overselling to the point of mass migration though.
    If the web closed at midnight, what would YOU do?

  15. #15
    seems like this thread is made every week.
    I reserve the right to be wrong at all times

    phpbb forums without hosting fees

  16. #16
    sorry for the redundancy.
    If the web closed at midnight, what would YOU do?

  17. #17
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    I go t aserver a while make. In Jan. I messed with it played here and there learned everything I could. I ran resellers but always just hosted friends sites.

    But when I got the server and I started making the plans I did not know how some offered high storage space for such a low price. I priced my packages as cheap as I could but I could not see going any lower as I thought I would shoot myself in the foot if something happened. I am one that has the 1000MB for around 20 bucks.

  18. #18
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    Originally posted by LadyHost
    so then that means they're betting the customer won't use all the space and what happens when people actually do start using the space?
    Then that server needs to be lightened, or have its capacity increased. I'm not a fan of overselling but it's common place in just about every industry, and very neccessary for most hosts to make their model work.
    AussieHost.com Aussie Bob, host since 2001
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  19. #19
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    i agree with bob. it is neccessary because even some good host are offering a lot of space for little price. most of host are betting on users won't use what is offer. i've a 1and1 account and i never reach the offer space.

  20. #20
    Most hosts offer more disk space and bandwidth than the customer would actually use. Average client does not need 100's GB of bandwidth or disk space.

  21. #21

    Exclamation

    Originally posted by WireNine
    Most hosts offer more disk space and bandwidth than the customer would actually use. Average client does not need 100's GB of bandwidth or disk space.
    Ok, so back to the point about "if a customer does not need that much disk space or bandwidth, then why would a customer upgrade"?

    Still seems to me like you are keeping yourself from making more money by taking in the volume for the low-end pricing...and this works???
    If the web closed at midnight, what would YOU do?

  22. #22
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    95% of my customers use less than 1% of their alloted bandwidth and less than 20% of their alloted disk space.

  23. #23
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    What average customer really needs more than 10mb of space?

    I have 10 personal domains all using less than 5mb of space.
    With this space I run scripts and sell downloadable software.

    I can't imagine who would need 1gb or more.

  24. #24
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    For our company website we're only using 160mb currently, and i'm sure that could very easily be trimmed down to under 100mb It's all about percieved value. You have to weigh how much you want to put into support really, to figure out your overselling margin. As the lower your prices, the more customers you will have to have to make the same income with higher prices and less customers, which means a lower ROI for your support. If your going to lower your prices, be sure to have adequate FAQ / Knowledgebase and a system in place to force users to go that method first.

    Otherwise you will be supporting simple things more often and putting more effort into your support system, which cuts down on your margins and ROI.

    Sorry if I seem to keep beating the same drum, but there's really nothing wrong with it as long as you treat overselling with care.

    We decided that we would like to keep our support quality high, so we charge a little more than a lot of people, and we decided to keep our server quality high, so we don't oversell on our servers, so each of our clients can fully utilize all of the space and bandwidth we sell them.

    Other hosts have other priorities, which is fine, nothing wrong with that at all. It's all the choice of the host on which market they want to target.
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  25. #25
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    Originally posted by rondo
    What average customer really needs more than 10mb of space?

    I have 10 personal domains all using less than 5mb of space.
    With this space I run scripts and sell downloadable software.

    I can't imagine who would need 1gb or more.
    hobbies site with bunch video clip. like a old TV show...one customer use 1gb diskspace with a lot of old TV show video clip.

  26. #26
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    Yeah, I host sites for friends, charge them a few bucks, and traditionatelly they'll all use very little bandwidth and very little space, but it's the movies that kill me.

    A friend of mine makes movies, and just a few movies will start eating up disk space faster than you can imagine, and before you know it they're already taking up 100s of megs, and then if the site becomes any popular you start draining bandwidth. This seems to be the way it is for many of the people I talk to, the people who need hosted content are at the extremes, either very little space/bandwidth, or they take up a large amount of space/bandwidth.

    But since I believe the majority tend to fall on the low side of bandwidth/space usage, it seems to me to just be an intelligent business plan to oversell.

  27. Havent you seen any of those $2.95 for 1000MB offers?
    $4.95 - $9.95 for 1000MB is seriously not that bad.

    Anyway overselling indirectly implies more efficient allocation of resources.

    You can still turn a pretty good profit on that. Whats wrong?
    >$650 but having to pay about $180 a month for the server.
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  28. #28
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    Originally posted by [email protected]
    Havent you seen any of those $2.95 for 1000MB offers?
    $4.95 - $9.95 for 1000MB is seriously not that bad.

    Anyway overselling indirectly implies more efficient allocation of resources.

    You can still turn a pretty good profit on that. Whats wrong?
    >$650 but having to pay about $180 a month for the server.
    But it's not $650 a month for th3 $4.95 a month accounts...

    At $4.95 a month for 1000gb accounts you could do 50 accounts (on your average setup leaving space for all system files and such) which is ... 247.50... do a comfortable 50% oversell (depending on your clients of course) and your at $371.25, take out the $180 for the server and your at $200 p/month supporting 75 clients...or 2.66 per client per month which isn't totally viable but i guess doable, though your going to have to have a lot of server to get to a point where you can support yourself. Though if you went up to 9.95 your at 566.25, divide by 75 clients and your at 7.55 a month for support/billing assistance costs, which isn't too bad and your making 566.25 after server fees.

