Ever wondered how Web hosts can offer gigabytes of disk space and bandwidth to its customers?

Let’s assume the host has one server. This server contains a 250GB hard drive and 2GB of RAM, along with 2000GB of bandwidth per month. Since most hosts do not colocate their own equipment and use dedicated servers, let’s assume that all of this only costs the host $150/month.

In order for the host to make a profit on this server, they have to make $150 per month from their clients. Let’s say that their smallest plan gives 2GB of space and 200GB of bandwidth for $4.95/month. Ten clients on this plan would bring the host $49.50 per month, only 33% of the revenue the host needs to break even. This would be a problem if all ten users used everything allocated to them.

The reason why they can offer such rates is that very few people will use all of their allocated resources. Most people will use a tenth of their allocated resources, if that. For a non-overselling host, they will need to charge $15/month at minimum to break even with the above plan, possibly more to make a profit.

Another thing to consider is the anti-abuse provisions in most host’s Terms of Service. This gives hosts the power to cut people off who are affecting other users on the server. The more that hosts oversell, the more users that will be on the server and the greater likelihood of problems–plus, it will be harder to be able to use all that’s allocated to you without running afoul of your host.

With non-overselling hosts, the lower bandwidth and disk space limits tend to regulate sites, instead of the Terms of Service–depending on the kind of site you’re running, of course. You’ll be more likely to run afoul of your non-oversold host’s Terms of Service if you get many visitors and your site uses forums and other scripts than if you just used all the bandwidth and disk space you’re given. In short, you have a better guarantee of the space and bandwidth being there.

With any host, though, it’s best to look at reviews and do research before joining. But non-oversold hosts may be your best bet if you plan on using a significant part of the resources allocated to you.

BTW: Thoughtbug Software’s hosting service offers 99.9% uptime, daily backups (with retention for one week) and no overselling. If you need hosting for your Web site or business, come talk to us!