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sohot
Posted: Aug 8 2007, 05:36 PM
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If I purchased one of your web pro accounts & actually used ALL of the diskspace & bandwidth on offer, will you still make a profit?

Lets say I have a movie download service, which uses around 140 gb disk space & 1,400 gb data transfer per month.

Can I host that on your $8.95 per month plan without getting kicked off, or my prices increased?

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andy
Posted: Aug 9 2007, 08:19 AM
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Group: Advantagecom Staff
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QUOTE
If I purchased one of your web pro accounts & actually used ALL of the diskspace & bandwidth on offer, will you still make a profit?


At this moment, no, not on that one account. We rely on cost averaging the customers that use a lot with those that use almost none to turn a profit. Also, as there is more disk space and data transfer being used by customers we can begin to tap into economies of scale that are not currently accessible to us. In other words, when we buy in bulk, we get better prices from bandwidth providers and server manufacturers.

QUOTE
Lets say I have a movie download service, which uses around 140 gb disk space & 1,400 gb data transfer per month.

Can I host that on your $8.95 per month plan without getting kicked off, or my prices increased?


If it impacted performance for other customers (per the Terms of Service), we would ask you to move it to a dedicated server or another hosting company.

It isn't as simple as "can you use everything?" The question that is of more importance is "how will you be using it?" If it is big files being accessed and downloaded by a few people such that it uses all your disk space and data transfer, that would probably be fine. However, if it is millions of 1KB files being accessed by 10,000 individuals a minute such that it uses all your disk space and data transfer, that would be a problem and you'd be asked to move to a dedicated server. If it is a 120GB database being queried 50 times with every page loaded on your web site, again, you would be asked to move to a dedicated server.

Do you have a movie download service or is it hypothetical?


--------------------
Sincerely,
Andrew Kinney
CTO, Advantagecom Networks

Please do not private message me. My regular management duties preclude responding to every customer that sends me a support issue. Instead, post on the forum or contact tech support.
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sohot
Posted: Aug 9 2007, 08:46 PM
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The question was only hypothetical.

However as I have a server with 160 gb RAID disk space (only around 105 GB available for /home ) & 2000 GB monthly data that costs me around $350 per month, I was wondering how it would be possible to make a profit at those prices if the customer actually wants to use all that is offered.

If I do decide to offer a movie download service I will be sure to get a $8.95 per month account, instead of waste all that money on a dedicated server that does not even have as much space as you are offering!
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andy
Posted: Aug 9 2007, 10:12 PM
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...instead of waste all that money on a dedicated server that does not even have as much space as you are offering!


Again, I have to point out that we are not offering a panacea of bliss that automatically trumps a dedicated server. There is more to this than just disk space and data transfer.

A dedicated server has many uses that simply cannot be serviced by a shared hosting account:
  • Heavily used databases. (disk activity that hinders server performance)
  • Guaranteed server isolation from the activities of other clients (it only takes one customer misbehaving, unintentionally or otherwise, to take down a shared server)
  • Heavy CPU/RAM utilization. You can monopolize the CPU and RAM on a dedicated server without repercussions. On a shared server, you'd likely be shutdown if you monopolized the CPU and/or RAM.
  • You can customize the server and software environment to suit your needs. With a shared server, you take it as we give it.
  • You control your server load and are never subject to someone elses poorly timed massive ad campaign that should have only been directed to a dedicated server (and nobody warned or consulted with the hosting company running the shared server before running the massive campaign). You choose what level of performance you get.
  • Root access.
  • Security. You can lock it down tightly or keep things more casual since you don't have to worry about other users on the server getting into your stuff. This is in your control with a dedicated server and out of your control with a shared hosting account.
A dedicated server is not a "waste" if you're using it for the right reasons.

As good as our shared hosting usually is, we have dedicated server customers that highly value their business operations and would never consider trying to save a couple hundred dollars while potentially risking tens of thousands of dollars or more to the actions of another client on a shared server.

I think it runs contrary to common sense to place extremely valuable business operations on the cheapest service you can find. Of course, if a person isn't making any money on his/her business operations, then that person won't care about this and it makes sense to cut costs, no matter what is sacrificed.


--------------------
Sincerely,
Andrew Kinney
CTO, Advantagecom Networks

Please do not private message me. My regular management duties preclude responding to every customer that sends me a support issue. Instead, post on the forum or contact tech support.
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sohot
Posted: Aug 10 2007, 05:44 PM
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I just think that the tactics being used by the web hosting industry to get new customers these days are getting quite ridiculous. Everyone is trying to out offer everybody else with more & more disk space & data transfer at lower & lower prices to win over new customers.

