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How Do You Offer Such Low Prices (IE $1 per month)
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How Do You Offer Such Low Prices (IE $1 per month)

Earlier on I asked if there is room for one more provider now here comes the next question as replies was more often then not an attempt to discourage me by that previous question. I understand that most of the VPS providers here are budget VPS however that still don't count for how you can offer a box for a buck a month when the IPV4 rental can cost that much? Also almost everyone stated that there should be at least two servers for redundancy. Now I am no accountant by no means but that there is not going to give you any profit left over, unless of course you oversell the box and even then your redundant box is useless as it is working to keep up with the other box both through the network and the physical hardware. Maybe I am dumb but I do not see how that equation works and make you profit.

Here is an example:
(This is not an offer please do not reply as to thinking it is and do not message me asking me to provide you with one either.)

Egghead Tek

  • CPU Cores 1
  • Disk Space 10 GB
  • Data Transfer 15 GB
  • IPV4 Addresses 1
  • Guaranteed RAM 128 MB
  • Burstable RAM 256 MB
  • Monthly Price $3.25

Company B

  • CPU Cores 1
  • Disk Space 15 GB
  • Data Transfer 150 GB
  • IPV4 Addresses 1
  • Guaranteed RAM 128 MB
  • Burstable RAM 256 MB
  • Monthly Price $1.32
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Comments

  • vdnetvdnet Member
    edited July 2014

    Extreme overselling, kid hosts who don't care about making a living, etc. It just isn't viable to have to sell 200+ packages to turn a profit on a server in my mind. Some hosts have a business plan and system worked out, but most probably are probably just racing towards the bottom.

    If you own your own IP space, IPv4 is cheap. Some hosting companies also just give out IPv4. If you aren't able to get IPv4 cheaply, then specialize on providing premium servers, not the low end servers.

  • lazytlazyt Member

    Look at the number of low price providers that deadpool. It shows you that the numbers don't work. That is why I emphasised providing a quality higher priced product over this downward spiraling race to the bottom.

  • The amount of possible disputes/chargebacks low pricing could attract means that you’ll be better off not starting such a business unless as @vdnet rightly said, if you own your network etc.

  • jvnadrjvnadr Member

    It depends. In some cases, previous posters are wright. Summer / Kid hosts or scammers that want to grab some wuick money and deadpools in 2-3 months.

    In some other cases, there are hosters with special agreements with datacenters or the datacenters itself, that can push prices to minimum due to lower costs or free space from their other ventures.

    For example, CC has 100's (if not 1000's) of nodes and owns some dc s. The average cost for operating a server is much lower than that a small hosting company has to pay. Also, they have plenty of space that is unusable and by giving low prices, it is all but profit to them.

    It is like air companies. If a flight has 150 seats and the air carrier can make profit if he fulfill 100 of them, then, he can sell the rest 50 below his costs. It is the reason that some low cost carriers can sell an airplain ticket for, e.g. 20$ for a trip between two european countries the same time that the cost for that ticket should be over 80$.

  • It's not a good market to get into if you are interested in making livable money and have no other lines of business to be a crutch for it.

  • GreenHostBoxGreenHostBox Member
    edited July 2014

    Look at GreenValueHost for example. They used to massively decrease the cost of their shared/reseller services and now they don't offer shared/reseller services anymore because their income didn't cover the cost of their servers. Not to mention that they also stated their VPS customers had higher support priority than their shared/reseller customers. Now they just focus on selling VPS servers.

    The main idea is it's not all about making prices dirt cheap. It's about the quality of the service you provide at the right price. You can throw some promotions along the way to promote your services. Most hosts that provides dirt cheap prices like the Company B plan bounds to have some sort of problems such as low I/O speed, slow network speed, downtime, massively overloaded servers, etc. which causes them to fail.

  • jvnadrjvnadr Member
    edited July 2014

    GreenHostBox said: Look at GreenValueHost for example. They used to massively decrease the cost of their shared/reseller services and now they don't offer shared/reseller services anymore because their income didn't cover the cost of their servers. Not to mention that they also stated their VPS customers had higher support priority than their shared/reseller customers. Now they just focus on selling VPS servers.

    This is not true. GVH is banned from here (we all know the drama!), but they are active in WHT. Just yesterday they posted 4 different offers, one for shared, one for reseller, one for managed vps and one for dedis. OK, we all bashing GVH and Jon for certain reasons, but there is no need to speculate them with untrue claims.

    http://www.webhostingtalk.com/showthread.php?t=1395934
    http://www.webhostingtalk.com/showthread.php?t=1395941

  • $3/m seems to be a ballpark minimum, though there are some providers who have the advantage of scale who can offer a small VPS for less than that, usually prepaid yearly.

