The Web Hosting Confusopoly

The part of the web hosting industry that caters to individuals and small businesses offers a perfect storm of conditions for a confusopoly:

  • Many companies offer superficially similar services
  • Customers are often unsure of their needs
  • Evaluating services’ quality is difficult
  • Prices tend to be low and subscription-based

To keep things simple, I’m going to focus on shared web hosting in this article. However, many of the points I make could apply to virtual private server (VPS) and cloud-based solutions aimed at those with modest hosting requirements. If you’re unfamiliar with the meaning of “shared hosting,” see this footnote.[1]

A bird’s-eye-view of the shared hosting industry

A ton of companies offer shared web hosting services. Some of these companies are large (e.g., GoDaddy[2]), while others are small, single-person operations. The structure of web hosting companies varies substantially. Some operate their own servers and data centers. Others resell server capacity managed by others.

Multiple web hosting services will sometimes be owned by a single parent company. While it’s common for multiple brands in an industry to have a single owner, things reach a bizarre level in the shared hosting industry.

Endurance International Group

The Endurance International Group (EIG) owns a whole lot of web hosting companies, including several of the industry’s largest (for a list, see Endurance International Group Brands).

In many industries, the tendency for individual companies to own multiple brands can be explained by market segmentation strategies. While Unilever might use similar ingredients in Dove and Axe deodorants, it makes sense for the products to be marketed separately.[3] Multiple brands can cater to different tastes—there’s nothing odd about Kellogg’s making both Raisin Bran and Fruit Loops.[4]

I don’t think conventional market segmentation gives a satisfying explanation for EIG’s strategy of operating dozens of similar web hosting companies. Many of EIG’s brands cater to roughly the same demographics. It’s revealing that Unilever and Kellogg’s are willing to stamp the parent companies’ logos on their products while EIG-owned brands don’t conspicuously mention their affiliation with EIG.[5]

Individuals comparison shopping among web hosts are likely to encounter multiple EIG-owned web hosts. Unless an individual is especially diligent, he or she is likely to believe that these brands are entirely separate entities. Searching on the forum WebHostingTalk gives some anecdotal evidence. Queries like “[name of EIG brand #1] vs. [name of EIG brand #2]” will turn up a lot of results.[6]

In 2011, DreamHost published an April Fools’ Day blog post joking that it had been acquired by EIG. To explain EIG to his audience, the author writes:

They’re like a scrap metal magnet for web hosts! (Or wrecking ball, depending on who you ask…)[7]

Despite its massive subscription base, EIG doesn’t have a stellar reputation. People often complain about degradations in service quality after companies are acquired by EIG.[8]

Difficulties with quality evaluation

Evaluating the quality of shared web hosting services is tough. There are a lot of different metrics that matter (e.g. uptime, speed, support quality). Consumers will have different views about the relative importance of each metric. Even deciding how to evaluate a metric is tricky. How bad is two hours of planned downtime in the middle of the night versus an hour of unplanned downtime in the middle of the day? Is an hour of downtime last year as meaningful as an hour of downtime last week?

I’m not aware of any rigorous evaluator of shared hosting services. However, there are a hell of a lot of websites that purport to evaluate shared web hosts. Search something like “best shared web hosts” on Google and you’ll find a ton of these websites.

Low-quality evaluation websites are so common because hosts often have high-paying affiliate programs. Referring users to plans that cost $5-$15 per month will often result in commissions of $50 to $125.[9]

My post bogus evaluation websites goes into far more detail about the low-quality websites ranking shared web hosts. In another post, I discuss how Namecheap, a host I strongly recommend, almost never gets mentioned on websites that review and rank web hosts. I expect that Namecheap does poorly on these websites because Namecheap’s affiliate program payouts are trivial compared to payouts offered by other providers.

Uncertain needs

Many individuals shopping for shared web hosting are not well-aware of their own needs. It’s hard for an individual launching a new website to know how popular it will become. Even with knowledge about a website’s popularity, many website owners don’t have the technical understanding necessary to assess what’s needed to host their website.

