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pathway Home  Monday, 23 January 2017
Ultra cheap Hosts
Written by Dan Lemnaru   

Hello and welcome to Ultracheaphosts.com! My name is Dan Lemnaru and I'll be your host. Well, your host on this website, not your hosting provider! smile

Before you get scared by the length of this page, I'll tell you that I've timed myself reading it and 15 minutes were enough to read it top to bottom. If you're a fast reader, you'll easily beat that.

Now, since you came to this site, I can assume pretty safely you're either looking for a cheap host... or wondering what's wrong with me creating a site dedicated to ultracheap hosts. Well, I figured that since there's a fast growing trend of hosts offering these ultracheap shared hosting plans, I'd do a good thing and explain what's happening for those who aren't noticing and for those who don't know what it means.

At the time of this writing (2006), it's been a few months, maybe almost a year since some of the major players of the budget side of the hosting industry have started to move after a significant period of relative calm. By moving I mean increase their offerings at a faster pace, for their offers went continually from cheap to cheaper anyway.

I'm not aware who really started it, and chances are there is no one host that can be blamed for this, but somehow, a name that comes to mind is Powweb, with its old 150Gb data transfer for $7.77 deal. At its time, it was seen by many as a pinnacle of overselling. Little did they know, for the future was about to take us all by surprise.

A few months went by -- not many -- and there were already a few well known budget hosts offering 200-300GB of data transfer for roughly $7-$10.

Now, don't imagine that in these months the costs of hosting were halved, that the technology experienced some revolutionary advances, that the costs of bandwidth plummeted or the wages of the technicians, sales people and server administrators took a nose dive. Neither of these happened.

Then what explains such an increase in the offerings of these hosts?

Well, the whole process is market driven and imbibed with marketing vapors. Once things started to go down this slope, and a few hosts have started advertising these huge plans, the other budget hosts had a choice to make:

1. follow suit as soon as possible
2. wait and see if their sales slowed down and then act
3. refuse to go down this tricky road or
4. engage fully in this game and try to outbid most offers on the market.

Initially, most chose the more cautious options (or failed to see where the market was heading), but as time went on more and more "brands" chose to follow the trend with less reserves. Only their managers and marketing departments know the exact reasons why, but it has probably got to a point where the old package specifications were no longer enough to get the number of sales they were used to.

For a moment there, it almost seemed like things would settle down again -- the soldiers were going back to their trenches after a few short skirmishes. Unfortunately (as many would say) some "big bears" were disturbed by all the initial noise and it prompted them to take things to yet another level, I guess in an attempt to really differentiate themselves, or maybe in an attempt to give a final blow to some of their competitors. And what's the best way to differentiate yourself when your target market is composed of price driven customers? Giving more honey for less! smile

Now, the dangerous thing for this market is that these big bears have huge resources. They have huge advertising budgets and can make a serious dent in the market share (they actually already have huge shares of it). They can also put up a serious fight for a very long while. In the end, all this means that more and more customers and potential customers end up expecting a certain kind of hosting offer: a very-very cheap one.

Is it really more honey for less dough?

On paper it most certainly is, but in reality, things are not so cut-and-dry at all. Now, although it might seem strange, we do need to answer this question from two points of view: the customer's and the host's.

a) A regular/average customer sees a host's plans: the prices, the various features. He then looks at a couple of other hosts and in his mind, or if he's the meticulous type, on a piece of paper, he's making comparisons, often wondering: "Will this plan be enough? What if it's not?.. What if I'll be using more than 100GB of data transfer per month?.. Then I'd better look for more options. But they'd better be under $10 per month 'cause that's all I'm prepared to pay for hosting."

And off he goes continuing to compare the offers of different hosts. Now, what our unaware customer usually doesn't know, is that he should carefully check the Terms of Service of each host. Only then he'll get truly close to knowing what he's buying. For unknown to him, chances are that all the hosts that he has on his list have a "server resources abuse" clause. It might be worded or entitled differently from host to host, but its meaning can generally be summed up in "if your site uses too much CPU and/or memory we reserve the right to suspend or terminate your account".

Some hosts also state limitations like "if your site uses over X% of the CPU for over Y seconds or creates more than Z simultaneous mysql connections, we may...". The funny thing is that X, Y and Z are rather similar among different hosts. Funny I say, because the same companies might offer totally different amounts of data transfer. You're given (on average, and only in theory) similar amounts of maximum CPU and memory usages that you can employ to push your given data transfer.

This makes for rather varied "server resources/data transfer" ratios between hosts, or, to use a figure of speech, with some hosts you have to spread the same amount of butter (server resources) on a much larger piece of bread (data transfer allocation).

b) Once a company gets to have thousands of customers, most of them already gained from the budget hosting market, it can deduce a pretty reliable average of how much such a customer will use in terms of data transfer and space. Some might be surprised to hear that these average numbers end up to be small compared to what is being offered, but it's not so surprising if we consider that most websites are not that popular. Remember, traffic is a pretty scarce and expensive commodity.

