What drives hosts to have incredibly low prices?
I search the offers here, and there are some fantastic deals. You can buy an entire year of hosting for $5. That's pretty close to free. There is no shortage of people selling a plethora of services at low prices. Shared, VPS, and even dedicated servers are being pushed for outrageously low prices.
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What is the driving force behind the low prices? I'm not complaining. I don't understand why some companies are undervaluing their services so much. Sure, not every company is going to offer top notch service. But, at these prices, it doesn't matter.
Saturation of the market is the key driver to pricing. The hosting market is very competitive and with competition comes cheaper prices.
you're right 5$ is low, hopefully, the host has a business model where they will upsell once they're are through the door.
Desperation . But note that, some offer $1 for first month then charge you high the 2nd month.
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I think there are a lot of hosts that sell at incredibly low prices, but these prices aren’t stastainable.
As with life, you get what you pay for. If you pay a low price you have to realise that these servers will be well oversold to cover costs.
Even a cheap server costs money to run, cPanel costs are quite pricy for a dedicated server, plus cloudlinux and and security software, then there are backup costs as well.
To do it right takes time, expense and Knowladge.
I guess, it is about market saturation and desperation of their investments, they are trying to grab as much of clients as possible and get income on quantity.. There are also companies that offer '1 month free' which is actually forcing you to pay for 3 months and in 3 months you have 1 month free, which is not actually 1 month free as you have to pay for 2 months upfront..
Most hosting business compete in price to acquire new customer, so the price just keep coming down.
As others have said there's a lot of competition. But there are also a lot of "here today, gone tomorrow" hosting companies. Sure they'll take your $5 for a year of hosting, but they may not be around by this time next year. There's not really any regulation to stop them.
I can't believe how low the prices are. It's mind-boggling how cheap you can get web hosting for. Anyone who was online ten or twenty years ago has to be in shock. What people are charging five dollars a year now would've cost 25-50 dollars per month. It's insane really.
Some hosts do this as part of their marketing plan. They use the cheap hosting as a means of upselling much higher priced products. It isn't a horrible idea when used in this way, IF the company knows what they are doing.
Others do it out of desperation. Usually, these are the new companies that have no real idea what it takes to run a hosting company. As others have said, the market is saturated.It's hard to get your foot in the door. These companies tend to not last very long and provide some pretty poor support while they are around.
I believe this is caused by insanity.
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Business stupidity.
Desperation.
Financial suicide.
Desperation . But note that, some offer $1 for first month then charge you high the 2nd month.
Even some EIG brand charges $0.01 first month then $15 from 2nd month.
I believe this is caused by insanity.
Or sunk costs. Where a host is already paying $xxx for a server, and the money is spent either way. Better to offset it by getting a customer at $x, then it is by posting a price of $X+Y, and potentially not getting a customer.
Myles Loosley-Millman - admin@prioritycolo.com
Priority Colo Inc. - Affordable Colocation & Dedicated Servers.
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Through the years I have seen many companies selling at prices lower than the reasonable ones. This has always been a one way ticket. They sooner or later sell the business.
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Through the years I have seen many companies selling at prices lower than the reasonable ones. This has always been a one way ticket. They sooner or later sell the business.
True, I've seen more and more 'Sell Customers / Hosting Business' threads popping up here. It's either that or they eventually try to exit scam or go bankrupt and shut down.
Better to host with someone who's in business for many years and have never had financial issues (with $1 sales you can be sure that something is fishy).
If it's too good to be true...you know the rest.
It is good for hosts who can play that game. Most of the so cheap plans are due to desperation or for backlinks. I have seen many fail miserably.
They are cheap for two primary reasons... 1, the server setup is garbage, slow ports, low resources, i.e. cpu cores and RAM, bad networks... 2, they are overselling the server a lot... heavy load, etc...
You get what you pay for, if you want fast and reliable hosting that is going to stick around, pay for it.
Personally, I would stay far away from anything that looks like it is practically free with such low prices, there is no way to properly support the service, low staff, no backups or other needed services, etc.
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I search the offers here, and there are some fantastic deals. You can buy an entire year of hosting for $5. That's pretty close to free. There is no shortage of people selling a plethora of services at low prices. Shared, VPS, and even dedicated servers are being pushed for outrageously low prices.