  • GreenHostBoxGreenHostBox Member
    edited July 2014

    @jvnadr said:
    This is not true. GVH is banned from here (we all know the drama!), but they are active in WHT. Just yesterday they posted 4 different offers, one for shared, one for reseller, one for managed vps and one for dedis. OK, we all bashing GVH and Jon for certain reasons, but there is no need to speculate them with untrue claims.

    I'm not much on WHT anymore so I based my report on their website and posts in WHT created months ago. They don't have anything mentioning about their web hosting services on their website which made me believe they don't offer it anymore. And there are posts on WHT specifically saying they will offer higher priority support to their VPS customers since their shared/reseller services don't cover much of their costs. I'm not trying to make false claims to bash them, I'm providing real examples. I apologize if you took it the wrong way.

  • jvnadrjvnadr Member

    @GreenHostBox It's not about the quality (most of us have personal experience from them, sometimes not so bad - their behavior on the other hand is something!) but about if they do provide certain line of service or not. I don't want to support them here, but I think it is unfair to use them as an example and with false facts, when they are banned here and cannot answer themselves.

  • W3HostW3Host Member

    Normally it's the IPv4 price that enables hosts to sell their services so cheap. Don't go with a cheap host. By cheap I mean like $3 or less per month. You'll just get terrible I/O, uptime and support.

  • GreenHostBoxGreenHostBox Member
    edited July 2014

    @jvnadr said:
    GreenHostBox It's not about the quality (most of us have personal experience from them, sometimes not so bad - their behavior on the other hand is something!) but about if they do provide certain line of service or not. I don't want to support them here, but I think it is unfair to use them as an example and with false facts, when they are banned here and cannot answer themselves.

    I'm using them as an example that providing dirt cheap prices are always not successful. I know that I am not making false facts as the proof is buried deep in WHT. They may have recently changed their ways that I may have not known but I'm basing what I said off of what I read at the time the posts was created.

  • I hope the 15GB data on your plan is missing a 0 in your post :)

  • Total OverSell with all resources non-guaranteed.

    E.G. on demand hard drive (allocated if needed) with cheapest SATA drives, 100+ users per CPU core, ram = swap, OpenVZ virtualization (openvz is best virtualization in question of overhead resources, in openvz there are near zero overhead at CPU and RAM resources), no support, full automatization, kids or indians in maintainers.

  • jvnadrjvnadr Member
    edited July 2014

    @GreenHostBox I really don't try to argue with you, but they offer shared and reseller hosting again since mid of May, over 2 months now. Since then they have almost daily offers on WHT (I thing the only place they still can post offers). When we post things here, we all have to be more careful when saying things about other people or providers and double check if those things are valid.

    Saying that, I agree with you that dirt cheap prices cannot be always successful, it depends of the person that runs the business and if he can have very low prices of renting/owning/operating his equipment. But i have seen some dirty cheap offers here in LET that are working much better than expensive vps's from various providers.

  • lazytlazyt Member

    Jon stated somewhere that they couldn't make a profit on the shared and they were dropping it. Since they moved back under the CC umbrella entirely they have started to sell the entire range of services again.

    Thanked by 1jvnadr
  • jvnadrjvnadr Member

    lazyt said: back under the CC umbrella entirely they have started to sell the entire range

    This. When you have backed up from a big dv and server company, you can drop prices a lot. As of quality, this is another field...

    Thanked by 1grayfuz
  • As someone who has recently started in the hosting business I can tell you that trying to make a profit off of those $1 vpses isn't feasible. You will break even at best. The only reason we are offering low end ones is to build our client base while breaking even on some initial customers.

    The only reason it works for us is we used funds from our custom development service to purchase servers/network gear. We where then able to get enough decent paying clients to get a half rack at a DC which means the VPS's we are selling are just there to bring in cash flow for now.

    That being said, I don't think this is a zero sum game here and there is always room for one more provider. Good luck finding something that works out for you.

    Thanked by 2EggheadTek lazyt
  • EggheadTekEggheadTek Member
    edited July 2014

    @hostnoob said:
    I hope the 15GB data on your plan is missing a 0 in your post :)

    Nope it is not missing a 0
    I will not lower my QOS for one client to gain another client. I have never done that and I will never do that. In fact if any of my sub-contractors do that they are no longer a sub-contractor for me.

  • @EggheadTek said:

    15GB data transfer is way too low imo

  • EggheadTekEggheadTek Member
    edited July 2014

    @hostnoob said:
    15GB data transfer is way too low imo

    That is why there is choices. That is why the service people get from my company will be of quality. Now that is not to say I won't offer specials, but as for normal prices that is what they get.

