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  1. #1

    Bandwidth Prices...

    hey all,

    Today the bandwidth prices are so d**n different, so i was gonna ask you guys, what do you charge per gb, and maybe if you wanna tell , about what aproximatly profit do you make on it.

    Im in need of this info to be certain what prices to set myself.

    I have been surfin around looking at many hosts to see this, but it would be nice to get to hear from actual ppl why and how they have the prices...

    hope this make sense...

  2. #2
    we pay 2,50 a gb if we buy it upfront. That is without any profit!! We sell it for 4,= so we make 1,50 profit a gb.

  3. #3
    Join Date
    Jun 2000
    Orlando FL USA
    we pay 2,50 a gb if we buy it upfront. That is without any profit!! We sell it for 4,= so we make 1,50 profit a gb.
    To add to this conversation/information... Note the key point in this comment.
    if we buy it upfront
    I certainly do not know how much they have to buy upfront to get that deal etc but it would seem that since it has to be purchased "upfront" then the host has to pay for it whether they sell it or not. Therefore, as long as they are not selling more than they have, the odds are that the profit isn't quite as much as what was posted since the host is having to pay for bandwidth that wasn't actually used/sold that month.

    As the host grows it no longer purchases bandwidth by the GB. For example, we purchase full DS-3s rather than xxGB a month. Once you have to buy the whole pipe (and local loops etc) you run into multiple year contracts and you must pay for the full pipe whether you use it or not, every month, for years. Additionally, if you want to continue offering speedy delivery of the bandwidth, there is no way you could possibly sell "all of the bandwidth" you have purchased since that would saturate the pipe and slow the delivery of sites down in damaging ways. Since you cannot sell everything you purchased, it's important to charge a little more to help cover those costs.

    While figuring out your bandwidth prices take a few things into consideration:

    A) Your current cost for bandwidth

    B) Your guesstimated future costs (are you receiving a limited time special price or will it last for the long haul?)

    C) The fact that not all site owners will use all of the bandwidth included in their packages

    D) The fact that some site owners will use far more than what was included in their package

    E) The fact that a percentage of your clients will not pay a dime for the bandwidth they did use (they'll just switch hosts)

    F) The fact that the rest of the clients will pay on time every time

    G) The fact that you will likely have to purchase more bandwidth than you can actually sell in order to keep your Quality of Service at acceptable levels.

    While looking at what other hosts charge do not forget that they are paying different amounts for different "types of bandwidth" (for lack of a better phrase) and with different requirements. There is also the sad fact that some hosts understand the true costs while others haven't a clue and are just setting themselves up for a fall. Be careful to ensure you are looking at YOUR costs and expectations over and above their prices and unknown variables.

    Most hosts offer a good amount of bandwidth within the packages and then charge around 5 times the amount they pay per GB for clients that use more than their package allowed for. E.g. if the package includes 10GB and the site owner uses 15GB then that extra 5GB of bandwidth is charged at a premium rate.

    This allows the host to offer the majority of site owners plenty of "wiggle room" with their packages, knowing that not all site owners will use it all, so they break even. The penalty goes to the site owners that cause this method to become unbalanced. With shared hosting many of the smaller sites cover the fees for the larger sites by not using everything included with their package. In the area of bandwidth, the tables are turned and it's the larger sites that use more than was sold to them who are requested to cover the costs. This is often why "extra usage" (resources over and above what was included in the package) are charged at a higher rate...
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  4. #4
    Thank you starhost and deb!

    As it seems most people dont want to reply to this thread, it might be because it actually asks you to reveal your profit and pricing, something you maybe dont want your competitors to know about, i understand that totally.
    So let me refprase it and just ask:
    How much do you charge per gb, plus
    how much do you charge per gb when people go over their plan.


  5. #5
    Join Date
    Jun 2000
    Orlando FL USA
    How much do you charge per gb, plus
    how much do you charge per gb when people go over their plan.
    Most don't technically charge "per GB" with shared hosting as it's merged in with the "total package". What the host charges for usage over what was included in the package is usually posted on their web site.

    If you were to break up the features within a single package the 'total cost' of the package wouldn't make any sense at all.... That's what makes shared hosting work for the site owner.

    It's cheaper to divide out the 'total cost of the server/bandwidth' by the number of sites you can safely host on it and this number is usually defined by how much each site actually uses which is usually defined by the cost and allowances of your packages

    In short -- It's just not that simple

    Look at any shared package offered at any number of hosts and simply divide the monthly cost by the amount of bandwidth included in the package. Say the package allows 5 GB of bandwidth for $10/month. That's $2 per GB subtract the worth of that hosts other features such as the hardware/support/etc and you'll find the bandwidth is horribly cheap for site owners that remain within their package limits. This is why overage usually costs a lot more -- to help cover the losses.

    As has been said _many times_ -- If all site owners used everything included with their packages, the cost of web hosting would sky rocket because the shared methods of pricing would be history.
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  6. #6
    Deb makes an excellent point. If you want to work out your rough gross margin per GB, then you need to work out a "utilization" rate which will probably be somewhere between 50-75%. That is, you are probably only using 50-75% of your pre-purchased bandwidth each month. As Deb points out, generally, in the short term your bandwidth costs are fixed cost. You are locked into paying for a certain amount whether you use it or not.

    Let's say your utilization rate is 50%. For example, while you may purchase 100GB of data transfer per month from a dedi hosting provider, you only use 50 GB.

    So as a production cost (cost of goods sold), each gig is not costing $2.50 but $5.00

    On the flip side, depending on how you model your pricing (ie, overselling of bandwidth and resources), let's assume that your customers only utilize 50% of their bandwidth allocation. So now, your revenue is not $4 per GB but effectively $8 per gig. In other words, while you have sold 1 gig for $4, effectively you know you are only going to need to allocate 0.5 a gig from your capacity to service that commitment.

    gross margin per gig = $3

    Is this "overselling"? No, because you still have the capacity under this model to provide 100% of the data transfer that each customer has bought.

    If instead you bank on each customer only using on average 25% of their data transfer allocation, but you still keep putting customers onto that dedi box until it reaches a utilization rate of 50%, now you are overselling your pre-paid bandwidth for that dedi by a factor of 50%. Revenue per gig jumps to $11.

    gross margin per gig = $6

    Probably more importantly that any of that is to recognise that in no way does gross margin per gig used reflect the bottom line profit of your hosting biz! The original poster's question attempts to equate profit margin with bandwidth used or sold. But my figures only reflect a gross margin - not the net margin of the business. Of course, there are many more costs involved in providing the value added component of a web hosting service, customer aquisition, running costs and overheads.

  7. #7
    i charge 2 usd for usa clients and 10 usd for mexico clients per gb hehehe pay me 20 usd for 2 gb transfer
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