The Truth about overselling for Buyers!

[repoman]

Hello Fellow web hosters and future clients,

Today I would like to discuss *gasp*OVERSELLING:devious2: , Why? Because today I saw a host that isnt even one month old and gives stupid offers .e.g 600gb bandwidth and 30gb space for $4.95...and then people go with them believing they will use/get that much. Most of you are like well, I use it no problems...okay lemme explain it this way.

You enter a competition to win unlimited peanuts, the organisers will hope that:
A) You cannot eat that much peanuts, in hosting you will not use that much
B) You will have an allergy to peanuts, in this case you wont use the hosting at all
C) That you will enter for fun and not want it, in this case you will pre-pay for a year and only use it for a few months.

Lemme just do some maths here. If a host has a dedicated server(a GOOD one), with lets say xeon dual core 2.8ghz and 2-4 gb ram and 300gb hard drive that will cost them around $300/$350 depends on the provider with around 1.2tb bandwidth. The person that gave that offer is probably a reseller anyway...so if you do the maths they can only host 2 people meaning get $10/month so that host is losing araound $340/month...how do they earn money? By selling around 100 of those accounts...that would mean they need to provide 300gb space and around 60000gb bandwidth so if every trys to use that...they are really screwed. Thats what overselling is...please add your comments/thoughts on this. Hope you enjoy my guide and I hope it will be a sticky:angel:

[ChangAdam]

Some people oversell in hope that people just won't use the resources they sold them.

[repoman]

Some people oversell in hope that people just won't use the resources they sold them.

You enter a competition to win unlimited peanuts, the organisers will hope that:
A) You cannot eat that much peanuts, in hosting you will not use that much

[monaghan]

You also need to factor in merchant account (or PayPal etc...) fees ($.30 - $.50 + 2 - 5% of the package costs on average) into your maths.

On top of this you need to also factor in the costs of providing support - many claim to offer 24*7, this would require at least 3 people all working an 8 hour shift 7 days per week or an outsourced cost per ticket basis.

Again you'd need to allow for the fact that the hosting company would need to make profit (you don't see many not-for-profit companies these days) in order to pay the owner.

Overselling is practical when well managed, for example additional bandwidth can usually be purchased, if your customers don't use all their allocation, then with proper monitoring and management, you could get away with overselling this as long as you were charging sufficient to pay the DC's additional bandwidth charges.

The other thing to factor in is the CPU use, if a site's running any dynamic scripting (PHP, PERL, ASP etc...) these will all consume CPU resource, the more resource they serve, the more CPU & disk IO will be required to generate the pages, badly written scripts will consume more CPU resource.

I could go on, but better leave space for other's to add their comments :)

[influct]

a good host also has costs on top of that, server management, support staff ect...

[Craig]

Who cares?, just because a host oversells DOESNT mean its a bad host nor does it imply anything other than they oversell, how do you know what servers they have?......do you know there finances?......NO. People are too concerned about other peoples businesses & they should focus on there own unless they work on the markets (stocks & shares). Get a grip people, overselling IS NOT BAD AT ALL, why do you think the big companies do it.... BECAUSE ITS A SUCCESS!!!!!.

If these companies were going to lose money they wouldn't still be in business for this many years << think about it people, its logic.

[AvailNetworks]

Everyone has a business model. I am getting sick of the overselling *GASP* discussions......everyone oversells, my cell phone company oversells, the hairdresser oversells, chinese buffets oversell.

It is a business decision, just like with the buffet. 99% of the people grab one plate of food. On occasion there is a giant moose of a man who comes in and has 6 plates, 4 desserts, 3 salads, and somehow consumes the dinner fork. Obviously he is a loss but it evens out due to the other people taking the normal amount.



Also you have to consider your target market when "overselling" is involved. Lets say at Avail Networks we cater to 18-22 year olds in the blog market (we don't but you get the idea).

Most bloggers do not have huge amounts of files, just some small off site linked videos, 99.99% text and barely any graphics. I could market 50gb storage and 2000gb transfer and clients will think, WOW LOOK AT THAT SPEED! (somehow people translate space as speed) I would not have to worry about them killing the server with porn files, mp3's and things of that nature.