Thus, every time you buy an account, no matter how much your hosting account allows you to use, the host expects you to use a couple GBs of data transfer. And it is in the vast majority of cases right. The percent of websites using close to what they've been allocated will be almost insignificant. There's a very nice, informative thread at HostHideout.com that I highly suggest you to read, as it details real life experiences shared by the owner of HostRoute.net. He proves to be a very candid person and he's worthy of being admired for that, because the type of data he's sharing in that thread is kept under locks by the vast majority of hosts.

We can assume, for the sake of easing our demonstration, that a very small percent of shared hosting users will be using over 50Gb of data transfer, and the most wonderful thing is that even if the current package sizes would be doubled, tripled, quadrupled, multiplied tenfold, the percent of customers using over 50GB is likely to increase only insignificantly.

This is what makes hosts "able" to offer ever more at constant prices. This, and of course, the existence of "server resources abuse" clauses. The occurrence of potentially troublesome sites/customers is very low, which is what in turn convinces the host that enforcing the "server resources abuse" clause won't become an issue, and won't be generating excessive negative press/feedback.

The problems of ultracheap, in a list

1. There's no direct relationship between data transfer usage and server resources (CPU and memory) usage. A wrongly written script, or simply a script that makes lots of operations, intensively works with (large) databases, can bog down a server even though it produces a relatively small result (page) and thus the data transfer used is quite reduced. The average customer will assume that buying 1000GB of data transfer basically translates into not having to worry about hosting even again, but he has no idea that he's actually very much confined by the CPU and memory.

2. To make matters worse, more and more websites are using scripts and databases (generally using PHP/ASP and MySQL/MSSQL). The advent and popularity of open source content management systems has transformed the way people create and administer websites. Forums are also becoming ever more popular, either on their own or as added sections to a website. This means that regular websites are using increasingly more CPU and memory, which might end up affecting some of the hosts' assumptions in the long term.

3. Unfortunately the vast majority of control panels of today offer no way for the end user to observe his account's or website's CPU and memory usage. This often leads to endless disputes over whether the usage is indeed as high as the host claims, with the customer being readier to believe that the host is just twisting his hand (some even use the word blackmailing), in an attempt to upsell (asking them to upgrade to a VPS/Semidedicated/Dedicated).

4. The server resources usage abuse clauses are often very ambiguous. This leaves things totally up to the hosts' interpretation. Not that if there are clearly stated limits, the customer is able to prove anything (see #3).

5. These ultracheap packages influence the customers' general perception about hosting and make them believe (erroneously) that hosting should only come in 3 flavours: cheap, very cheap and very-very cheap. The phrase "I've seen XYZ host offering <insert huge specifications>, so I know it is possible!" perfectly demonstrates the thought process of most non-technically educated hosting customers. Before you laugh at this, remember that most people who use a computer have a very rudimentary understanding of how it works. Hosting and servers are just as much of a black box to them.

6. The skewed perception of what the real costs are in the hosting industry serves to make dedicated servers seem very expensive when that's not the case at all. Fact is most sites using hundreds of GBs of monthly data transfer belong on a dedicated server. However, it has come to the point where a $10 shared hosting package can come with say 10GB of disk space and 1TB of data transfer and this can easily make even a cheap $100/month server with an ~80GB disk and ~1TB data transfer allowance, look like a rip off. It is not!

Good at math?

Here's an interesting experiment. Take a host of your liking and see if it offers both shared hosting and dedicated servers. Try to find out the average configuration of the servers they're using to host their shared hosting customers (ask them, if you can't find the answer on their site). Based on their dedicated servers' pricing, try to estimate how much they should ask for a server with the configuration that they're using themselves for their shared hosting.

Now, based on this known cost, do a rough calculation to approximate the amount that you should be asked for one of their shared hosting packages. Is this estimate close to reality or are their shared hosting packages much cheaper that you'd expect? If the latter is true, that's a rough sign of overselling. The bigger the surprise the more overselling is involved. smile

Now let's try to apply good old math to play with something else. Being really generous in our assumptions, let's say that the host manages to use high end servers to host it's shared hosting customers, at an overall cost of only $300/month.

Many ultracheap hosts have shared hosting packages starting at some $8/month (usually if paid yearly). Mathematically the $8 cover roughly 1/40 of the assumed cost of the server. That would mean we should be entitled to use on average 1/40 of the CPU and memory. However, if everyone would do that, the server would be really busy most of the time. Computers don't perform well at all when they're pushed towards the limits of their capacity. We have to tone down our expectations significantly.

For the sake of simplicity we'll say that we can use on average 1/100th of the server's computing capacity. Again, all this was done very-very conservatively, for in reality, $8 will not cover that much at all. I've given you this example though so that you better understand what it is that you're buying, and use this knowledge wisely together with the old adage: "you get what you pay for".

Ultracheap or unlimited?

A particularity of the evolution of budget hosting is that it is not the prices that are falling while the allocations remain constant, it is the allocations that are being "improved" while the prices stay unchanged. This is yet another proof that what is happening is not due to fundamental changes in the costs structures, but a mark of continuous adjustments of the overselling factors/percents.

