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  1. #1
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    Mar 2006
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    Web Hosting Overkill?

    One thing i have been pondering about for a while now is why people continue to start web hosting companies? it is already hugely overpopulated by web hosting companies, but littler guys still want to start the companies up. Now im not being aggressive this is just a observation and i would like to know from some of the new comers to the game who are only just starting to create the business why they are doing it, it is a ridiculously competitive game to play with the major and cheapest companies already at the top serving most the customers.

    One thing i have noticed is the new comers are giving away web space to new people which is great, but not so good for the company. I have free space from someone and i am grateful for it and he has said he will be stopping the free web space, which is the right thinking.

    I have known about 4 people recently who have tried to start these web hosting companies and have failed miserably. My advice, dont go down the web hosting road.

    Thanks for reading.
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  2. #2
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    I feel like the reason why its good for the industry to be very populated is it keeps prices reasonable. If there were fewer companies, then the demand would be much greater from those companies, this would result in higher prices. As with any company, the majority of the battle of running a hosting company comes within the first several months; this is the make or break time.

    The same question could apply to retailers. Why do so many small brand companies continue to appear at malls when we have monster companies such as Old Navy, Gap, Abercrombie & Fitch *etc.

  3. #3
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    Dec 2005
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    Well it depends on how you look at it. I host some sites for local people and i have absolutly no competetion.

  4. #4
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    One thing i have been pondering about for a while now is why people continue to start web hosting companies?
    For some reason or another the industry itself seems to promote the image that it's a get super rich super quick industry. As all good hosts find out, that's not really the case. However, I do think part of the contributing factor is how common it is to see web hosts offering reseller packages. Many industries have the ability to resell things, but there is generally a larger upfront cost and greater requirements for certification and education. Heck, in some cases you don't even need a local business license to run as a sole proprietorship if you live in the right area - all you have to do is pay taxes. I think this unique to webhosting circumstance is responsible for the high volume of new hosts each day (it seems that way).

    However, I will say, as someone already alluded to above, there are still markets out there that are wide open and there will be that rare exception that does quite well. That alone is enough to pull in a fair chunk of newbies.

    I have to say, to a degree, these new companies are good because it separates the wheat from the chaff quite quickly. It gives companies the opportunity to show themselves as established places with good service and support. It keeps things competitive (to a degree) as well. It is not without the obvious negative effects, though.

  5. #5
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    Sep 2003
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    It's a very competitive market, but looking at my resellers, I can see a lot of them doing well. As as their is demand, new hosting companies are going to keep cropping up...When a few big companies go out of business, well that brings in some good business as well. I believe in the end we will be left with hardly any hosting companies remaining. Just the major players that were able to survive..

  6. #6
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    Jul 2006
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    There's a lot of hosts because there's a lot of demand for them. Sure, a lot of them fail, but a lot of them succeed too. About half of restaurants fail within their first couple years of operation but I don't see a shortage of new restaurants nor a lack of demand for them. Provide a service, do it well and manage it correctly and you will succeed.

  7. #7
    Join Date
    Jun 2003
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    Ohio
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    Quote Originally Posted by Iwannasite
    There's a lot of hosts because there's a lot of demand for them.
    I totally agree with you on that. There a lot of new websites being put up every day. All those websites need a host.

    The key in my opinion to success is find a niche market and go after that.

    The fastest way for a new host to fail is to try to compete with the big companies on price. They will 99% of the time win. While the little guy is paying out of his pocket for his servers.

    Think about it like this - to have a good production server you would have to spend about 200.00/ month or more, but we will say 200.00.

    So that means you are paying that yourself until you get 100 customers at 2.00/month on it. Assuming you are not overselling, and you don't need to upgrade/repair, now you are breaking even. But that doesn't count your time and effort to manage the server and customers. (From experience a lot of the customers that buy budget hosting demand a lot more support) So you are working for free. And how long do you think it will take to get 100 customers just to pay for the server?

