Why web hosting is easy.

August 8, 2005 on 9:23 pm | In Musings by Josh Jones | 47 Comments

Money grows on server trees.

At DreamHost, all websites are not hosted on state-of-the-art sgi origin 3000 supercomputers.

Web hosting is too easy for them!

Even if web hosting is one of the hardest Internet businesses, compared to the rest of the business world, it’s still pretty darn easy.

Web hosting is really competitive and yet still a very lucrative because it provides a value that is literally thousands of times the cost. For around $100 a year, a business or individual gets a world-wide publication and communication tool that’s available all the time (*cough cough*) with zero effort. Twelve years ago, you could spend a billion dollars and not have something even remotely as great!

And yet, when you get to a certain size (like say, DreamHost size) the cost to provide that service is itty bitty. Our data center and network expenses, i.e. our “Cost of Revenue”, is about 5% of our total revenues.. and it drops every year.

Of course there are plenty of other costs. There’s hardware, people (ohh, the people!), office overhead, credit card fees, insurance, benefits, and pizza (not always a benefit). But in theory, all the amazing value that hosting provides could be had for like $5/year.. and in 2006: $4.50. Of course, we can’t actually charge $5 a year! Nobody would sign up.

This hugantic disconnect made possible by the amazing “computer” is why I say web hosting is easy.

You can survive a lot of stupidity when you’re able to mark everything up 2000%…

Did you know in 2000 we had twice the employees we have now, with one fifth the revenues?
Stupid!
(Good thing that still put us at about a 50% margin!)

Did you know we had TWO full time handymen for the office space we were renting?
Stupid!

One of whom did cocaine at his desk (yes, the repair guy had a desk) every morning?
STUPID!

They say the key to business is not making any fatal mistakes. Well, the more revenue you have coming in, the bigger mistakes you can survive. Fortunately we were apparently super-glued to the biggest cash heifer this side of Ebay.

Which is why I’m always confounded when hosts go bankrupt, or like Interland, can’t seem to find a profit even with $100M in revenues. Could they really have more crack heads working for them then we did? Do they take longer trips to Burning Man? Do they use more sgi servers? Perhaps they’re getting that really nice Internap bandwidth? Are their credit cards charging them 70%? Maybe they’re buying ads in the back of Wired? HostingTech?

Whatever’s killing their cow, it can’t be the cost of providing web hosting.

It’s just too easy.

47 Responses to “Why web hosting is easy.”

  1. Torch Says:
    August 8th, 2005 at 11:20 pm

    now that you’ve divulged all your secrets, i’m going to start my own webhosting company and put DreamHost out of business!

    maniacal laughter, cackling, etc.

  2. Nutcase Says:
    August 9th, 2005 at 2:33 am

    Are you guys ever going to offer invision powerboard as a one click install as well?

  3. Albright Says:
    August 9th, 2005 at 2:51 am

    I can’t believe you’re bragging about how much you’re up-charging your customers… that doesn’t seem like good business sense to me. And what do you mean by “nobody would sign up” if you charged $5 a year? You’d be deluged with sign-ups! Hell, could you change my account over so I only pay $5 a year, please?

  4. Matthom Says:
    August 9th, 2005 at 5:32 am

    You know what I’d like to see? A complete make-over of the Dreamhost main site, with a web standards approach, much like this blog.

  5. ModeratelySatisfiedCustomer Says:
    August 9th, 2005 at 5:44 am

    Maybe if you spent a little more money on your web panel, making it work at a relatively decent pace, rather than the absurd amount of time it takes right now, you’d get even more revenues.

    I know you guys are into humor and all, but really, in this day and age, your web panel blows. It’s pathetically slow, then I have to wait 10 minutes to 48 hours for something to go into effect? WTF!

    Get VDeck, Plesk, or something to help your customers out – or at the very least, develop something in house that has immediate effects.

    It’s 2005. I shouldn’t have to wait a half hour to get an email telling me my Wordpress has been installed. I can do that myself in 3 minutes.

  6. Kenn Christ Says:
    August 9th, 2005 at 7:06 am

    Albright: Do you feel you’re getting a good value for your money? I do, and that’s why I don’t care what DH’s profit margins are. I want them to make a lot of money because that means they’ll be able to give me better service.