Hosting a standard website that gets a moderate number of views each month is not a resource-intensive task. Many consumers don’t realize this. People purchasing web hosting often land in a silly situation where they are comparison shopping with the wrong metrics in mind.

Typically, shared web hosting will be sold through plans that offer a set of server resources each month. A consumer uncertain about his or her own needs might be comparing two providers’ offerings:

  • Provider A: $10 per month for 100 gigabytes of bandwidth and 10 gigabytes of disk space
  • Provider B: $10 per month for 10 gigabytes of bandwidth and 1 gigabyte of disk space

As far as the consumer can tell, both providers offer seem to be offering services that are equivalent in all respects besides disk space and bandwidth. Provider A offers 10x more server resources for each dollar. Does that make Provider A a far more cost-effective option? Probably not. For most websites, Provider A’s plan is absolutely overkill. Provider B’s more modest offering will be more than sufficient.

Overselling

Since consumers often evaluate providers with a “more is better” mentality, providers have an incentive to increase the amount of server resources included in plans. Since customers don’t usually use all their allotted resources, web hosts can oversell their services to increase efficiency.

For example, if a server has 1,000 gigabytes of disk space, and the host doesn’t oversell, 10 gigabytes could be allocated to 100 different clients. In this situation, it’s quite possible that clients, on average, would only use 10% of their allotted disk space. If that happened, 90% of the available disk space on the server would go unused. A web host could safely offer more than 10 gigabytes to each client.

This situation isn’t unique to the web hosting industry. If every cell phone subscriber tried to make a call at the same time, many calls wouldn’t go through. As long as providers are careful, some overselling (and often substantial overselling) can take place without causing trouble. However, web hosts sometimes go to extremes with overselling. Plans may include more resources than can actually be delivered.

“Unlimited” resources

In the last several years, shared web hosts have trended towards offering “unlimited” disk space and bandwidth. Companies vary in how transparent they are about what “unlimited” amounts to. Some companies excitedly pitch unlimited plans as if they’re restriction-free. Others make it clear that limitations exist, but that limitations are not explicitly placed on bandwidth or disk space.[10]

Terms of service restrictions

Hosts will often put restrictions in their terms of service or other agreements to restrict resource use and maintain server stability. The level of transparency about restrictions varies. Some hosts are up-front about restrictions, while others only mention restrictions in the fine print of agreements.

Here are a few examples of restrictions affecting HostGator’s shared hosting plans:

  • A maximum CPU usage limit of 25% (can be exceeded for up to 90 seconds)[11]
  • A soft limit of 250,000 inodes[12]
  • A requirement that only files relevant to a website be stored on servers (i.e., no personal file storage)[13]

Even hosts that don’t aggressively overload their servers will have some restrictions. For example, a web hosting customer using modest amounts of bandwidth and disk space might occasionally run a poorly optimized script that degrades performance for other users on the server. Restrictions could permit a host to suspend the account running the problematic script and improve performance for other users sharing the server.

Web hosts offering unlimited or aggressively oversold plans have additional, economic incentives to be restrictive. HostGator offers unmetered disk space with it’s shared hosting plans.[14] It’s unsurprising that HostGator also prohibits subscribers from putting personal files on their servers. If a host didn’t oversell at all, this restriction probably wouldn’t be necessary. Users with personal files would just need to stay within their disk space allotment. As a general rule, hosts that don’t explicitly restrict bandwidth or disk space generally have other restrictions that you’ll be more likely to encounter as you use more disk space and bandwidth.

Strategic pricing

Intro rates

It’s standard practice for web hosts to aggressively advertise low introductory rates. In July of 2018, I took a look at the difference between intro rates and renewal rates among ten popular hosts. Renewal rates were regularly 2-3 times higher than intro rates.

Aggressive upselling of garbage services

Hosts often try to sell additional, add-on services. These services are often useless for the typical website owner.[15]

Long-term commitments

Hosts often offer deep discounts to individuals who make upfront purchases of plans with long billing terms (e.g., 3 years). I haven’t seen any hard data, but I suspect that a large proportion of individuals who purchase these long-term plans stop using them before the service term runs out.

