The Power of Statistics
Statistics are used especially when you don't know something for sure, but you're willing to accept a prediction for that thing with a percent of confidence. The higher the percent (e.g 95%, 99%, etc.), the better the prediction is. Business applied statistics help the producers better understand consumer behaviour, so they can predict the quantity of products to sell, the price for the product and so on. So, what does this have to do with web hosting? In the last two years we have noticed a trend of web hosting overselling, especially in the hosting plans offered by the big web hosts in the market. And this overselling is related to business applied statistics.
The idea of overselling is simple. Let's say a company has a hosting plan that offers 250GB disk space. They have a server that has a 500GB hard drive, so they should be able to host two accounts on it. But instead of advertising and selling two accounts, they decide to advertise and sell five. "Fraud!" some of you might shout. Well, not necessarily. If the company has statistical data that points to the fact that only 25% of their customers are using the whole disk space available and the rest of 75% are only using up to 10 GB of disk space, a simple mathematical equation shows us that the prediction for the disk space used by the five customers equals 290GB (1*250 + 4*10), which is less than the 500GB limit. In our example, the sample of five customers is a very low number, and the error of the prediction can be quite big in case two or three of the customers are big disk space "spenders", but with samples of hundreds of thousands of customers, the variation of the error will be very small.
The web hosting overselling trend was somehow expected, because most of the players in the hosting services market have now at least 5-6 years of experience, meaning 5-6 years of valuable statistical data, enough to make a prediction with a high level of confidence. The hosting companies noticed that most of the accounts do not use more than about 0.1GB of disk space or more than 1GB of monthly bandwidth, so why do they offer 600GB of disk space? Or 5000GB of monthly bandwidth? The answer is quite simple: because it makes their offer stand out as a good deal, exceptional value for money. It's all about marketing the product!
Overselling - bad or good?
The advantage of overselling for the host is that they don't need servers and bandwidth to cover all the "advertised" disk space and bandwidth. They make more money off each server than they would normally do. As long as part of the extra profit "translates" into cheaper hosting plans, more features or better customer support, their clients are also in advantage.
For this win-win situation to actually work, the web host has to take into consideration the followings:
- Do not be greedy. If the web host gets too greedy and ends up selling much more than they could possibly provide, it will affect the quality of their service and their credibility.
- Avoid downtimes. Be prepared for small variations in the percentage of clients that actually use the whole space and bandwidth advertised. Be able to handle the sudden increase in demand without downtimes related to adding new hard drives, buying extra bandwidth, etc.
- Monitor servers' usage. The web hosts usually have well-defined Terms of Service that prevent users from abusing the resources (spam, illegal websites, CPU consuming scripts, etc.) These "rules of engagement" can help the web host better manage the accounts and the infrastructure.
So, as long as the hosting company monitors its server usage and manages its resources and infrastructure so that the quality of the service is not affected, overselling is not a bad thing!
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