    It’s commonly said that your prices create a perception about your products/services. You want to be inexpensive, but not “cheap”. I read an article recently about how raising prices can create more demand. I wish I could remember where I found it now.

    Personally, I appreciate the fact that they’re not hiding behind typical corporate PR bullshit.

  7. Matt Hampel Says:
    August 9th, 2005 at 7:24 am

    I have to go with MSC here — WTF is up with the web panel’s speed? Why should I wait “minutes” for a database to be created when my other hosting service (using Cpanel) creates it as soon as I hit submit?

  8. Simon Jessey Says:
    August 9th, 2005 at 7:50 am

    Our data center and network expenses, i.e. our “Cost of Revenue”, is about 5% of our total revenues.. and it drops every year.

    Despite everything that Josh said, I find DreamHost to be exceptional value for money; moreover, the deal gets better each week. I’ve also made more in referral revenue, without even making an effort, than anything I’ve been spending on the hosting – I basically get my hosting for free!

    Maybe if you spent a little more money on your web panel, making it work at a relatively decent pace, rather than the absurd amount of time it takes right now, you’d get even more revenues.

    The web panel is hideously ugly and exceedingly slow, yet it is certainly capable. Once I’d mastered its peculiar vagries, I found it more than adequate for my needs. A wholesale rewrite of the panel would doubtless be a task of monumentous proportions, but perhaps worth considering in the not-too-distant future.

    Personally, I appreciate the fact that they’re not hiding behind typical corporate PR bullshit.

    I totally support Kenn’s sentiment. The friendly, “family” nature of DreamHost, together with its corporate transparency and dedicated staff, is crucial to the company’s popularity and success. I’ve always been impressed with the fact that folks like Nate, Josh, Jeff, and Dallas (among others) have been approachable and available, giving the impression that they have a personal interest in each of their customers.

  9. Eirik Says:
    August 9th, 2005 at 8:06 am

    I do have to agree with the rest of the comments here on one thing; the panel is too slow.

    Regarding the prize vs Dreamhosts revenues: to be honest, I don’t mind the 2000% markup at all. I’m getting my money’s worth – and then some – so why should I complain?

    Consider going to the pub for a pint of beer. In Norway, a pint is about 50 NOK (about 8 USD). To my knowledge, about 6 NOK is what the pub pays for the pint, the rest is pure profit… and it’s not like you can bring a bunch of mates to the pub and get 10% of what they pay for their beer deducted off your bill… neither will you ever be greeted with a sign saying “We have doubled the size of our glasses, and didn’t change the prize! And guess what! Every week, the size will just keep increasing!”

  10. Eirik Says:
    August 9th, 2005 at 8:09 am

    I wanted to mention this as well, but forgot. I also want to add Andrea to the list of staff who really do their best to keep us happy. The “family” nature, that Simon mentions in his comment, is something I truly appreciate as a Dreamhost customer.

  11. Eirik Says:
    August 9th, 2005 at 8:10 am

    Bah, guess I should have ended the blockquote ;)

    What I wanted to quote was Simon’s post “I totally support Kenn’s sentiment. The friendly, “family” nature of DreamHost, together with its corporate transparency and dedicated staff, is crucial to the company’s popularity and success. I’ve always been impressed with the fact that folks like Nate, Josh, Jeff, and Dallas (among others) have been approachable and available, giving the impression that they have a personal interest in each of their customers.”

  12. Will Says:
    August 9th, 2005 at 9:40 am

    It’s pathetically slow, then I have to wait 10 minutes to 48 hours for something to go into effect? WTF!

    It’s not actually the web panel itself. It’s my understanding that the web panel executes scripts and pushes new configs to the server at set times. You wouldn’t want configs to be redone every time one person makes a change.

    Get VDeck, Plesk, or something to help your customers out

    No, the DreamHost web panel is so much better.

  13. Jack Says:
    August 9th, 2005 at 10:08 am

    Of course, we can’t actually charge $5 a year! Nobody would sign up

    haha, so true! I know I was wary of the $100 deal! Any less and I wouldn’t have signed up :-)

    Also, I see alot of anti-dream host panel talk, I don’t get it? The panel beats the crap out of cPanel and Directadmin (haven’t had experience with others) , I think alot of the hate is the simple layout and colours .. people want purdy :/

  14. Adam Backstrom Says:
    August 9th, 2005 at 10:49 am

    I definiately agree with you on the value. I’ve hosted my own servers before, and the peace of mind I get paying someone else to monitor servers and services is well worth the cost.

