Saturday, March 20, 2010

Breaking Down the Cost of Web Hosting

You may be curious to know why so many web hosting companies have different prices for what is nearly the same service. Well, one cause is that, just like any business, the web hosting industry has scams and shady companies looking to make all the money they can off the unknowing. They offer higher priced services with the belief that someone will pay for them. On the other hand, most web hosting providers actually have legitimate reasons for the prices they charge, whether they are high or low. Knowing this can help clear up some confusion regarding the pricing differentiation of web hosting services. Let’s take a look at some factors that impact cost the most.

Support – This just might be the single most important factor that impacts the cost of a web hosting service. Companies that deliver quality support and quickly respond to technical issues tend to have a much higher ratio of skilled employees to clients. Because maintaining a well trained staff and efficient support system can be costly, these firms often charge more for their services. For these providers, satisfied customers usually results in more business. Some companies choose to cut corners in the support department in order to offer a cheaper service. Unfortunately for them, their businesses usually do not survive.

Network and Infrastructure – A large portion of the costs for a web hosting service can be attributed to the company’s network and infrastructure. Some companies store their severs in many different data centers which isn’t cheap by any means. In addition, redundant internet connections, electrical systems, backup power and security features are needed to ensure a reliable service. All of this results in a pricing structure that enables the host to maintain a reasonable profit margin.

Loss Selling – Some web hosting firms sell at loss in hopes of expanding their client base and selling additional services to those same customers at a later time. For instance, a company might price their hosting plans lower than market costs to make other services such as web design, SSL certificates and search engine marketing more attractive to the customer. Although there are many benefits to be reaped from attracting customers with lower prices, this is still a risky move. If the gamble the host takes backfires, it may be difficult for them to maintain quality of service over the long term.

Over Selling – This is one of the most common practices in the web hosting business and a major reason why prices are so cheap. A perfect example would be a company that offers unlimited disk space on a piece of hardware that only has a capacity of 100 GB. Because the average website only requires minimal space, the firm is able to get away with overselling and still maintain quality of service for its customers. However, this is still risky because there is always a chance that several customers will maximize the resources allocated to them.

When evaluating web hosting packages, one must keep in mind that the lowest price doesn’t necessarily translate to the best value while the highest price does not guarantee the best return on investment. Regardless of the cost, it is all about prioritizing your needs, doing your homework and choosing a provider wisely.