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  1. #1
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    * Web Hosting Overselling

    In the last two years we have noticed a trend of web hosting overselling, especially in the hosting plans offered by the big web hosts in the market. And this overselling is related to business applied statistics. ...
    ... The web hosting overselling trend was somehow expected, because most of the players in the hosting services market have now at least 5-6 years of experience, meaning 5-6 years of valuable statistical data, enough to make a prediction with a high level of confidence. The hosting companies noticed that most of the accounts do not use more than about 0.1GB of disk space or more than 1GB of monthly bandwidth, so why do they offer 600GB of disk space? Or 5000GB of monthly bandwidth? The answer is quite simple: because it makes their offer stand out as a good deal, exceptional value for money.
    I'm trying to figure out if overselling is good or bad or it doesn't matter. From what I read so far in WHT overselling is bad, but this might be just small hosting companies that can not afford to play with statistics (not enough data or not enough number of customers). So far, from what I learned in school, overselling is just business applied statistics, and as long as the host monitors the servers and doesn't get too greedy, the customers won't "feel" they are overselling.

    I would like to hear arguments from both sides if you guys have the time to get into this discussion.

  2. #2
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    Overselling to a certain extent can be beneficial to both the business and customers.

    Overselling to an extreme extent (which, unfortunately, is very common now) can cause harm to customers in certain situations, and is usually coupled with overloaded servers (poor performance).

    That said, overselling isn't necessary for a business to operate in this industry. There are all sorts of business models that target specific segments of the market.

  3. #3
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    Quote Originally Posted by bobitza View Post
    So far, from what I learned in school, overselling is just business applied statistics, and as long as the host monitors the servers and doesn't get too greedy, the customers won't "feel" they are overselling.
    Yep your are probably right, shame that the monitoring and doesn't get too greedy is something some of them don't care about.

    I honestly believe that if you deliver quality you do not need to oversell, but it also comes with a price, and thus another market.
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  4. #4
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    @layer0

    Well, poor performance and poor customer support in the longrun will be the downfall of the host. But I think we can not just "label" a host with the overseller=poor performance label just because in its plans has 5000GB bandwidth or unlimited space or whatever. Correct me if I'm wrong.
    Last edited by bobitza; 01-13-2008 at 02:11 PM.

  5. #5
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    Quote Originally Posted by 040Hosting View Post
    I honestly believe that if you deliver quality you do not need to oversell, but it also comes with a price, and thus another market.
    Yeah, but it's a rat race out there ... if you don't oversell, a lot of people will be tempted to go for that TB of space offer, even if they wont use it (probably they'll just use 50 MB) ... and you'll loose a sale.

    So, is overselling bad or good? Is it bad for business, good for customers? both? none?

  6. #6
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    Quote Originally Posted by bobitza View Post
    @layer0

    Well, poor performance and poor customer support in the longrun will be the downfall of the host. But I think we can not just "label" a host with the overseller=poor performance label just because in its plans has 5000GB bandwidth or unlimited space or whatever. Correct me if I'm wrong.
    In theory, you're not wrong, but this is what typically happens and is observed by customers. These hosts are setting unrealistic expectations for their customers and their business is often made more profitable by overloading their servers. What you get in the end is poor performance. That doesn't mean extreme overselling and good performance doesn't exist, but it's something that's seen much more rarely. However, it is indeed impossible to make a blanket statement such as overselling=poor performance.

  7. #7
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    Quote Originally Posted by bobitza View Post
    Yeah, but it's a rat race out there ... if you don't oversell, a lot of people will be tempted to go for that TB of space offer, even if they wont use it (probably they'll just use 50 MB) ... and you'll loose a sale.

    So, is overselling bad or good? Is it bad for business, good for customers? both? none?
    There are companies that successfully develop a business model where they attract customers for other reasons than these high disk space and data transfer (or bandwidth) allocations. It depends on the customer the company is targeting and what differentiates them from other providers (competing on price just isn't the answer for a startup company IMO).

    It's also not possible to make a blanket statement saying that overselling is good or bad for customers. Typically it's going to be good for the business, since it's a means of maximizing profit if done right, but the customer experience will vary from host to host and each customer has different standards. Some customers are happy with the host that offers the lowest price, while maybe not very good service. Even then it's good enough for that customers needs as maybe they're only hosting a personal site with a few hits per day. You then have customers with stringent requirements who are willing to pay for better service.
    Last edited by layer0; 01-13-2008 at 02:22 PM.

  8. #8
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    Quote Originally Posted by bobitza View Post
    Yeah, but it's a rat race out there ... if you don't oversell, a lot of people will be tempted to go for that TB of space offer, even if they wont use it (probably they'll just use 50 MB) ... and you'll loose a sale.

    So, is overselling bad or good? Is it bad for business, good for customers? both? none?
    Thats up to those customers, and maybe they are very happy with the services of an overseller, but there are also customers who want reliability from the start, not a tough guess on how much a host will oversell.

    I think it depends if its good or bad only from the customer perspective.

    If someone offers 500GB diskspace you know there is a chance people are going to use it, and even if its a split second by more users you have the chance the disk will get full and the server will give problems. You avoid this risk by not going to a overseller, but that doesnt mean it WILL happen, just that its is more likely to happen at some point of time. *

    Of course there are many more and other resources to be taken into consideration, and each host might oversell different resources, we all know the example of Diskspace and Bandwidth because they are the most visible ones.
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  9. #9
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    @layer0

    You're right ... some of the customers don't even look at a low priced offer because they associate low price with poor performance.

  10. #10
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    Quote Originally Posted by 040Hosting View Post
    If someone offers 500GB diskspace you know there is a chance people are going to use it, and even if its a split second by more users you have the chance the disk will get full and the server will give problems.
    I don't know too many technical details, but don't they cluster the hard drives, or what's the name of making it look like 1 big hard drive?

  11. #11
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    Quote Originally Posted by bobitza View Post
    I'm trying to figure out if overselling is good or bad or it doesn't matter. From what I read so far in WHT overselling is bad, but this might be just small hosting companies that can not afford to play with statistics (not enough data or not enough number of customers). So far, from what I learned in school, overselling is just business applied statistics, and as long as the host monitors the servers and doesn't get too greedy, the customers won't "feel" they are overselling.

    I would like to hear arguments from both sides if you guys have the time to get into this discussion.
    Like others have pointed out, I think the issue isn't as black and white as it appears to be. I also think that a distinction should be made between normal overselling, and massive overselling.

    It isn't just about monitoring your servers either. Every host must turn a profit over the long term -- this can be hard for a massive overseller to do. A lot of that has to do with the mindset of the potential customers themselves. There are differences between hosting customer #1 who is looking for 5GB of space for $5, and customer #2 looking for 500GB of space for $5. Some level of overselling will be involved in providing both accounts in most cases, but most likely the memory and cpu demands of customer #2 will out way those of customer #1.

    While many will argue against that point, In my experience the massive overseller will have a higher percentage of power users per server.
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  12. #12
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    Quote Originally Posted by bobitza View Post
    I don't know too many technical details, but don't they cluster the hard drives, or what's the name of making it look like 1 big hard drive?
    Some might be able to add additional diskspace in the form of iSCSI / NAS or other means, but a lot of them don't thats why i pointed out i was giving an example here of diskspace and concluded with that there are many other factors.
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  13. #13
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    Overselling is good if you can afford it. If not then don't oversell or you will be in trouble and get bankrupted.
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