  15. ModeratelySatisfiedCustomer Says:
    August 9th, 2005 at 11:25 am

    As long as changes go into effect immediately, I don’t care what they use. I just know my experiences in the past with other panels has been immediate, none of this waiting BS.

  16. pixie Says:
    August 9th, 2005 at 12:32 pm

    I have used dreamhost for like.. YEARS!

    I LUV DREAMHOST, and this entry in this blog is a great example of why. Love the humor :)

    And I get sooooo pissy when companies over-hire and then have to lay-off. It’s a culture killer for sure.

  17. Brian Says:
    August 9th, 2005 at 1:10 pm

    They have a point – there is a point at which you perceive the value of X to be more than what you’ve being charged. At that point you’re wary and have reservations about paying for the service.

  18. Billy Says:
    August 9th, 2005 at 1:13 pm

    Why cant we all just . . .get along?

  19. Deamos Says:
    August 9th, 2005 at 6:21 pm

    Heh.

    I would not have signed up if you were offering hosting like I have with you for $5. :)

    Sure sign of overselling. Even as it is at first I thought that might be the case, but lately your servers have been kicking some serious ass.

    You guys are great, whether webhosting is easy or hard.

  20. Bob Says:
    August 9th, 2005 at 6:41 pm

    Are you guys ever going to offer invision powerboard as a one click install as well?

    They can’t, you have to pay for IPB.

    Can i choose to pay 5$ a year instead of what i pay now? I trust you not to give me poor support and crappy service!!!

    :D

  21. Gabe Says:
    August 9th, 2005 at 10:04 pm

    Honestly I don’t know what all the bitching about the web panel is. I keep hearing about how many more features other panels have, but demoing other hosts hasn’t revealed any significant features in other web panels.

    Yes, the panel.dreamhost.com load times are excruciating, but the actual update times for most things seems to be very speedy even if it says it might take an hour it’s usually updated in 4 or 5 minutes in my experience. I wouldn’t mind the page load times improving a bit, but honestly how much time do you spend in the web panel anyway?

  22. Kemayo Says:
    August 9th, 2005 at 10:47 pm

    Hey, I did sign up for not much more than $5 a year. Well, okay, it was $9.44 per year. And only for the first year. But still…

    My main complaint is that, if you’re making the mad profit, it’d be nice if I hadn’t just found out that the server my database is on was down for the last 15 minutes. :-P

  23. Brian Says:
    August 10th, 2005 at 9:48 am

    Point to Kemayo. I found out DH HAD a blog because my co-worker noticed the site wasn’t up (server reboot in progress) and was poking at the control panel.

    Site down – cpanel – blog – brag about how easy web hosting is. Bad timing on someone’s part.

  24. Jake McGraw Says:
    August 10th, 2005 at 11:34 am

    It’s pathetically slow, then I have to wait 10 minutes to 48 hours for something to go into effect? WTF!

    While the panel may not change for 10 minutes to 48 hours, a quick ssh login and check shows all the changes have taken place almost immediately (or maybe I’m just really lucky and always use the panel right before an update).

  25. Discourse.net Says:
    August 10th, 2005 at 12:03 pm

    Dreamhost.com Gets Cocky

    This blog is hosted at dreamhost.com. On the whole I’ve been happy with its low prices, although as this blog grows I chafe more an more at the limits on processing times imposed by the virtual host controller on my shared machine. I am no longer…

  26. David Says:
    August 11th, 2005 at 6:00 am

    Hi Josh,

    A question with regard to the web-hosting game… I have a client who wants to get in, and he’s looking at control panels.. CPanel, Iworx, Plesk, etc…

    Can you offer any advice / recommendations?

    Thanks :)
    David
    (Happy Dreamhost Customer)

  27. Administrator Says:
    August 11th, 2005 at 2:14 pm

    I’m not sure what you mean “get in”.. get in to the webhosting business and offer a control panel to his customers?