Footnotes

  1. Content on the internet must be “hosted” somewhere. When an individual visits Confusopoly.com, the individual’s computer communicates with another computer (called a server) via the internet. The server sends the data that composes Confusopoly.com to the user’s computer.

    Nearly all websites are housed on a server or multiple servers. An extremely popular website might use an extensive network of servers distributed across many geographic areas. A moderately popular website might use a dedicated server, an internet-connected computer with the sole purpose of hosting a single website. However, the vast majority of websites don’t require much in the way of computing resources. Using a dedicated server for a typical website would be overkill. Most of the server’s computational capacity would go unused (imagine using a supercomputer to run the video game pong).

    Small and medium-sized websites often use what is termed “shared web hosting.” With shared web hosting, a single web server will host many websites.

  2. As of March 2018, GoDaddy claims to have over 17 million customers. See GoDaddy Company Overview (archived copy)
  3. Both Dove and Axe are included on a page on Unilever’s website (archived copy) listing brands Unilever is behind.
  4. Rasin Bran and Fruit Loops are both listed on Kellog’s brands page.
  5. For example, Fruit Loops boxes (archived image) have a large Kellogg’s logo on the front of them.
  6. A customer could be fully aware of EIG’s ownership and still want to hear opinions about the relative quality of EIG-owned brands. Glancing at these threads, I don’t think that’s usually the case.
  7. From an archived copy of
    DreamHost is now part of the Endurance International Group! Sadly, the original blog post isn’t available anymore. I’m not sure why the post was taken down, though I guess it has something to do with DreamHost wanting to be in EIG’s good graces. Other blog posts published around the same time are still accessible.

    About a year after the first post poking fun at EIG, DreamHost released another post. The second post also appears to have been removed from DreamHost’s website. Damn.

  8. Click here to search for threads on WebHostingTalk with “EIG” in their titles.
  9. At the time of writing (10/8/18), HostGator offers commissions of $50 per sale when a small number of customers are referred each month, rising to $125 for 21+ sales (archived affiliate page). SiteGround offers commissions of $50 per sale when a small number of customers are referred each month, rising to $100 for 11-20 sales, and custom arrangements for 21+ sales (archived affiliate page). InMotion offers commissions of $50 per sale when a small number of customers are referred each month, rising to $120 for 21-30 sales, and custom arrangements for 31+ sales (archived affiliate page).
  10. From my vantage point, it looks like there’s been a positive trend over the last few years towards greater transparency around unlimited plans.
  11. “HostGator allows a maximum of 25% CPU usage limit. You may exceed this limit for no longer than 90 seconds.”
    From CPU Resource Usage | HostGator (archived copy).
  12. “The use of more than two hundred and fifty thousand (250,000) inodes on any shared or reseller account may result in a warning, and if no action is taken to reduce the excessive use of inodes, your account may be suspended.”
    From Acceptable Use Policy | HostGator (archived copy).
  13. “Shared hosting space may only be used for web files, active email and content of User Websites. Shared hosting space may not be used for storage (whether of media, emails, or other data), including, as offsite storage of electronic files, email or FTP hosts.”
    From General Terms of Service | HostGator (archived copy).
  14. At the time of writing (1/3/2019), HostGator lists its Hatchling shared plan as having unmetered bandwidth. See this archived page.
  15. I’ve had a HostGator account for several years. Looking back at old emails, I see that HostGator has tried to upsell me on the following types of products and services over the years:

    1. Premium support
    2. Search engine optimization
    3. Advertising support
    4. Website design
    5. Phone service
    6. G Suite
    7. Privacy tools
    8. Business loans
    9. Backup services
    10. Website security products
    11. WordPress themes

    Promotional emails are annoying but easy to ignore. My bigger concern is that many of items like security and search engine optimization services are pitched as smart purchases to individuals who don’t have the background necessary for assessing whether the services actually make sense for their websites.

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