The other day I was reading an article by a writer at a somewhat successful publication, that was basically a takedown piece on a particular large hosting firm where the plan they were on cost $10 per month. As someone who has been in the hosting industry for years, I knew why this particular customer was having a poor experience, but it dawned on me that others wouldn’t. It got me thinking, if people understood the economics of hosting companies, would their expectations change? Hosting companies are largely like most others, where gross profit determines how many people they can staff for support among other things. A lot of hosting firms will have an average cost of goods sold (servers at data centers) of around 30%. That leaves 70% of each dollar they bring in to pay staff and everything else. If the company is still trying to grow (and hopefully it is) then another 10% or so will go towards marketing expenses. After all, the cost to acquire a customer in hosting is actually one of the highest out there. Bidding on a keyword like “web hosting” can cost up to $50 per click with AdWords. So marketing and COGS (servers, infrastructure) alone mean that only 60% of each dollar they bring
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