Reseller Web Hosting: Frequently Asked Questions - Why would a person or company become a web hosting reseller?
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There are many reasons for a person or company to get into reselling web hosting services. A start-up web host might have sales and service expertise, but neither the money nor the skills to manage their own servers. A web hosting company that has been around for a while might find itself expanding quickly, but not yet ready to invest in the additional hardware it needs. A company that engages in an Internet-related business, such as website design or search engine optimization, might do web hosting “on the side” as an additional service for their customers.
Individuals might get into reseller web hosting for a variety of reasons, without necessarily choosing to go into web hosting as a business. If they own multiple domain names, for instance, becoming a reseller web host might be a cost-effective way to manage them all. Or if they have a popular domain that needs more bandwidth than is typically available in a shared hosting account, a reseller web hosting package could offer them the space they need, plus room to grow. Websites with popular forums often bump up against this problem.
How do web hosting resellers make their money?
It’s a pretty simple equation. Let’s take the example of a reseller web hosting package in which the reseller pays $30 per month for 2 GB of disk space and 10 GB of bandwidth. The reseller then divides this into 100 accounts, which are each allotted 20 MB of disk space and 100 MB of bandwidth. The reseller charges $6 per month per account. Assuming he sells out his accounts, he takes in $600 per month. Subtract the $30 per month he pays to his host, and he makes $570 per month in straight profit – not counting the cost of his own time and labor providing customer service.
What is overselling?
Overselling is a way for reseller web hosts to make more money. It is based on a fairly safe bet that can sometimes turn around and bite the reseller. Taking the example above, suppose our reseller chooses to sell 200 accounts with 20 MB of disk space and 100 MB of bandwidth, but does not buy a second reseller package for the space. He would then take in $1200 per month, while still paying only $30 per month to his host – a profit of $1170 per month.
The fairly safe bet that this arrangement is based on is the idea that most people who buy those accounts will not use all of the space and bandwidth allotted to them. Hotels use the same idea when they overbook their rooms by about 10 percent, because about that many reservations turn into “no shows.” As with hotels, however, this bet can come back to haunt the reseller when they get enough customers who genuinely need their entire allotment of space and/or bandwidth.
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