Web Hosting: Cheap Isn't Good

Hi everyone,

I guess this will be my very first blog that is related to Web Hosting, which I hope will be useful as a guide to readers who are new to web hosting and would like to shop for their first paid web hosting service.

When it comes to shopping for your paid web hosting service, I’m sure you will be confused by glancing through advertisements in newspapers, online forums, search engines…etc as you will realise that there are simply too many companies and hosting packages to choose from; Which company is the best? Which hosting package is suitable for me?

Most of the time, we will automatically filter the choices available according to their prices. We tend to filter out companies who offer the most expensive packages and pick the cheapest (hopefully free if possible) provider and subscribe to their services. This is definitely the first step taken by any wise consumers and companies to reduce their expenditures.

However, how cheap can web hosting services go? Is RM200/year for 100MB diskspace cheap? 1GB diskspace at the same price is certainly cheaper. However, 10GB diskspace is still the cheapest if you were to compare it with the 100MB and 1GB! Why not RM200/year for Unlimited Diskspace? Since there isn’t a market price for web hosting services, we tend to have the impression “the cheaper the price, the larger the diskspace, the better!”

Unfortunately, to be very honest with you, such theory never works for web hosting services. You’ll need to balance between capacity and reliability carefully, when it comes to web hosting services. Why must it be between capacity and reliability only? The reason is because the higher the capacity that is offered to you, the lower its reliability and vice versa.

Don’t believe it? Let us use some common sense and simple calculation. I will take the operating cost of approximately RM950/month (US$250) for the following server specifications in the United States:
Intel Dual Xeon 2.8Ghz
1GB RAM
160GB HDD
Linux OS with cPanel/WHM Control Panel
1 Terrabyte of bandwidth/month
The operating cost would be RM950 x 12 = RM11400/year. Let us work out the calculation from the point of view of a web hosting provider, say we run a hosting company now and we are in the midst of deciding what hosting package combination is the best to offer, without losing money. We have these plans in mind now:
Plan A: 100MB Diskspace, 1GB Bandwidth/mo = RM200/year
Plan B: 1GB Diskspace, 10GB Bandwidth/mo = RM200/year

In order to sustain our company, we need RM11400/RM200 = 57 clients on the server. Therefore, we have utilized the following server resources:
Plan A: 57 x 100MB = 5.7GB Diskspace ; 57GB Bandwidth/mo
Plan B: 57 x 1GB = 57GB Diskspace; 570GB Bandwidth/mo

Ok, looks like the result is quite obvious. We know that the Plan A will use the least server resources and it is very likely that we still can put in more clients on the same server to start generating revenue for our company. Plan B? Forget it; it has used up half of the total bandwidth for the server, just to cover our expense! In other words, our company can earn quite well if we were to sell Plan A to our clients. With the extra revenue, we can expand our company, upgrade the equipment and perhaps purchase a new server for our business before we actually fill up the server! Plan B on the other hand is not really benefiting us and we will only be financially ready for the next new server until we fully utilize the server!

Now let us set a constant value for the number of hosted clients. We’ll use 200 clients as the standard before we are ready for a new server:
Plan A: 200 x 100MB = 20GB Diskspace, 200GB Bandwidth/mo
Plan B: 200 x 1GB = 200GB Diskspace; 20TB Bandwidth/mo

Oops, here is the conflict. For Plan A, there are still plenty of resources available, just nice for the existing clients to upgrade their hosting packages to a larger plan in future. For Plan B, we have exceeded the diskspace and bandwidth of our server. Is it possible for such phenomenon to happen? Yes it is possible by overselling our server resources.

What is overselling? It is when the web hosting provider sells more diskspace than its actual hard disk free space capacity. The true story is that most people cannot use more than a couple of GB of diskspace. Most users actually do not need more than a 100MB of diskspace. You can generate 1GB of content by shooting a thousand high-quality photos. And you would want to upload for your friends a small fraction of those.