    Now take a look at it this way - Find a niche market, say local businesses, or churches, or a specific group. Your group will not expect to pay 2.00 / month, they will think you are a fly by night company working out of your basement. So for them you can charge 20.00 - 30.00 per month for less server resources. Now you only need 7-10 customers to make that same 200.00. That is 1/10 of the customers, 1/10 or less support needed which allows time to get more customers and manage our customers and servers properly. This way your profits will go up and you can run a successfull small hosting company.

    Now don't get me wrong, I am not saying you can get rich in hosting either, but just because there are a lot of hosts out there, it doesn't mean the market is sautuated and no one should start a new hosting company.

    Just think about your long term plan, research your market and competition,set some good achievable goals, and go for it.

    This is just the opinion of someone that hasn't had to have a "real" job for the last 2 years and works out of his basement.

  8. #8
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    Quote Originally Posted by IPB2
    One thing i have been pondering about for a while now is why people continue to start web hosting companies?
    1. Very low entry barrier.
    2. Work from home or any remote location.
    3. Be your own boss.
    4. Retire rich.
    My advice, dont go down the web hosting road.
    It's a hard road, but there's rewards there for those with a hard work ethic and determination to match. This road will no doubt be littered with those who did not succeed. That's the same in pretty much any business.
    AussieHost.com Aussie Bob, host since 2001
    Host Multiple Domains on Fast Australian Servers!!

  9. #9
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    Jan 2007
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    1
    The problem is people starting webhosting businesses for a quick buck then realize its a long process so they bail out thats why it seams theres so many only 10% of them succeed

  10. #10
    the promise of getting rich quick is one of the factor... the other one is that its just so darn easy to set up a hosting company.... ofcourse the prices remain competitive due to the competition...

  11. #11
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    Feb 2004
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    Merville BC
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    One thing i have been pondering about for a while now is why people continue to start web hosting companies?
    I started mine as a hobby. Now its a business.

    i would like to know from some of the new comers to the game who are only just starting to create the business why they are doing it, it is a ridiculously competitive game to play with the major and cheapest companies already at the top serving most the customers.
    Because the large companies loose the personal touch. My customers are on my msn list, they have my home phone number, and know I am there for them.
    Three out of four people make up 75 percent of the population

  12. #12
    Join Date
    Dec 2000
    Location
    The Woodlands, Tx
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    I sold my company, and it has sold again. I still run the show. When I owned it, there was little money to keep it running. The second was just kinda "lets make money then advertise", which of course never really works. Third owner hired me on and put the money needed to make it work and fix ongoing issues. Now I am taking over their hosting and making it like the one they bought.

    So while I never got "rich" out of doing it, I've made a career.... and never spent a day in school for it. The interesting thing is the clients this company has. People with money often prefer to pay someone with the knowledge to do everything for them. That's the kind of clients we have, and it seems to work quite well.

    So, I learned how I could avoid trying to compete in the "cheap hosting" market. Ok, well, not learn, but bought into it. So I guess I got lucky. On the other hand, if I had to start completely over, I would know how NOT to do it. Via this buyout, I discovered there are plenty of niches to be filled. Now I am deciding on if we want to try to fill those niches, or make money by helping others fill those niches.

    Looking at how the buyers operate, I also discovered that all the ways I went about it in the beginning (1996) was pretty much all wrong if I wanted to succeed. You live and learn, thats how it goes. The company who bought us had their hosting all wrong, but I had my business all wrong. Now both those problems are being resolved. It's long and drawn out, and is taking a lot of money & patience, but we're getting there. I hope I can take this hosting thing to a much higher level.

    I remember when I started, it was actually fairly easy and the future looked bright, boy was I so mislead..lol. We had hacking issues, financial issues, legal issues... just about every issue you could have, we hit it like a brick wall. It can be very tough going. So many times I almost gave up.

    I'm glad I didnt. I have a bright retirement coming my way because I never gave up. Try hard and long enough, and yes there is a future in hosting, especially if you find a niche that isnt taken.

