If you’ve ever been shopping for web hosting, you’ve probably wondered, “How can they possibly be making money charging $4/month for all these services?” The answer is they can’t. And I don’t mean they’re not making money.

To make a buck, web hosts rely on the fact that most of their customers won’t use all of the services they sign up for. Most will not use their allotted disk space or bandwidth. This is also why you see so many “Unlimited” hosting plans out there. Sure, one customer may use 20 GB, but the next ten customers probably will use less than 1 GB. To protect against customers who would use 100 GB, every host reserves the right in their terms of service (ToS) to cancel your account. In fact, nearly all the companies offering an “unlimited” plan have a clause in their ToS saying you can only upload files that are used by your web site. So, if you would like to store a backup of some files, it is technically a breach of their ToS and they are allowed to cancel your account. This actually happens more often than you might think.

If you take advantage of the 24/7 telephone support and make a single phone call to your web host, it’s almost certain that they’ve lost money on you for the year. Your $48 per year barely covers your share of the bandwidth, data center, disk space, memory, power, etc, let alone a half hour of a staff member’s time. To decrease this expense, cheap hosting companies with a high volume of support hire cheap labour (often India and Eastern Europe) to handle all their support requests. I’ve had frustrating, lengthy exchanges over email with unqualified, incompetent support staff at companies selling cheap web hosting. And you don’t need to take my word for it, just search Twitter for “hosting sucks”. If you expect to reach someone helpful when your web site is having issues, it should cost you more than $4 per month. Especially if we’re talking about reaching someone by telephone.

The “100% uptime guarantee” is another marketing gimmick that is really a joke in the web hosting world. And the joke is on you, the customer. There’s no such thing as 100% uptime. The internet is a distributed system and some things are completely out of the web host’s control. For example, a hacker takes aim at a web site hosted by your web host (maybe it’s a political blog). The hacker has control of thousands of computers and launches an attack by simply visiting the targeted web site with all these computers at the same time. This hammers your web host with more requests than it can handle, so some requests don’t get served. Because the attack requests are coming from thousands of different computers, they appear just like legitimate requests, so it’s very difficult for the web host to block the attacking requests. The web host can do very little in this situation. Waiting for the attack to be over is usually what happens.

Another example where uptime could be compromised is when a web site with usually low traffic suddenly gets a jolt of traffic (maybe their site ended up on the frontpage of CNN, Digg, or another popular site). In all likelihood, a low traffic site will be sharing a server with a bunch of other low traffic sites ($4/month plans) and it will be close to max capacity. Most web hosts pack as many customers as they can onto servers to cut down on hardware costs (using web sites’ average traffic and usage of server resources to determine how many is too many). So if a site on a shared server has a big spike in traffic it will slow down all the other sites on that server, maybe even bringing down the server completely. The remedy is usually to turn on caching (if a CMS is monopolizing the server resources), blocking/redirecting traffic from the popular source, or just waiting until the traffic slows down. If the host is using VMWare instances and there are some additional hardware resources available, they could simply update the VPS settings. Sometimes the site owner will upgrade their hosting to a solution that can handle the extra traffic.

Backups is another important area that cheap web hosts often skimp on. Usually they say they do daily backups but are light on the details. How many days of backups do they actually keep? Do they backup your databases as well? What about your email? Is it on-site or offsite or both? Is recovery included? The truth is, good backups are expensive. Keeping several versions of your files takes up lots of extra disk space, so chances are they are not keeping very many. Transferring backups to an off-site location also eats lots of bandwidth, so the chances that your backups are making their way outside your data center is almost nil. It’s a good idea to ask your host about the details of their backup solution and then test them on it by requesting a file recovery. You might be surprised to find out there’s a fee to perform the recovery. It’s also fairly common that they are simply unable to recover your file.

It has been my experience that web hosting companies who charge a bit more are better than the $4 web hosting companies in almost every respect. Support is as responsive, sometimes better, but almost always more helpful. Bandwidth is better quality and latency is lower. Uptime is higher and extended downtime is rare. If you sign up for cheap web hosting, you should expect cheapened services and in my opinion, it’s well worth the extra few dollars per month for good web hosting services.

When I co-founded Zenutech Web Hosting nearly a decade ago, my partner and I made customer service the cornerstone of our business. We were available 24×7 by telephone for sales and technical support. However, we also offered a “Beginner” plan for $3.45 per month that didn’t include telephone support. Unfortunately, most customers who signed up for that plan didn’t realize this and we ended up providing telephone support to them as well. We considered telling the customer to email us instead or charging them a fee for the call, but felt it would undermine promoting ourselves as a great customer service company. Something had to change though. We were losing money on this. We could degrade our customer service by hiring cheap labour to handle support or discontinue the Beginner plan. We chose the latter.