Can Money Still Be Made In The Hosting Industry?

Business

At first glance, the Web Hosting Industry looks to be well over saturated
with loads of hosts full of great features for incredibly cheap pricing. This is
in fact a truth. The industry is well saturated with hordes of web hosts
charging prices it's impossible to compete with and loads more joining the price
wars every month. This probably has you wondering how one can make money in this
type of market. The answer is quite easily actually.

Many hosts join the price wars and try to compete with prices that barely make
enough money to pay the bills. This type of pricing will ultimately bring their
downfall. The money that is needed for expansion of servers, staff, and other
features just simply isn't there. The owner, which quite often there is only one
of, cannot simply keep pouring money into servers and staff and expect to keep
growing. Many other companies offering these rates are one-man operations. The
person may be 100% competent, but what happens at 2 A.M. his time when the
server(s) go down and he's sound asleep? This type of endless price wars will
get you nowhere; it's best to stay far away from them.

Another profitable guerilla marketing tactic many companies often employ is
"overselling" or filling up their servers or reseller accounts until all
resources are actually used and not just allotted. The concept is based on the
fact that most clients do not use all of their resources. For example, Joe
purchases a 10 GB Space and 100 GB Transfer account from Host A. Normally, one
would divide the account up into 10 accounts of 1 GB Space and 10 GB Transfer
for about $10.00 each which would equal $100.00 in profits minus costs. If Joe
were to employ overselling, he might sell 15 or more of those accounts at $15.00
and make $150.00 in profits minus of course the costs. Obviously if one or more
were to use their allotted resources, this would present a huge problem when Joe
cannot acquire more resources and is forced to suspend or shut down client
accounts.

Overselling often results in servers with literally hundreds or more of websites
on them. The server wouldn't be affected much at all if these were HTML and
Image websites, but often websites have resource-intensive scripts that add up
and greatly slow the server. The resulting problems often give the host a bad
name, and generally result in the shutdown of that host. This also usually
results in a greater workload for the host, as they will be tending to a server
that has trouble often.

When employed the right way, what I term "strategic reselling" can be very
beneficial to the host. Overselling on transfer and reducing space amounts is
often a good way to make the extra profit without compromising clients or the
server. Extra transfer can always be bought, extra space on a full hard drive,
cannot. Joe could divide the space up into 12 or more accounts of 500-750 MB
accounts with 10 GB of transfer. He could quite easily sell around 15 of these
accounts at $10.00 each and pay very little in transfer overages and make a
respectable profit and keep happy clients.

Another very valuable piece of advice for anyone interested in the hosting field
is to find that niche spot that very few or no one else occupies. This niche
will give you a unique marketing tool. Often it can be a different type of
service rendered or simply different plans. Finding a niche before you start out
is very advantageous to a successful business and will help maximize profits.

Attacking the local market is also a very wise stratagem. Many small local
companies pay hundreds for ads in the local phone book. They'll be very
surprised and eager when you can give them an online international presence for
a fraction of the cost to advertise in the phone book. Many are completely
unaware of how much a good web host and website will cost them and assume it's
an arm and a leg.

The final piece of advice is to be completely honest and plan out what you're
going to offer. A strong business plan is a must and a very successful part of
that plan is to remain honest. The industry is unfortunately full of many
dishonest web hosts. Whether they're stretching the truth about owning a data
center, or having the ultimate server, it's not a good practice that will keep
them in business. Provide honest answers to your clients and potential clients.
This practice will keep your host ahead of the pack. You will gain customers as
you remain online while many others come and go.

In conclusion, stay the course. As with any business venture, you're going to be
in the red for a bit when starting out. This is completely normal. After all,
Rome wasn't built in one day. Calculate your prices and come out with a model
that will keep you in business. For example, you may purchase a reseller account
and it costs you $0.65/GB of Transfer. You can turn around and resell the
bandwidth for $1.30/GB bringing in an income of $0.65/GB. This will allow you to
make $6.50/10 GB of Transfer and so on. Prices will of course vary, and the
amounts of profit you want will, of course, be up to you. Be prepared to work,
this is not a get rich quick business. If you're not dedicated to your job, and
ready to devote most of your time to support, then this business is not for you.

The money can be made; one just must be willing to work to make it.