I bet the vast majority of hosting companies offering similar plans couldnt possibly supply to their customers the amount of disk space & data transfer offered on their hosting plans if only 20% of their customers wanted to use the full amount of space & data transfer offered.
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andy
Posted: Aug 10 2007, 07:13 PM
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QUOTE
I bet the vast majority of hosting companies offering similar plans couldnt possibly supply to their customers the amount of disk space & data transfer offered on their hosting plans if only 20% of their customers wanted to use the full amount of space & data transfer offered.


True, but you could also say that all the sewers in the world would overflow if even 20% of the toilets flushed at the same time. mrgreen.gif It just isn't going to happen. Well, actually I have heard of that happening in some localities after the Superbowl, but that type of event has no analogous component in the hosting world.

Assuming that 20% of their customers *could* use all their disk space and data transfer (that's a hugely erroneous assumption), there would only be less than a 5 to 1 oversubscribe ratio. Most hosting companies use an oversubscribe ratio between 10 to 1 and 40 to 1. It is an absolute must in the web hosting industry if you are to turn a profit. If you try to sell web hosting with a lower oversubscribe ratio, you'll get few if any takers because technical people tend to be so egocentric. The bigger the ego, the more likely they are to feel good about themselves when they find a huge hosting account for a low price.

The reality is that there are four basic types of shared hosting customers:

1. Those that typically use less than 5% of their disk space and/or data transfer. This group makes up about 80% of shared hosting customers. They tend to be individuals running personal web sites, very small businesses, offline centric businesses, service professionals (doctors, lawyers, etc.), and those just getting a business started. This is a hosting company's bread and butter.

2. Those that use between 30% and 60% of their disk space and/or data transfer. This group makes up about 15% of shared hosting customers. These people tend to be successful business people with well established online operations. Hosting companies don't make a lot of money selling hosting to these people, but hosting companies like them anyway because they tend to be good about paying their bill and often have no problem paying for additional non-hosting services like design or programming.

3. Those that use way more than the initial allocation of their disk space or data transfer. This group makes up about 3% of shared hosting customers and they tend to be resellers or running an Internet centric business of some kind. They also make up probably 10% to 15% of the revenue, so they definitely pay their share. These customers are a constant challenge to hosting companies, but they are well liked because they tend to drive growth.

4. Those that use exactly 100% of their disk space and/or data transfer. This group makes up about 2% of shared hosting customers. This group can be further split into three groups:
4a. The totally oblivious. They don't pay any attention and run out of resources without purchasing more because it isn't important to them if things work. This group makes up about 1% of shared hosting customers. This group is tolerated as long as they keep paying their bills.
4b. The sly cheapskate. They want it as cheap as possible and don't mind buying multiple accounts from multiple companies and changing their DNS to point to a different host throughout the month when they run out of data transfer. Repeat that each month. This group makes up about 0.5% of shared hosting customers. This group is not well liked by hosting companies because they often are late on their bills and they cost a lot to service. It is a relief when they finally go out of business because their business model was so weak that it only survived on the generosity of hosting companies. If they pay their bill, they're tolerated.
4c. The spiteful. They are on a mission to stick it to the man or are trying (fruitlessly) to prove a point. This group makes up about 0.5% of shared hosting customers. This group is abhorred by hosting companies. There is always some jackalope that is anxious to make your life difficult or screw up an otherwise perfectly good business model for no good reason. Frequently they are just told to pack up and take a hike.

My point:
There is no conspiracy. Nobody is trying to swindle you with large quotas and low prices. Reality supports a properly managed oversubscription business model in the web hosting business. It may seem rediculous to the uninitiated, but it is done because hosting customers demand it, whether they can actually use those levels of resources or not. Customers go for the "best deal" based on disk space and data transfer when they don't know any better and, unfortunately, most *don't* know any better.

What prompted us to join in the fray with our higher disk space and data transfer quotas? We heard too many hosting customers say "I'm switching to ***insert latest fad company name*** because they offer a better deal." Did those customers need more disk space or data transfer? No. Could they not afford our prices? No. Did they save a significant amount of money? No. Were they upset about reliability or speed? No. Was our customer service deficient? No. It was just ego boosting by way of "proficient shopper pride". It is a disease and it has a wide rate of infection among web hosting consumers. blink.gif

I like to think that by keeping customers from switching away, we're saving them from themselves. wink2.gif We make things pretty easy for our customers and many have been so sheltered over the years that they just don't realize how tough it is to be a hosting customer with any other company.


--------------------
Sincerely,
Andrew Kinney
CTO, Advantagecom Networks

Please do not private message me. My regular management duties preclude responding to every customer that sends me a support issue. Instead, post on the forum or contact tech support.
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