    I haven’t really used any of those extensively.. maybe I should! I’m pretty sure Cpanel is the most popular, but I don’t know if that’s deservedly or not. Plesk is probably okay too.
    I’ve never heard of Iworx!

  28. -los Says:
    August 11th, 2005 at 7:36 pm

    Dreamhost for almost 5 yrs and I will continue to refer people – The service, and services are well worth it. When things go wrong -we complain and panic and panic and panic * EMAILS DOWN OH MY GOD MAN EMAILS DOWN I CANT GET MY EMAIL MY PEOPLE CANT EMAIL MY PHONE WONT STOP RINGING WHAT AM I GONNA DO WHAT AM I GONNA DO AAAAAAAHHHHHHH // and then all of a sudden everything works again and wow maybe you missed some spam or got that email a little late -

    Has anything ever been down more than 2 days? Not in almost 5yrs I’ve had sites hosted

    I want the stats on the clusters /storage/ memory/ processing power /* maybe for good ol venkman :)

  29. Albright Says:
    August 13th, 2005 at 3:07 pm

    Albright: Do you feel you’re getting a good value for your money?

    Yes, very much so. My point was just that I think it’s unprofessional to brag about how much you are marking up your products/services.

  30. Daniel Says:
    August 15th, 2005 at 11:15 am

    I think Albright is a whiner. Albright you should be glad to have found resources like this where people OPENLY talk about how they made the big money. I plan on continuing to use dreamhost, and recommend every buddy of mine to their services. I also plan on continuing to read the dreamhost blog to reaffirm the fact that there are PEOPLE behind the “dream” at dreamhost, and maybe even learn a little bit from them at the same time.

    *gasps* You mean… YOU MAKE A DECENT PROFIT FROM PROVIDING A GOOD SERVICE? How terrible! I must be able to suck the life from your customer service veins, AND dig in your pocket at the same time. If they’re making any mistake with this blog, it’s the mistake of assuming they have a mature audience.

    And for the knuckleheads that don’t understand why they might not sell as much if they dropped the price to $5: DUH! People would think it’s some kind of scam because they’ve never seen webhosting that low. They wouldn’t buy, and aside from that… Why drop the price more when they can simply have a higher paycheck and people won’t be suspicious of their services? Basic human psychology there.

  31. Erika Says:
    August 15th, 2005 at 12:34 pm

    I love Dreamhost, because it ranges from the technical to the no-so-technical. Though I can upload and use most of the languages available now, when I was a totally newbie and had no idea what was up, Dreamhost was the only company who didn’t make me feel a complete idiot. I appreciate the down-to-earth nature of their staff–it lets me know that there is more to them than just the technical know how. They’re running a business, but like your neighbor, they have no problem sharing how that business is run, and that should invoke some sense of security in how well that business is doing.

    Keep up the good work, guys. And if the panel is a little slow from time to time, the value of the service, the support, and the ‘features’ is worth it.

  32. kgraff Says:
    August 16th, 2005 at 7:26 am

    I moved my personal web site to Dreamhost this spring then set up two more sites. The control panel is slow sometimes, but IT WORKS and is well documented. I am liking Dreamhost more and more.

    As to why Interland has problems, they seem to have the knack of alienating people of all experience levels.

    Web hosting is easy, just do the right things!

  33. Saleel Says:
    August 17th, 2005 at 4:26 am

    My 2pence: the panel definitely takes a little getting used to, but everything is there. What I really, really find annoying though is the wait for things to be setup… why not instantaneous like other hosts?

    But other than that, DH rocks: overall, the best host I’ve, umm, hosted with.

  34. Kreig Says:
    August 19th, 2005 at 6:10 am

    Yeah, have to say, admitting that you guys make oodles of cake and party easy; well, that doesn’t go down to well with us reg’lar folks what have to work hard for our cake.

    Your service is impeccable. Rubbing the customers’ noses in your blessings is not.