Still if someone manages to accumulate and publish 20GB of diskspace, hundreds of others that bought this diskspace will not. So what happens is that those hundred others are paying for the service used by the few people that can upload so much content.

According to HostingInsider, “Users on shared servers often experience slow speeds, due to overselling. Many shared server web hosts oversell their servers. Overselling is assuming that most users will not use up all of their resources, so they put more users on a server than it could hold if every user used up all of their alloted resources.”

Ok, now let us come back to a customer’s point of view. As a customer, would you like to be with a hosting provider who oversells his server? Would you like to be put into a crowded server? Would you like to pay for plenty of diskspace but instead of you yourself using it, someone else in the same server uses it for you? I’m sure the answer is NO, am I right?

Now how does it going to affect the reliability of the server? Imagine for a company to be able to expand and purchase more servers, it has to be financially stable. In other words, we now set the sales of the company a constant while the hosted number of clients a variable. Without any calculations, we can tell that Plan B uses a few times the server resources of Plan A for the same sales. The rationale is, the higher the server resource utilization, the lower its reliability.

So the conclusion is, “cheapest price, largest space” does not guarantee you reliability in return. Instead of subscribing to the largest diskspace possible when you’re using not even 1% of it, why not just subscribe to the package that offers you the sufficient diskspace for your existing web content as well as its future development?

Disclaimer: Everything in this blog serves as a reference only. The hosted number of clients depends on the server specifications and its performance.

7 Replies to “Web Hosting: Cheap Isn't Good”

  1. Dude sub-headings are GREAT, especially when writing long articles.

    Would make it much easier to read.

    Eye loses focus with one long page of text.

    Cheapest is not best is same for everything, including hosting, like dreamhost offer great packages but if you start using too much CPU time they dump you wish massive charges, you can’t reach the bandwidth limit, but most people don’t know they throttle the CPU cycles.

    Don’t ever believe unlimited bandwidth that’s the most important thing when it comes to hosting..

    I’ve used pretty much every single one of the ‘best’ hosts.

    Have to say still Rackspace is best without anyone else coming close, if you can afford it.

  2. Dear ShaolinTiger,
    Thank you for your comment. I must admit that Rackspace is indeed the best provider in our industry.

    However, their fee is certainly unaffordable to many of us, thus, most of the time only companies who run ecommerce sites opt for their services while for personal use web sites, you can hardly able to afford yours with them.

    Thanks for sharing your experience with us!

  3. Not sure if a lot of people have heard of Media Temaple but I know most designers should know about them. But the question would be, are they for real or are they good cause of extent of word-of-mouth?

  4. Dear Danny,
    Yes, I have heard of MediaTemple before. Comparing their Shared Hosting and Virtual Dedicated packages, seems that they do oversell their shared hosting server:
    Shared Hosting: 5GB storage for $14.95
    Virtual Dedicated: 4GB for $49.95

    Thanks!

  5. Seriously, everyone oversells unless you have a dedicated server to yourself but they do guarantee you the space you sign up for if you need it. The difference here is how they manage the server load.

    Some cheap hosts out there are still pretty reliable, and if you’re a blogger and just doing this for fun, do you think you would wanna pay for the extra reliability (0.1-0.2% extra) which you don’t really need?

  6. Hi boringest,
    First of all, not every web host oversells their services. It is very important for you to read the TOC & AUP of the web host carefully when you’re signing up for their services, especially when you believe that they are overselling their services.

    Yes, such providers are just nice for personal web sites but when it comes to mission critical web sites, I seriously hope that one should expect to pay a little more. I still remember two years back when a hosting client wrote an article to The Star, blaming ALL the local web hosting providers simply because he said that ALL local hosting providers are not reliable. The main point is, he did not mention how much he paid for the hosting provider. He must have expected too much from the provider.

    As to giga hosts’ reliability, only time can tell, seriously. If you’re an active member in any web hosting forum, you’ll realise that since the past few years, there are many oversellers who end up revising their packages back to something normal or they cease their operation when their servers are no longer able to sustain the growth of the web sites hosted.

    Thank you!

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