    Hell I have not even jumped on the "unlimited" bandwagon yet as far as shared hosting goes. I probably never will. Unlimited is nothing but a gimmick. Read the TOS with the provider you are with. Other then that I am sticking with my guns on my pricing and such. There may be a bit of room for it but we will see what happens. I am not here to make a quick buck. :D

    Once again there in no attitude intended. Just 100% friendly tone :D

    Thanked by 1lazyt
  • BitmapBitmap Member

    I really believe that if LET were to replace the current pricing cap to $10/month, we could start to see slightly better services across the board, of course... people would still be able to post an offer for $7.00 (or below) a month, that's part of competition.

    For the extra $36/year or so hosts could potentially made from folk, those in the 'low end' market could use that extra dosh to provide better services (or rather, you'd hope so).

    Thanked by 2ricardo Pwner
  • Agree with bitmap. The $7/m thing is a nice ideal, but ultimately it results in ads for services disguised as hosting that basically don't give you hosting.

    I suspect the business model of this place likes the status quo though.

  • How do you offer such low prices? You just post the offer. That is about as far as some take it, and the list of providers in the deadpool isn't shrinking.

    Now, lets figure out the actual costs, Don't forget licensing!

    WHMCS ~$20
    SolusVM ~$30
    Server, Dell Dual Intel Xeon 5520
    72GB RAM, 4x2TB HDDs
    10Gbit port ~$ 550 (should have more than one however)

    There you go. requires 600 $1 clients, and your not making a penny. Not to mention that you cannot simply stuff 600 people on that hardware.

    Keep your head up, you will figure out how to get the numbers where you want them. I personally use smaller servers (16-32GB RAM), keep 4-8GB set aside (for file system caching, what a concept!) with less clients per node to prevent issues, but I also increase my overhead and management time.

  • @EggheadTek I think you are missing something important here. Most of the successful providers here actually started out providing other services outside the LEB/LET range and usually use their Low End offers as a loss leader (as in they never expect to make a profit from the services) for advertising their commercial services. However, a lot of kiddie hosts that don't understand this is how the successful groups here do it and instead think that offering unrealistic packages that they can never make profit from is a good way to get customers and start a business, meanwhile not considering that there is no way to sustain such a service at the costs they are trying to provide them at. Then a few months later, they go out of business for this exact reason and yet people actually come here to ask why such a provider would deadpool when logic dictates at the time of purchase that the prices they were purchasing at would never be sufficient to sustain the services.

    Groups like GVH/CVPS/UGVPS/HVH and other CC providers are able to do this because CC is willing to provide these groups servers at cost and provide super cheap (albeit dirty) ip addresses for them to use as long as they become CC's bitch and do their bidding. So these groups really don't count as they are really just shell companies that are being supported by CC.

    Others who are pulling this off likely don't own their servers and just rent and have been lucky enough so far not to run into problems like DDOS and other abusive issues that can quickly cause someone providing services in this situation to lose their hosting and deadpool. Also, they are likely also overselling to the point the service may be hardly usable, causing people to leave negative reviews and leave them. If you search, there are several groups to which this exact thing has happened to on this forum (in both cases).

    my 2 cents.

    Cheers!

  • EggheadTekEggheadTek Member
    edited July 2014

    TheLinuxBug said: have been lucky enough

    I would never run my business on luck. If I wanted to gamble I would go to a casino. I think my prices are fair and if others do not think so they should find someplace else that does offer that type of service. Once they have to move three or four times because the provider they was on was overselling or closed they will pay a premium price for premium services.

    Once again there is no attitude intended. Just 100% friendly tone :D

  • lazytlazyt Member

    Nah some of them will never learn and just keep going from cheap to cheaper then crying on here when the provider disappears.

  • blackblack Member

    Self-managed, oversell on OpenVZ, own your own IP space. LET isn't really the market to make a lot of money.

  • sz1hostingsz1hosting Member
    edited July 2014

    we can provide quality vps hosting but the minimum is $2.39 a month any lower it would end in no profit, luckily we are very friendly - have friends who work there or know people that work there etc with the dc's we use otherwise it would be hard. If you have not got good contacts in the hosting industry you will fail guaranteed unless you can afford to lose a lot of money, or you have a big budget eg: $10.000 + USD

  • PwnerPwner Member

    @sz1hosting said:
    If you have not got good contacts in the hosting industry you will fail guaranteed unless you can afford to lose a lot of money, or you have a big budget eg: $10.000 + USD

    It doesn't take having contacts to succeed (though they can make a big difference in anything), it takes having a successful marketing plan and providing good service/support.

    Thanked by 1sz1hosting
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