Overselling webhosting - good or bad?
For those new to reseller hosting, overselling is the practice of selling more webspace/bandwidth than you’ve got, in the hope that none of your customers will ever use anything like their full allocation anyway. The practice is common, not only in web hosting, but also in other industries - but is it an acceptable practice or a ripoff for customers?
Advantages of overselling web hosting
You might think that there are only advantages for the web host or hosting reseller, but actually there are advantages for the customer too.
Let us say you’re starting out in reseller hosting with a 5Gb webspace/50Gb bandwidth hosting package and you want to entice your customers with a web hosting starter package that offers them 500Mb storage and 5Gb bandwith allocation. That means after you’ve signed up 10 customers, you’ve run out of space and bandwidth - time to upgrade to a bigger package?
Well, maybe, maybe not. Take a look at the actual resources being used by your customers. Chances are none of them are using anything like their allocation of disc space or bandwidth. Perhaps quite a few of them are websites belonging to small businesses, either a limited number of static html pages, or maybe a small ecommerce site selling a few dozen products.
You know and I know that such a site does not usually need 500Mb webspace. One of my web design (not hosting) clients runs a successful online store selling their own brand of equine products (about 30 products). Disc space used is about 15Mb out of an allocation of 500Mb.
So - if you’ve reached the theoretical limit of what you can sell, but in actual fact you’re nowhere near that limit, you can continue to sell more hosting packages - and the clear advantage to you is that you make more money without it costing you more for hosting.
What about the advantage for the customer? Well, thats easy - if overselling were not a standard practice throughout the industry, web hosting prices would invariably be higher.
Disadvantages of overselling web hosting
There are two main disadvantages to overselling. Firstly, of course, all of your customers could start using up all of their allocation, leaving you unable to supply the service that you’ve sold. In practice, this is unlikely to happen, any build up would happen over a period of time and you should be able to spot it and make plans. As a reseller, you will be in the position of being able to upgrade your reseller plan to cope with it.
The second disadvantage is the resource usage of the processor. The processing power of the processor is the main limit to how many websites a particular server can host. Too many websites and the server will get overloaded and performance will become unacceptable. Again, this is largely dependant on the type of sites hosted - sites running lots of scripts/busy forums etc. will have more resource usage than mom & pop business sites.
Should you oversell or not?
While there are people who think that overselling is evil, the majority of web hosting resellers will say that they need to oversell to make a profit. There are many reseller accounts that specifically advertise that overselling is allowed - it’s sold as a positive benefit of their package. There are others (not so many!) that proudly proclaim that they do not allow overselling.
My view is that overselling is fine, if the situation allows it. Only you will know that - it will depend on the type of sites you are hosting and the resource usage. And of course, if one or more of your customers does start to use their entire allocation, you must have a plan in place to be able to supply them with it. As long as you not overload the capabilities of the processor, then there should be no problem.
Some people say overselling is immoral because you are selling more than you have got. That really isn’t the case. In the example above, if you’ve sold 10 packages and you find you’ve still got half your disc space/bandwidth unused, then you would not be selling more than you’ve got.
In fact if you are selling someone a 500Mb plan, you are selling them the ability to use 500Mb storage, you are not selling them a particular 500Mb chunk. As long as they can use that much when they want it, by upgrading if necessary. then its OK.
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