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Overselling

Overselling... What does it mean?

For only $3.95 a month get 20000 MB/Mo bandwidth and 1000 MB space. Does it sound too good to be true? You know what they say: "If it sounds too good to be true, it probably is".

In the hosting industry, this is called overselling. Overselling is the practice of offering enticing hosting services in the hopes of drawing more business to their doors. It is a very common practice and everyone seems to be doing it.

The idea is simple, get unsuspecting consumers to purchase a hosting package by offering more than can be provided. We all know that 95% of sites only use small amounts of disk space, bandwidth and E-mails. On average, a site will use 500 MB bandwidth per month and about 5- 10 MB disk space.

Maybe an example will help you get a clearer picture.

A web hosting company might have a server with a 80 GB hard drive and 700 GB/Mo bandwidth at a cost of $300/Mo.  The company starts to sell plans with 1 GB space and 10 GB/Mo transfer quota at $3.00 per account. After selling 70 plans, the total revenue for that server is only $210/Mo.  The bandwidth allocated for those 70 clients reaches the limit of 700 GB and the disk space allocated reaches 70 GB. The company is not making any profits, they are losing money.  However, the web hosting company notices that each month only 275-300 GB of bandwidth are "consumed" by the clients hosted on that server.

It decides then to sell more accounts - overselling the 700 GB limit of bandwidth. After selling another 10 plans and hosting those websites on that same server, the allocated disk space totals 80 GB. However, the company notices that only about 40 GB of space were used by the customers over the last 6 months.  The bandwidth consumption increased as expected at about 325-350 GB per month. So it seems there would be no problem to host another 10 or even 20 customers on that server.

Since the cost for the server is constant, every added plan could be easily seen as pure profit. Anyway you look at it, they were able to get more money from that same server. The only problem would be if many customers would consume all the bandwidth and the space that they were allocated.  The server would not have sufficient space, some customers would not be able to get what they paid for and the company would have to pay at a higher-than-usual rate for the bandwidth consumed over the 700 GB that were initially allocated by their provider.  By now, you should get the picture.

The ugly truth folks.. Hard drives have a limited capacity and bandwidth also has a limited capacity.  The above company will struggle to stay alive putting their customers at risk.  The company wouldn’t be in this position if they would have sold their plans at a more realistic price.

PJMCo.ca was founded in 2001 with a simple philosophy that has never wavered.  Provide customers with honesty, quality products, great service and reliability.. all at a fair price!

Sincerely,

Patrick Michaud
Owner

 

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