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Phil21 · 10-03-2008, 09:51 PM

Hehe... I love GFY hosting arguments. The wild speculation is awesome!

Both Brad and Snake Doctor make good points.

One thing to note though, I don't know anyone who was actually selling for $4-5/Mbit. They may exist, but at no real significant scale.

Selling a 100Mbit line for $400/mo *is absolutely not* selling for $4/meg. Not even close. Those hosts make their money on a sheer numbers game - if you have 100 of those $400/mo 100meg clients, only a small fraction will use the full pipe. In fact, the actual numbers skew towards *less* than 60% utilization as you get enough customers to become statistically relevant.

Guess what? That $4/meg just turned into $7-8/meg. Not great, but certainly much better than the marketing makes it look like

If you are shady like a number of providers who sell at those rates are, you can make even more money by purposely selling substandard hardware or hardware configurations that cannot push that amount of bandwidth. Additionally, you can also run transit links at 99% utilization and further decrease your operating costs, without it being overtly obvious. Of course, you're also doing the other obvious things like putting stuff in cut-rate facilities, not staffing properly, etc. At this point, you're really into the $10/mbit+ territory. THESE type of hosts I believe are who Brad is targeting in his posts. Folks like Choopa who are selling close to these numbers, but doing so in a responsible manner due to their sheer scale (e.g. not cutting corners), I do not feel are a problem - just look at the actual offerings to see how it could work on the backend.

Also of note.. Pricing can and is used as a marketing tool. The price match guarantees are just that - marketing. The cost of acquiring a client in the competitive hosting market is extremely high - if you can gain one simply by price matching, that's in most cases rather cheap. Sure, you may take a loss on that client for a while until costs go down (server hardware paid for, bandwidth prices increase, the client's usage invariably will either go down - or go up which is just as well as you then sell at your standard rates), but you gain marketing mindshare getting your name out there, the good word of mouth from another client (assuming you don't suck), and a bit of a boost to your buying power to assist with further lowering costs.

So.. You really are not comparing apples to apples. I'd sell $500/mo 100meg servers all day, and know that once I hit a decent scale doing so, I'd be making decent money while generating a bunch of word of mouth behind the scenes that would bring me more profitable leads in the future. I would *not* sell $5/mbit "pay for your use" plans, with multiple servers a-la-carte (which most of our clients, and probably Brad's fall under). We would go under in very short order.

So sum it up. $4-5/meg deals are used as a marketing tool. They are not actually $4/mbit other than for a very small minority of clients. This includes myself when I sell these - however I'm very up-front about it "one server, one pipe" - much different than a standard managed hosting customer with 15 servers of various configurations, $18/mbit flat-rate used with a minimum, and customized server management. Two completely and entirely separate models.

10-03-2008, 09:51 PM
Phil21 Confirmed User Join Date: May 2001 Location: ICQ: 25285313 Posts: 993	Hehe... I love GFY hosting arguments. The wild speculation is awesome! Both Brad and Snake Doctor make good points. One thing to note though, I don't know anyone who was actually selling for $4-5/Mbit. They may exist, but at no real significant scale. Selling a 100Mbit line for $400/mo is absolutely not selling for $4/meg. Not even close. Those hosts make their money on a sheer numbers game - if you have 100 of those $400/mo 100meg clients, only a small fraction will use the full pipe. In fact, the actual numbers skew towards less than 60% utilization as you get enough customers to become statistically relevant. Guess what? That $4/meg just turned into $7-8/meg. Not great, but certainly much better than the marketing makes it look like If you are shady like a number of providers who sell at those rates are, you can make even more money by purposely selling substandard hardware or hardware configurations that cannot push that amount of bandwidth. Additionally, you can also run transit links at 99% utilization and further decrease your operating costs, without it being overtly obvious. Of course, you're also doing the other obvious things like putting stuff in cut-rate facilities, not staffing properly, etc. At this point, you're really into the $10/mbit+ territory. THESE type of hosts I believe are who Brad is targeting in his posts. Folks like Choopa who are selling close to these numbers, but doing so in a responsible manner due to their sheer scale (e.g. not cutting corners), I do not feel are a problem - just look at the actual offerings to see how it could work on the backend. Also of note.. Pricing can and is used as a marketing tool. The price match guarantees are just that - marketing. The cost of acquiring a client in the competitive hosting market is extremely high - if you can gain one simply by price matching, that's in most cases rather cheap. Sure, you may take a loss on that client for a while until costs go down (server hardware paid for, bandwidth prices increase, the client's usage invariably will either go down - or go up which is just as well as you then sell at your standard rates), but you gain marketing mindshare getting your name out there, the good word of mouth from another client (assuming you don't suck), and a bit of a boost to your buying power to assist with further lowering costs. So.. You really are not comparing apples to apples. I'd sell $500/mo 100meg servers all day, and know that once I hit a decent scale doing so, I'd be making decent money while generating a bunch of word of mouth behind the scenes that would bring me more profitable leads in the future. I would not sell $5/mbit "pay for your use" plans, with multiple servers a-la-carte (which most of our clients, and probably Brad's fall under). We would go under in very short order. So sum it up. $4-5/meg deals are used as a marketing tool. They are not actually $4/mbit other than for a very small minority of clients. This includes myself when I sell these - however I'm very up-front about it "one server, one pipe" - much different than a standard managed hosting customer with 15 servers of various configurations, $18/mbit flat-rate used with a minimum, and customized server management. Two completely and entirely separate models. __________________ Quality affordable hosting. Last edited by Phil21; 10-03-2008 at 09:55 PM..