Occasionally we would run into the person who tries to fill up their space and that would be no problem because the 500 other people on the server would be well within their guidelines. As long as the users keep their usage reasonable, all is well

[Blue1998]

Who cares?, just because a host oversells DOESNT mean its a bad host nor does it imply anything other than they oversell, how do you know what servers they have?......do you know there finances?......NO. People are too concerned about other peoples businesses & they should focus on there own unless they work on the markets (stocks & shares). Get a grip people, overselling IS NOT BAD AT ALL, why do you think the big companies do it.... BECAUSE ITS A SUCCESS!!!!!.

If these companies were going to lose money they wouldn't still be in business for this many years << think about it people, its logic.

I agree with him serious over selling its not bad at all look at all the top high company they offer sell like 20 GB Space for 4.99 but that way they got thier fam :) i think overselling is not bad at all and i bet everyone uses it but dont show it

[serverorigin]

Hosting business is a cutthroat business. If a company does NOT oversell, I honestly do not see them ever making their profit margin unless they are selling VPS accounts.

Fact is bandwidth and space is fairly cheap and I have 2 servers we currently lose money on....But our other servers, make up for it. Part of life and part of the business.

If your business model doesn't reflect that, then more power to you. Otherwise, do the same thing I have said to you in like 6 threads. Don't worry about everyone else, the customer is the one in the end that makes their final decision and I can guarantee the serious oversellers that have been in business less than a month, probably won't have that customer much longer than 30 days anyway.

[xd3vilx]

Everyone has a business model. I am getting sick of the overselling *GASP* discussions......everyone oversells, my cell phone company oversells, the hairdresser oversells, chinese buffets oversell.

It is a business decision, just like with the buffet. 99% of the people grab one plate of food. On occasion there is a giant moose of a man who comes in and has 6 plates, 4 desserts, 3 salads, and somehow consumes the dinner fork. Obviously he is a loss but it evens out due to the other people taking the normal amount.



Also you have to consider your target market when "overselling" is involved. Lets say at Avail Networks we cater to 18-22 year olds in the blog market (we don't but you get the idea).

Most bloggers do not have huge amounts of files, just some small off site linked videos, 99.99% text and barely any graphics. I could market 50gb storage and 2000gb transfer and clients will think, WOW LOOK AT THAT SPEED! (somehow people translate space as speed) I would not have to worry about them killing the server with porn files, mp3's and things of that nature.

Occasionally we would run into the person who tries to fill up their space and that would be no problem because the 500 other people on the server would be well within their guidelines. As long as the users keep their usage reasonable, all is well
i totally agree with you. Sometime it is all down to business plan, if you plan well than you have a chance to keep balance or even earn a profit. Some host prefer to keep trust and decided not to oversell while some just oversell to keep with their business plan on how to earn profit. Who doesn't have to earn money? However, overall, i don't against oversell, however at least do it in a correct way. 80Gb Of Space, 1000GB Of Bandwidth For $10-20...I think it is possible to offer so much without OVER oversell unless you are a big company.

[talence]

If the hosting is able to provide the space which is sensored while buying hosting then who cares what the server leaders are doing. Just use your space and rely on your hosting. Thos hosting companies living on the net for a long time wouldn't scam you, they may oversell but you be sure you will be able to use the whole space, as thats the logical issue, and thats why they are still on the WEB.

Kind Regards

[monaghan]

Bottom line is whether the host has the business & technical skill to oversell and survive. My guess is that many of the newer hosts don't have the experience and rely on luck.

Many of my customers still use less than 20Mb of disk space, so potentially I could oversell, but my business model caters for not overselling. This reduces my support & management costs.

As you'll find on just about every other overselling thread on any forum is that skilfully managed overselling can be good, unmanaged overselling is bad.

[repoman]

Please delete this topic :)

[Craig]

Please delete this topic :)

Why should it be deleted?, this thread does tell the truth (to some extent) but not in your opening post.

[thewarrior]

a good host also has costs on top of that



You mean a good host is called so when they ahve high prices?

[JodoHost]

If a company does NOT oversell, I honestly do not see them ever making their profit margin unless they are

Thats nonsense.
Infact the trend in the managed hosting market is that prices are increasing.

[serverorigin]

maybe but my post was 2 weeks ago.....why bring this old topic back up?

And if your selling managed then it is probably dedicated or VPS ....Maybe enlighten me on overselling those?