  35. Daniel Says:
    August 23rd, 2005 at 3:24 pm

    Since we know the founders of dreamhost didn’t actually have to work, have talent, or be creative to be wealthy… Just because they make it sound easy doesn’t mean it was. You have to realize something: it’s easy for THEM, because they’re probably all brilliant people. All of you people whining and complaining need to go get a therapist and talk about your bad highschool experience, and the way your mother treated you as a child… Then maybe you can figure out why you have to feel anamosity towards those who arn’t just “more fortunate than you,” but to those that actually TRIED to accomplish something instead of going and jumping at the first chance to start filling out job applications and sell your life away. Start a business, don’t whine on blogs about how unfortunate it is that you don’t own theirs.

  36. Daniel Says:
    August 23rd, 2005 at 3:29 pm

    Oh… one more note… For those of you that realized after reading my post (or otherwise), that any apprehensions you have is actually simple envy go look up the term “guerilla marketing” on google and amazon.com and figure out what you can do about making yourself successful instead of disliking other people for being successful.

  37. Cheap Generic Viagra Says:
    October 28th, 2005 at 4:32 am

    My mind is like a complete blank, but oh well. That’s how it is. My life’s been dull lately, but maybe tomorrow.

  38. Thiemo Says:
    November 24th, 2005 at 1:58 pm

    hey guys that sounds very well ;)
    so whats about a nice job at your nice hosting place ? ;)

  39. Sam Jackson Says:
    December 16th, 2005 at 11:59 pm

    I think I’d feel a little bit better if DH had a reassuringly vague statement like “Do No Evil,” even if it didn’t mean anything. Still, as the nameservers for my website will show…I’m still for it.

  40. Dmitriy Says:
    December 18th, 2005 at 11:50 pm

    So much text but northing useful

  41. GadgetsGuy Says:
    January 7th, 2006 at 1:22 pm

    Sounds like a decent deal, but I have heard mention elsewhere of a CPU time limit of 2400 seconds a day?
    Could Somebody explain this to me?

  42. Mary Anne Martin Says:
    January 26th, 2006 at 4:25 am

    I totally agree with what you’re saying. I wish more people felt this way and took the time to express themselves. Keep up the great work.
    Mary Anne Martin
    http://www.hostingwebsitecenter.com

  43. Mary Anne Martin Says:
    January 26th, 2006 at 4:33 am

    I totally agree with what you’re saying. I wish more people felt this way and took the time to express themselves. Keep up the great work.
    Mary Anne Martin
    http://www.hosts4u2.com

  44. pull to inflate » Blog Archive » dreamhost charges it’s customers 2000% markup? Says:
    March 30th, 2006 at 8:44 am

    [...] Looks like the dreamhost blog is bragging about it’s financial margins on how easy it is to host with their past experience. Does this mean that I’ll stop having downtime, email issues, moved mysql databases without notification, and all around stability? Hopefully, I host 3 xserves at work for over 30+ sites and 200+ email users, without any of those issues. [...]

  45. Candy Says:
    May 27th, 2006 at 2:09 pm

    I’m sick of Dream Host. I’m going back to Spaggle!

  46. Californication » Blog Archive » Dreamghost Says:
    August 3rd, 2006 at 12:12 pm

    [...] The last two weeks this site has been down quite a number of times; responsible for the mayhem was some Big Trouble at our webhost, Dreamhost. I quite like Dreamhost for the features they’re offering (Ruby on Rails, unlimited domains etc – onontbeerlijk voor Het Voorlopig Nog Geheim Project!) and they’re generally very responsive and communicative. They for instance published a lengthy blog post chronicling their problems, illustrating it with images of the exploding Hindenburg, earthquakes and fires, generating some comic relief. It even prompted corporate blogging mogul Robert Scoble to compliment them on their efforts (and also generated an entry in Valleywag). This fast and open communication is quite nice for us customers, though it may occasionally backfire (check what they posted a year ago). Even nicer of course would be enjoying a webhost offering the same features, communication *and* less downtime. [...]

  47. the spot© » web hosting Says:
    December 6th, 2006 at 11:37 am

    [...] Talking to Jason today made me wonder about the viability of web hosting as a business. It seems like a saturated market. What I found surprised me. Although competitive, it can be quite lucrative, almost ridiculously so. I found an article from Dreamhost describing the revenue vs. cost in hosting. [...]

Powered by WordPress. Pool theme by Borja Fernandez, modified by DreamHost.
Like WordPress? Consider attending WordCamp LA.
Entries and comments feeds. ^Top^