What is the driving force behind the low prices? I'm not complaining. I don't understand why some companies are undervaluing their services so much. Sure, not every company is going to offer top notch service. But, at these prices, it doesn't matter.
I'll going to chime in because I've done hosting at cheap prices on WHT.
I started this company 4 years ago. It wasn't something I woke up one morning and said hey I want to be a web host. I did a lot of planning before opening and it's worked well. I've always had a business plan from the start and know when and what's next.
I've done plans in the $5 to $12 / year range, it can work when your a small operation to build brand awareness. It's not something that should be done forever though. Keep in mind you will never see these plans advertised on the main site. Unless your a big player with a large marketing budget, it's hard to get signups when your the new guy unless you offer cheap plans. It's all about volume with prices that cheap. It's always been in the plans that I would only do volume driven hosting until I could move on to the next phase. Thankfully that time has come for me .
I'm not going to give away all my trade secrets, but you have to do it right. You need the right servers so that you can operate by volume. I did a lot of research when choosing a dedicated server provider to run this business with. A $300+/mo server plus, cPanel license and other business related expenses will quickly get you in debt and before you know it your out of business. But with the right server you can offer cheap plans. Keep in mind you won't have the newest hardware, with shared hosting most customers don't care about this, only that the service is up and running at all times. It's all about keeping your expenses in a "sweet spot" otherwise you will drown in debt, servers get cut off, customers get upset and rightfully so even if they only paid $5 for a year of hosting. We've seen it countless times on here.
If I couldn't make a profit selling $5/year hosting I wouldn't have done it this long. That's not without it's trials and tribulations just keep that in mind. Again it's all about volume, when you have multiple accounts paying $5/year it will pay the bills and generate a profit, more then you think. There are drawbacks to cheap hosting volume driven hosting, I'll get into that too.
The ultimate goal is to convert those $5/year customers to bring customers with upgraded plans with normal market price. If you offer good service you'll get a nice amount that will upgrade. My business costs have been covered 100% by signups since the first month of operation. It can be done but you have to plan everything carefully. A lot of low-end market providers don't do that, get in way over their head and that's why we see so many get sold or close their doors and run for the hills. It doesn't help a lot are kids who have no clue about running a business.
I also do a lot of work with local clients so I don't strictly operate by volume these days. My brand has been around for a few years, I get way more signups through the main site more then I did 4 years ago.
Drawbacks
Hardware isn't the newest stuff. Can't buy or rent top of line dedicated servers selling such cheap plans. Does this make my service less reliable? No but it does limit what I can offer. The benchmarks on the current generation of hardware is very impressive, I'm looking forward to our new setup .
The datacenter my servers are hosted at has been pretty reliable.. Network uptime has been a good 8/10 so can't complain about that. Downside is they don't offer some of the options I need to move to the next level. Customers will be moving to a new datacenter and I'll keep a few old servers for holding backups and development related projects.
When it comes to staffing you have to do everything solo until you are able to hire on staff. I can't tell you how many nights I would get to sleep only for my phone to go off with a notice that their was a customer that submitted a ticket. I now have staff members so I can actually get sleep at night but that took awhile to make happen. During my first year in business, the company was only about 4 months old at the time I was admitted the hospital for 3 days from an accident, in tons of pain, had a concussion and I was still replying to support tickets via my phone all while being heavily medicated. Had no choice since I was the only person to provide support at the time. As luck would have it that's when the first disaster would strike with a ton of old wordpress installs getting compromised.
Another thing is when you offer super cheap pricing you get customers that expect the world and all it's gold. Some of them will having you thinking they pay $5000/yr. While this isn't every customer, the ones that are like that will have you rethinking why your putting yourself through this for little money in return. Sometimes it's best to refund them and move on. You also get introduced to the world of abusers and scammers, you learn all their tricks pretty quick. Then they have the nerve open a dispute with paypal when you shut them down. That can be a huge headache. You learn quickly how to screen new signups.
Have I ever thought about getting out of the low-end market? Yes this has always been the plan. This year is about big changes, getting latest generation hardware, expanding services to more locations, adding new services I could offer before etc. Can't do that with $5/year prices. WHT will still get "special pricing" because that's what this crowd demands but not at those dirt cheap prices, that will be phased out in favor of more reasonable plans in the very near future. I feel at some point every low-end host needs to bite the bullet, play ball in the market and get reasonable prices for their services. We deserve it for all the hard work and risk that goes into this. I'm now where I don't need to rely on volume, I can focus on providing a more premium level of service .
wow thanks this was all very helpful. I agree that cheaper pricing is a reason.