[ExileHosting]

Ok in my eyes you've got two types of oversellers, you have:

The stupid cheap resellers that liek the example in this thread offers 30GB and 300GBb/w for about $5, and purely think that by offering such a large package for such a low price people are going to buy it, wrong, you'll find that most smaller package offering hosts are making the money at the minute

The good well priced overseller, ok so the price may still be a bit "stupid" but at $15 it seems more reasonable and more trust worthy, these hosts tend to be those that have been around a while, read a few reviews about reselling and done there homework, simle raise the price. I always seem to find that these types of oversellers have great support too, or all of the times i have approached someone they have
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Anyways guys that was my 2pennies worth, i wish you all well and i'll now let you criticise me :D

[serverorigin]

No,
I think you're absolutely right. In some cases we oversell our shared hosting but we do not lack the resources to provide what we offer. I think that is the big difference between flat out bad companies and good companies.

Whether you can back up the offer. We can and we are successful exactly as we are.

[amz]

Just to chime in here ...

Some overselling to a degree is actually good business, perfectly normal,
and helps guard against resource waste and excess cost overhead.

The problem comes with the reselling far exceeds the resource expansion
capabilities of the host and then it is on a one way collision course for
some very serious problems!

With the increasing competion in the market, we are seeing a lot more
hosts and resellers pushing beyond the limits of overselling to compete
against the hosts that can legitimately offer what they offer.

If a host is overselling drive capacities on a server say 5% to 10%,
it is no big deal and the host should be able to upgrade the system
or clear any file waste in plenty of time for there to be the possibility
a real issue of any kind. IE: Inside the realm of the host's growth.

It's when you start talking 50%, 100%, 200%, 500%, or even as
crazy as it sounds 10,000% overselling as I have seen in a couple
of resellers that I got into quite a heated argument.

That kind of overselling is just pure insanity and asking for big trouble!

Well that much is obvious given the high number of host failures today!

Well there's my 2 cents for this thread ...

[Fabreeze!]

Overselling is not just done by Web Hosts,

Its done by Bus Companies, Air Lines... etc..

It is a bad practice and CAN result in very unhappy customers.

[webguru72]

I host my sites with several companies.... Not intrested in webhosting. I have no idea how you can keep up with support and make just a few dollars a month from one customer.
Here is my theory, I do not mind hosting with a client that oversells by a bit (that would ultimatly reduce my cost down as well) in that event it is ok. just like the power plant, if everyone turns on the lights and keep AC working, the power plant would have a major outage, however, if they do not oversell by a bit, then the electric bill would be tripple or the least the double as they would have to have multiple power plants.

I hope this helps :)

[danosd]

It is completely understandable that hosts need to oversell, the better ones get risk analysts do the calculations for them. They base their calculations based on the fact most users will not use all the resources that they are offered, but if a user does use up the promised server resources the server will not collapse. If it weren't this way costs would be too high. If you don't like overselling get a webmaster you trust to split the costs of a dedicated host with you.

[Volt.Networks]

If you only slightly oversell, to fill up more of the server, I don't see what's wrong with it, as long as its not excessive.

Say you have a 80 GB HD. You offer 1 GB Plans and sold 80. But this 80 only use half of your server. You can oversell another good amount of accounts, say maybe 10-20, depending on how you feel about the usuage. If the server starts to get close to 80GB, either upgrade the server, or transfer some clients to a diferent server. As long as the host is capable of offering completly what they sell, then they can oversell.

Airlines as well as many different business oversell, expecting customers to drop out or not use all. Thats why airlines have stand-by tickets, expecting for some people to miss their flights and other such mishaps.

Its a business strategy to break even or to help profit in this compettive market.

[webguru72]

If you only slightly oversell, to fill up more of the server, I don't see what's wrong with it, as long as its not excessive.

Say you have a 80 GB HD. You offer 1 GB Plans and sold 80. But this 80 only use half of your server. You can oversell another good amount of accounts, say maybe 10-20, depending on how you feel about the usuage. If the server starts to get close to 80GB, either upgrade the server, or transfer some clients to a diferent server. As long as the host is capable of offering completly what they sell, then they can oversell.

Airlines as well as many different business oversell, expecting customers to drop out or not use all. Thats why airlines have stand-by tickets, expecting for some people to miss their flights and other such mishaps.

Its a business strategy to break even or to help profit in this compettive market.
TRUE THAT well said

[CollarHosting]

Agreed it ends up going for reliablity over how good a deal is. Remember that most of the host that oversell are using Adword which costs around $10 per click and less 1% or less usually signup. So there spending a more money to get that one customer so you have to wonder on the reliability and service.