Why Digital Point Hosts Fail

First of all the title was just to catch every ones attention it’s not strictly digital point based hosts, but for the most part they are the most guilty of doing what I am going to talk about.  So it does in fact happen on other forums such as http://www.webhostingtalk.com/  but I would say at a far less frequency.

First of all the back ground here.  The majority of hosts who post on forums as their main way of acquiring customers all go out of business in one way or another.  The most common occurrence is their server just suddenly go down and never come back up.  In these cases the host most likely got their money and ran, so for the hours of work they got a few hundred dollars maybe.  The next case is where they sell the company or at least that’s what the new owner says anyways.  In these cases the sale is for maybe a $1000 at most if that which isn’t a whole lot of money.

These happen for a few reasons and I’m going to go over them real quick.

The obvious one is the person running the so called company does not actually know what they are doing from the technical side.  If you are a entrepreneur and do not have the knowledge then you really should be hiring someone who has the technical knowledge.  Unfortunately for them they do not have the money to invest or are not willing to on staff that are actually qualified so this is thrown out the window.  As a result of this you have all sorts of various problems that come up.

One such example is a recent host who sold who did not even know how many hard drives they had on their server.  It was first five 500GB drives then it was seven and it turned out to actually be just one drive with another mounted as /backup.  This can look really bad considering it’s very easy for a user to see the number of drives on a machine that are not in a raid configuration.  Then on top of that issue the user in question had no idea what raid was so it was pretty obvious they had no idea.  So within a month after selling probably 40 accounts for pennies they were sold to another company for a few dollars.

It does not just end there however, I have read of cases where they’ve ran fsck on mounted partition.  Then the excuse they used was the file system was corrupted and everything was put into the lost+found.  But wait a minute isn’t that what happens when someone runs a fsck on a mounted partition?  Yep it is and I went and tested it on a test machine I have here and sure enough that’s what happens.  This comes down to not knowing what they’re doing and the cover up story having many holes in it.  This company is apparently still in business, but a blunder like the one they had would have me wagering they will not last very long either.

Now if they have enough technical knowledge to get by they still have the issue of not having any business sense what so ever.  Now this would not be bad if all their competitors had business sense but they do not.  As a result an endless chain of events happens where competing hosts try to out do each other.  So this has resulted on digital point anyways of prices they are not sustainable at all and each time the prices are getting lower.

Here’s some examples:

Reseller Account 30GB Space Unlimited Bandwidth $20/year

Now lets look at this even more closely that is just $1.67/month.  With a reseller account one user could add hundreds of sites and with allocations like that it is very much possible to do so.  TO put this into real perspective here at Hawk Host we offer the following

Reseller Account 30GB Space 300GB Bandwidth $324/year

For every 1 account we sell they must sell 16 in order to have the same amount of revenue.  That is pretty startling and considering our prices are considered pretty cheap by some it’s just down right scary.

Don’t worry it does get worse there are master reseller accounts which allow you to make reseller accounts with space and bandwidth allocations of unlimited which are being sold for $20/year.  In order to make reseller accounts at Hawk Host you would require a VPS and probably a powerful one at that.  So I would say the person would be looking at a minimum of $400/yr to do something like that with us. They would also be limited in memory and CPU which these master resellers are not.

It’s pretty clear with prices like I just mentioned it’s not profitable if at all.  So what ends up happening is if they continue to get enough money to support these crazy prices the servers will become pretty unstable.  If they are lucky and their yearly prices are maybe high enough to sustain things for a bit they end up getting more and more servers.  But let me tell you quantity of servers will not solve the problem at all.  It is just going to increase revenue and profits (if any) will continue to be the same.  If only they’d realize that if they were to sell these packages even at $100/year they could sell far less and still have the same profits.

The next issue is they do not think long term which can be a big problem with a web host.  Offering life time accounts thinking yeah I’ll get a solid word of mouth then most people will pay monthly.  Problem is the only word of mouth is these life time account people.  Well the people they tell would want a life time account as well.  It’s clearly not going to work out very well at all and those life time accounts will become very costly very fast.  $20 one time payment does not last long when the user is using 500GB of bandwidth each month after they’ve settled in.

It’s unfortunate for people looking for hosts on digital point that it’s littered with soon to go under web hosts.  But with web hosting it’s so easy to get into with very little investment if any these problems are bound to happen.

Just my thoughts though,  maybe I am wrong and they’re all getting 20+ signups a day and making great profits.  I just highly doubt that