"doing it right"
Translation = cutting lots of corners, quality tanks almost immediately.
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After 28 years in the hosting business I have tried cheap hosts and dedicate servers before the cloud...
Trying to save a buck on hosting was not worth it.
Experienced majority of $5 host had poor or limited system resources but actually worked for a while. Nothing you would want your business on that's for sure!
Step up to a dedicated server with endless resources and you will see a night and day difference! However lasts until hardware fails. Resulting in painful downtime.
Provisioning new server, ip addresses, custom configurations and user data restoration is a nightmare.
Cloud is the only way to go... I'ts another house payment but a darn good one. I use two cloud providers Amazon and IONOS...
Good security, redundancy and plenty of resources is the only way to go.
"doing it right"
Translation = cutting lots of corners, quality tanks almost immediately.
There is a point where "doing it right" is corner cutting that frankly just makes sense. There still exists services out there and individuals buying it where to host even the smallest web site is over $500/month. If you go down a few tiers and there are $50/month offerings which probably make no sense to most normal small web sites. Now if you ask the $500/month web host they will say everyone else is cutting corners they don't use dedicated machines for each web site. If you ask the $50/month he argues you need at least your own virtual machine to host a web site. At these levels it's true they are cutting corners but does it make sense? I'd argue it does as Jimmy's Roof Repair doesn't need to be paying $500/month for his 5 page web site that receives 50 hits a month.
I'm looking at a more extreme case here but there is always companies trying to find efficiencies through hardware and software. A $2000 processor today compared to one 5 years ago could see a 25% increase in performance per core and have twice or three times as many cores. If overhead of the applications hasn't increased by just as much this would improve density and thus lower costs which would mean the potential for lower prices.
"I'd argue it does as Jimmy's Roof Repair doesn't need to be paying $500/month for his 5 page web site that receives 50 hits a month"
Agree... Jimmy's roof repair needs a free facebook page!
You can buy an entire year of hosting for $5.
Check back the same "company" a year later.
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corner cutting that frankly just makes sense.
I refer to the ones that don't.
$1/month hosting is BS, to say nothing of $5 year, or lifetime, or some some nonsense.
Quote Originally Posted by airamericaweb View Post
"I'd argue it does as Jimmy's Roof Repair doesn't need to be paying $500/month for his 5 page web site that receives 50 hits a month"
Agree... Jimmy's roof repair needs a free facebook page!
I don't think either is ideal. There is a middle ground.
I've been selling these incredibly low prices hosting for 1.5 years on Web Hosting Talk so far, so I guess I can answer this question quite honestly.
Why do I ( Incredibly low price ) do it ?
Simple Answer : I can do it, and make a profit out of it, and as an added mini bonus, i feel good owning a host that provides fairly cheap hosting to people who probably don't make enough money from their website to justify a $50+/year service.
Yeah I know $50 isn't that expensive, but a decade or more ago I was a student from a 3rd world country, and I was hopping from free host to free host because I couldn't pay that amount myself trying to host a simple blog AND a small gaming clan forum with phpBB.
So I guess my target audience are these people of these age ( Maybe older people, but no spare change (, and if I can provide them a service for incredibly low prices that is reliable, and make a fair profit for myself, why not ?
People are forgetting, that some third world countries are REALLY REALLY poor. The minimum wage here is like $1.25/hour . A full time fresh graduate engineer earns RM 1300 ( ~320 USD ) here. It may be worse, elsewhere.
There are 4 types of shared hosting providers, in my opinion :
1 ) Charges premium price -> Most money goes to advertisement/referral fees ( Cough EIG Cough ), avoid these. These companies earn a lot of money and keep shilling or get self made shills due to their huge referral fees ( Just google any EIG Company + Affliate/Referral program ). Then you understand why half the internet recommends them ( Like 600 blogs comparing the same companies, recommending the same ones with the referral link, all whom probably paid some $5 fiverr gig to do SEO for them )
2 ) Charges premium price -> Most money goes to the server quality & support ( MDDHosting, HostWithLove, Veerotech, KnownHost & more that sorry, I cannot name and sorry if I missed you out ). This companies earn less money than Company Type 1, but they don't pay out as much referral/advertisement fees. However, they survive on the sheer good reviews and honest ones from their VERY happy customers due to their EXTREMELY good customer support.