    That's more sustainable, and makes more sense. Realistically in my view

    We've managed to work out a way to offer prices in that type of price range, but I can't say more at the moment

    Granted the above takes the assumption of a 50Gb /home partition, whcih may be a little small on a 180/month server, but it depends where you shop.
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  29. #29
    Originally posted by rondo
    What average customer really needs more than 10mb of space?

    I have 10 personal domains all using less than 5mb of space.
    With this space I run scripts and sell downloadable software.

    I can't imagine who would need 1gb or more.
    well our companys site is over 500MB, But one of my personal sites is about 5GB and the traffic is so high its on its own server.

    But what i find is that 75% of the resellers use close to all their resources, but for shared accounts they only seem to use like 10% of their resources.

    right now im not over sold, i have about 20% of the main server used. i have figured once we get to 60-75% we will stop selling on that server and then move to the next one.

    Another thing im thinking about doing is putting resellers on a seperate server then shared accounts are on.
    Max Wilson

  30. #30
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    Originally posted by WebDogPro
    Another thing im thinking about doing is putting resellers on a seperate server then shared accounts are on. [/B]
    Sounds like a decent idea to me

  31. #31
    thats the way i would do it bro

  32. #32
    In my opinion there are two groups of companies whom can or willing to offer their plans for so low or insane enough.

    #1, Established companies who have thousands of clients under their belt. These companies can afford to "leverage" on their existing resource for such tactics.

    #2, New start-ups who think hosting is a easy business to get into for some quick bucks.

    I have noticed a trend, many of people whom post to sell their hosting business are those companies who are offering rock bottom prices but with only a small client base (from 10's to 100's).

    I just think people should think twice before trying upsell their service with low prices. Hoping with oversubscribing to make some money, however, "hoping" usually don't get you very far.

  33. #33
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    Originally posted by euroxsw

    I have noticed a trend, many of people whom post to sell their hosting business are those companies who are offering rock bottom prices but with only a small client base (from 10's to 100's).
    I do see this alot recently aswell. The way i figure is that either they:

    1. Have rock bottom prices in order to gain customers quickly, thus paying for their reseller/dedicated account. Then raising prices for the newer customers.

    2. Dont want to make money anytime soon.

  34. #34
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    The term overselling has changed throughout the past few years. If you look at some of the larger hosting companies that don't specialize in webhosting, you will see that they have larger packages. 5/month for 1 gb of space is no longer a massive ammount. Godaddy.com offers 2000 mb of webspace for around 10/month. Times have changed, and technology is advancing.
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  35. #35
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    Reseller's needs will grow and some or many of them will start to require upgrades -- on a server that is already filled.

    Overselling.. oversubscribing... While there's a lot of talk about this with respect to "bandwidth" and space, IMO, more problematic are the overselling of server resources and support capacity.

    "The server is slow" and "support responds 4 days later" complaints occure more frequently than "The host told me I was using too much bandwidth and they were paying too much in overages" or "There was no more space on the server".

    That's just my general perception of things... you may disagree.

    Times have changed, and technology is advancing.
    Actually, I didn't see such a rapid technological development the recent year to account for the halving in price of the what is commonly named as "budget hosting".

  36. #36
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    Originally posted by ldcdc

    Actually, I didn't see such a rapid technological development the recent year to account for the halving in price of the what is commonly named as "budget hosting".
    Oh, so the availability of SATA drives, and 200gb hard drives for under $150 don't have anything to do with the drop in cost of disk space?

    If you look at a server nowdays that has 100 customers on it. And compare it to a server 3 years ago that has 100 customers on it. For the cost of hardware today, you can give those same 100 customers 4 times the resources as you could have 4 years ago.

    Technology costs drop for the host, shouldnt the host pass those savings on to the customer?

  37. #37
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    Originally posted by amish_geek
    Oh, so the availability of SATA drives, and 200gb hard drives for under $150 don't have anything to do with the drop in cost of disk space?

    If you look at a server nowdays that has 100 customers on it. And compare it to a server 3 years ago that has 100 customers on it. For the cost of hardware today, you can give those same 100 customers 4 times the resources as you could have 4 years ago.

    Technology costs drop for the host, shouldnt the host pass those savings on to the customer?
    agree. Fry's have 200gb SATA for under $100. i can't see why servers provider can't lower cost on server with bigger storage space.

  38. #38
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    I don't blame any company for overselling. . .as long as they keep a close eye on what their customers have used. I have personally never seen customers use more than 75% of what I have offered...

  39. #39
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    Originally posted by amish_geek
    Oh, so the availability of SATA drives, and 200gb hard drives for under $150 don't have anything to do with the drop in cost of disk space?

    If you look at a server nowdays that has 100 customers on it. And compare it to a server 3 years ago that has 100 customers on it. For the cost of hardware today, you can give those same 100 customers 4 times the resources as you could have 4 years ago.

    Technology costs drop for the host, shouldnt the host pass those savings on to the customer?
    Hardware has never really been the primary cost of hosting. Service / Support is where the real cost is, and that cost just tends to keep rising
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  40. #40
    Here's my take:

    There's absolutely nothing wrong with overselling so long as you actually provide the services advertised should the need arise. This means that the overselling host must be willing to bear the overage charges himself...

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