    Here's a hint. Companies that are large enough to have a network, but not rich enough to have their own IT team yet. Rewards arent immediate, but they do remember who helped them, and will pay you well when they get to that point. So a niche is going to go far beyond just hosting or email.

  13. #13
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    Sep 2004
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    Quote Originally Posted by MikeWalczak
    I feel like the reason why its good for the industry to be very populated is it keeps prices reasonable. If there were fewer companies, then the demand would be much greater from those companies, this would result in higher prices. As with any company, the majority of the battle of running a hosting company comes within the first several months; this is the make or break time.

    The same question could apply to retailers. Why do so many small brand companies continue to appear at malls when we have monster companies such as Old Navy, Gap, Abercrombie & Fitch *etc.
    I agree with Mike completely.

  14. #14
    Join Date
    May 2002
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    Florida Panhandle
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    Think of it this way, would you prefer choice? Or would you prefer the market to be dominated by 2 or 3 large corporations?
    Nationhosts, LLC
    http://www.nationhosts.com
    "Nationwide hosting solutions"

  15. #15
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    Aug 2003
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    Quote Originally Posted by mohamoud
    Well it depends on how you look at it. I host some sites for local people and i have absolutly no competetion.
    i am your competition
    if you haven't considered chapter 7 bankruptcy, maybe you should.
    eliminate your debt, keep the property you want, most people qualify.
    contrary to popular belief - no attorney is necessary!

  16. #16
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    Aug 2003
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    Red face

    Quote Originally Posted by Servtex
    The problem is people starting webhosting businesses for a quick buck then realize its a long process so they bail out thats why it seams theres so many only 10% of them succeed
    a lot of us started out because we had design clients that had to be hosted somewhere.
    if you haven't considered chapter 7 bankruptcy, maybe you should.
    eliminate your debt, keep the property you want, most people qualify.
    contrary to popular belief - no attorney is necessary!

  17. #17
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    Feb 2002
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    Australia
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    Quote Originally Posted by Aussie Bob
    4. Retire rich.
    Just wanted to clarify that I was being cheeky there, hence the "".

    Hosting is a tough business, and far from a get rich quick scheme. It's long hours, and after a few years of that, you might have built yourself a nice income, depending how fast you grow and how your business is structured. The hosting industry has been good to me and my family, but I have put the hard yards in, and it's paid off nicely, but we're not rich, but not struggling either, although struggle is good for the soul.

    I see the hosting business as having several phases, in the first few years. The first phase is when your revenues meet your costs. The next phase is when your costs are met, and you can be paid a decent wage. Then you push beyond that and take your business to where you want to go. It's like a journey up a mountain, but if you ever reach the top of that mountain, infront of you is another mountain, if you want to keep climbing higher.

    It's hard work, day in day out, but you can stop climbing if you want, and just enjoy the view. I see the journey being more rewarding than reaching the destination, whereever that may be.
    AussieHost.com Aussie Bob, host since 2001
    Host Multiple Domains on Fast Australian Servers!!

  18. #18
    Join Date
    Nov 2006
    Location
    Lansing, Michigan
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    138
    Generally, speaking businesses tend to not turn profits for the first few years. Depending on your business model and industry this may be sooner or later than the general rule. Web hosting is a very competitive business and it's tough to stay ahead of the competition.
    Patrick K. HendersonSales Manager
    LiquidWeb.com
    StormOnDemand.com
    Twitter: LW_Patrick

  19. #19
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    Sep 2004
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    The hosting industry - though seems saturated - has not even hit it's prime yet. Each and everyday there are more and more people becoming familiar with the net and want to have a site of their own. I have read that about 70-80% of the population still don't even know what hosting is. Alot of people can still be reached. In fact - my immediate circle of friends and network are not familiar with hosting and that is just what is around me. I have said it once and will say it again, hosting is the car dealerships of the internet. Sure there are alot of them, but as the demand grows, so will the number of dealerships. (And they all do pretty well too)

    Besides - people will tell you lies on here to try and get you not to start a hosting company so you have to be careful asking such loaded questions on a hosting forum.


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