3 ) Charges an incredibly low price For maximum profit -> These companies ( Won't name them), also charge similar to me, but maximise their profits, to the point the server barely moves, and hence, get a lot of bad reviews/disappear after a year.
4 ) Charges an incredibly low price For profit -> These companies ( BuyShared is an example ) charge low prices, but their servers are controlled a lot better than Company Type 3, and earn a bit less profit, open more servers when a server reaches capacity. Spends a lot less on support than Company Type 2, server runs, but no instant/super good support responses like Type 2
So everyone has their target audience I guess
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4 ) Charges an incredibly low price For profit -> These companies ( BuyShared is an example ) charge low prices, but their servers are controlled a lot better than Company Type 3, and earn a bit less profit, open more servers when a server reaches capacity. Spends a lot less on support than Company Type 2, server runs, but no instant/super good support responses like Type 2
So everyone has their target audience I guess
You're missing a big point for us though
We own pretty much everything minus the building at this point.
We own our equipment, IP addresses, routers, network connectivity, etc. This means that when we add a new shared node we're only really having to pay a one time cost on some hardware (or in many cases we're just reusing gear we decommissioned from retired product lines), and the licensing. The only time our overhead really goes up much is if we buy another rack, but we've been making a good effort to just cleanup/consolidate/etc what we already have.
We automate as much as we can, even on our shared hosting, to keep our support queues under control.
Francisco
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I think another valid question should be:
What drives clients to seek incredibly low prices?
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For the long-term (non-introductory) low prices, I think the key is that the marginal cost involved in hosting an additional shared account can be very low (especially for companies that are already large & well-established). Most websites are not resource-intensive.
I don't buy what other posters are saying about long-term, low prices not being sustainable. Namecheap offers cheap hosting and has been doing that for about a decade.
I don't buy what other posters are saying about long-term, low prices not being sustainable. Namecheap offers cheap hosting and has been doing that for about a decade.
I don't think you're appreciating the word "cheap" in what other posters are mentioning. I don't think most of those posters would consider Namecheap's offering to be "cheap", they're talking about hosters that are ~1/10th namecheap's lowest sticker price.
Myles Loosley-Millman - admin@prioritycolo.com
Priority Colo Inc. - Affordable Colocation & Dedicated Servers.
Two Canadian facilities serving Toronto & Markham, Ontario
http://www.prioritycolo.com
You're missing a big point for us though
We own pretty much everything minus the building at this point.
We own our equipment, IP addresses, routers, network connectivity, etc. This means that when we add a new shared node we're only really having to pay a one time cost on some hardware (or in many cases we're just reusing gear we decommissioned from retired product lines), and the licensing. The only time our overhead really goes up much is if we buy another rack, but we've been making a good effort to just cleanup/consolidate/etc what we already have.
We automate as much as we can, even on our shared hosting, to keep our support queues under control.
Francisco
We have a winner -- this thread can be closed .
Honestly though Francisco is 100% correct in this assessment. Some others have touched upon some things which are true but I think this is the biggest deciding factor -- it allows for good margins while offering a competitive price.
We own our equipment, IP addresses, routers, network connectivity, etc.
You also have controlled growth, and go "out of stock", which is a foreign concept to many in this industry. They just add and add and add and ... oops. I'd suggest your approach to a number of things is somewhat savvy. But such an operation requires initial investment, something that bottom-feeder hosts rarely do. The lower the cost, the more careful the planning must be, and you always proceed with caution.
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Lots of points covered here, but I might as well add on a bit too.
Over saturated market will drive costs down. Some hosts selling for $5/year aren't sustainable and will likely close - But as others have said, some actually profit even at this low prices. In the early days of starting a hosting company, you don't have the brand reputation to get customers so you usually compete on price.
Then once you have customers paying a minimal fee, this is where your reputation grows & you have reviews, feedback, recommendations, etc. If you're at a lost for the first year, the client base & reviews should make up for it; If your service is good, the referrals will follow.
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