Now, the more overselling, the closer these hosts get to the "unlimited hosting" model, for "unlimited bandwidth" is the mathematical extreme of overselling. In fact, amidst all this buzz, at least one well known, relatively old host has switched to offering a form of "unlimited" data transfer.

In time, more hosts might join it, but I have to wonder if that's really the right answer from a marketing point of view. "Unlimited" has already been so widely criticized that it might make it hard to market it effectively.

Also, using their own wits, many people tend to question "unlimited hosting" offers. These offers just scream "too good to be true", to everyone, whether they understand the industry and the involved costs or not. However, if finite numbers are being used, it's not so easy for someone who doesn't know the afore mentioned costs to realize where the absurd starts, even more so when they see quite a few big hosts having relatively similar offers.

In fact, psychologically speaking, it might be that we humans are more prone to be impressed by really high numbers than by the word "unlimited". It is well known in the marketing world that numbers can produce immediate, profound, and long lasting impressions on potential customers. Numbers are widely and wisely used to draw attention to an offer.

Then again, some companies have been doing fine with an unmetered bandwidth shared hosting offer.

Support issues

Some ultracheap hosts are often criticized for providing slow and/or low quality customer support. There are three main probable causes that I can think of:

1. Overselling is without a doubt a huge part in how these hosts can afford to sell at such low prices. Economy of scale is also a part. However, keeping costs as low as possible remains a full time commitment for any company/business that is competing on price. It doesn't take a genius to realize that low cost support has good chances to be more limited in terms of quality.

2. Due to their prices' strong appeal to the masses, a good chunk of the customers of the cheap hosts are average individuals, who require relatively significant amounts of support and "hand holding". There is unfortunately an incompatibility between this and the host's need to keep support related costs per customer at low values. Added to that, among these customers are quite a few individuals who have the inclination to start a rampaging mud throwing campaign if things are not handled their way, which may be a reason why we see so many negative reports on the companies' support. Despite the age old adage, the customer is not always 100% right though. smile

3. Customer support (or rather the staff's wages) happens to be a/the major part of the costs of any host, and the aim in the case of any host, is to maintain an acceptable level of satisfaction among the customers while keeping costs at levels that promote profitability. "Acceptable level of satisfaction" is something with no clear definition though, and it really is up to each host to define for itself. For a very-very cheap host, how do you think "acceptable" will/should be defined?

Taking advantage of these huge offers

The first type of user/website that may enjoy some level of success using these huge packages is the one who actually fits the host's overselling based model, and that is the one who uses very little of what is being promised. A customer with very limited hosting needs is also unlikely to be using high levels of server resources. He is the customer that these hosts are looking for, that make these enterprises profitable.

The second type of usage is when one actually tries to take advantage of the huge space and data transfer allotments, but do so without tripping that by now infamous server resources limit. In theory, using the huge space for backup purposes or using the huge space and data transfer to store and distribute big files like (high resolution) images, audio and video files, would be the best bets in trying to use as much as possible of what you were given.

One needs to be careful though, as hosts can have clauses in their terms of service that limit the way in which the accounts can be used, and stipulate things like: accounts must be used for regular/normal/standard websites (whatever that means), with over 95% of the used space being linked to from a web (HTML) page; that the account can't be used for storage/backup purposes or for file distributing purposes.

This means that 1. the potential customer must read the terms of service, acceptable usage policy etc. as carefully as possible; 2. read the FAQ pages and browse the knowledgebase, looking for service limitations of any kind and 3. for a bit of added certainty, ask the host directly to confirm that no such limits are in place. I say "for a bit of added certainty" because it wouldn't be such a huge surprise if it would turn out that a sales representative either did not know the right answer, misunderstood your questions (not matter how clearly you write them) or outright lied to close the sale.

As yet another piece of advice, stay out of hosts that are just starting out and are using this kind of business model. With a big, well established company, you at least have some reassurance they won't disappear over night.

Worst case scenario, they'll get bought and all hell will break lose. Wait! What was I saying about reassurance? smile

An oddity I noticed is that the many ultra cheap hosts use proprietary control panels. In many cases you'll also find that they use cluster technology, and have advanced data storage solutions. These in the end improve overall efficiency and lower their costs. It is part of what they have to do to in order to make the offers that they do.

Going back to my initial observation, proprietary control panels can be strange or even cumbersome if you're used to certain "standard" control panels (cPanel, DirectAdmin, Ensim, Plesk, Helm, H-Sphere etc.). The process of moving to and from such a host wil be a manual endeavor, and this will probably make you think twice when it comes to moving out of such a host. Don't kid yourself, this is an important thing, because it might make you stick with them (at least for a while) despite being less than satisfied with the service.

Before I tell you good bye, I must remind you that proper research increases the chance of making the right choice, or at least of knowing what to expect from each host. You might want to spend some time on my other site, Hostpeek.com, to see how some of these ultra cheap hosts compare to one another.

Good bye now! smile

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