Seeing the big picture… Why most hosting providers fail.

ServersIt’s no surprise that there are hundreds, if not thousands of new hosting providers that are started every day as there is simply little to no barrier to entry.  Anybody who has $5 to $15 can sign up for a reseller account and be their very own hosting company within minutes and this has some very unfortunate side-effects for the industry as a whole.

Many think that selling hosting is as simple as taking the disk and transfer allocations, splitting them up into their individual plans, and then sitting back and waiting for the money to come rolling in.  This usually ends up in the person who tried to start said company realizing, after a few months, that they aren’t going to get rich quick like they expected and that hosting really is a lot of work.  What happens to somebody who starts a business to get rich instead of because it’s what they are passionate about do you ask?  The answer is simple: the business folds.

Most new hosting companies are operated by individuals who have little to no business sense or experience and many times they fail to plan or to even see the big picture.  These individuals purchase a $5 to $15 per month plan and then expect to compete with the larger providers purely by cost but they fail to realize that in this industry that the less somebody pays, the more they expect from you and your service.  The individual who jumps from provider to provider looking for the best possible price tends to be the person who causes the most trouble and due to the naivety of these new hosting companies they become overwhelmed by cheap customers.

New hosting companies that manage to stick it out more than a year or two have a small chance of actually becoming profitable if they plan accordingly and make all of the right decisions.  Too many times have I seen a provider that appeared to know what they were doing but in reality they had no technical know-how and relied heavily upon friends and others in the industry to essentially run their business for them.  These hosting companies often will go from design to design mimicking as closely as possible, without directly copying, the providers that they themselves see as successful.  What these hosting companies don’t realize is that it’s not just the site design that makes the provider successful but the whole package.

I’ve said numerous times in the past that any company can try to copy what we do but more often than not they will fail to see the big picture and simply copying one aspect of how we operate our business will not give them the reputation and growth that we’ve worked hard to obtain over the years.  You can copy a design, you can copy an advertisement, you can post in the same forums, but none of this in and of itself will lead to success.

At the end of the day if you have a solid business plan, the time, the money, the desire, and the passion for running your own hosting company then you very well may succeed.  If you’re simply starting a provider in an attempt to make some quick and easy money, I suggest you stop now before you damage our industry any more than it already has been by the countless before you.

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8 thoughts on “Seeing the big picture… Why most hosting providers fail.

  1. So, I saw this thread the other day on WHT and a nameless 15/16 year old with some of his friends wanted to start a game server hosting company. It seems that you address that very issue about only knowing/having one aspect about hosting doesn’t really work. While the kiddies may have had some technical knowledge (correct me if I’m wrong, but the kid seemed just a *tad* bit pompous and overconfident about himself) about hosting/whatever and some of mommy’s and daddy’s money but just those two things don’t really work by themselves.

    But I digress; I agree completely with what you have written about here. People sign up for no-name hosting companies who don’t know what the heck they’re doing and ask for help from the incompetent owner of the hosting company. The owner doesn’t know (php lolwut?) how to fix anything and now they’ve ruined the experience for the customer. Now that customer has a bad taste in their mouth from that no-name company and they will be *so* leery of future hosting if they ever choose to have web hosting again. And God-forbid they sign up with any hosting company with less than over 9000 servers which really hurts companies like MDD, TinderHost, or SpeedSparrow (I hope you aren’t enemies with those guys :p) who aren’t that large but offer the greatest support in the web hosting world.

    Anywhoser, great post Mike and keep up the great work!

  2. No, they’re not enemies. Competition is good for the consumer and we welcome competition from those that are competent to actually provide quality services to their clients.

  3. We’re in the middle of a hiring round, and have a question on the application about people’s experience with regards to hosting, cPanel, Linux, and the like. One person answered this question by mentioning he had owned a hosting company, and in the same paragraph also confessed he did not know much about Linux and CLI was his weakness – but he could learn fast.

    I remember sitting and staring wondering how on earth a one man shop hosting company could function with a one man owner that knew nothing about the servers. It astounded me that he saw nothing wrong with his answer.

    I’m so with you here.

  4. When I refer folks to MDD Hosting (which I do frequently because they are awesome) I often get the response “they are so expensive” or “I need unlimited ‘x’ @ $5 / year like I get at Dreamy Hostdaddy Monster Cloud Rack”.

    More than not, they come back to me a few months later thanking for referring them to MDD after a horrific meltdown/slowdown at whatever cut rate hosting they picked solely on price.

    Superior quality of service backed by amazing support and professionalism.. that is how I would articulate my experience with MDD.

  5. Pingback: MikeDVB.com » Intellectual Property, Copyright, and “HostYourDream.net” – Site Ripper and Thief

  6. Hi Mike,

    I ran into your blog after poking around on WHT and looking through some of the information on MDD’s site. I hear what you’re saying about the small-time, get-rich-quick wannabes, but I’m curious about your opinion on the big hosting companies, where they fail and how MDD Hosting plans on avoiding the same pitfalls, if it ever came to that.

    My impression of the industry is this: it seems like a number of the big, popular web hosts started off strong. Because their reputations grew, they became what someone from WHT referred to as “the flavor of the month.” Droves of people signed on, the company burgeoned and soon servers were overloaded, customer service declined and was outsourced, and then there were a lot of angry customers trying to figure out where to go next.

    How does a company like yours balance its commitment to its customers with a need to grow? Sorry, I realize that’s a pretty loaded question, lol. Still would love to hear your thoughts on it, though 🙂

  7. @Jazmin
    It’s constant work to maintain the balance and it’s the point at which the majority of the employees don’t actually care that things become hard if not impossible to maintain.

    One good way to, perhaps, keep the quality, support, and hospitality is by increasing the pricing. You are going to get far fewer customers but those customers are going to pay more and appreciate the attention that they’re receiving.

    Many of the larger providers that have gone down hill have done exactly the opposite, and decreased pricing to compete on pricing and not on actual service and support.

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