Overselling - what the buyer (you) should know about it

Overselling basically means to sell beyond the means of delivery. However, that's a little bit oversimplified. Maybe an example will help you get a clearer picture.

A web hosting company might have a server with a 80 GB hard drive and 700 GB bandwidth. The company starts to sell plans with 1GB space and 10GB transfer quota. After selling 70 plans the bandwidth allocated for those 70 clients reaches the limit of 700GB. However, the web hosting company notices that each month only 275-300 GB of bandwidth are "consumed" by the clients hosted on that server.

So, it decides to sell over the 700 GB limit of bandwidth. After selling another 10 plans and hosting those websites on that same server, the allocated space totals 80 GB. However, the company notices that only about 40 GB of space were used by the customers over the last 6 months. The bandwidth consumption increased as expected at about 325-350 GB per month. So it seems there would be no problem to host another 10 or even 20 customers on that server.

Since the cost for the server is constant, every added plan could be easily seen as pure profit. Anyway you look at it, they were able to get more money from that same server. The only problem would be if all their customers would all of a sudden consume all the bandwidth and the space that they were allocated. The server would not have the space (solution: add another hard drive) and the company would have to pay at a higher-than-usual rate for the bandwidth consumed over the 700 GB that were initially allocated by their provider.

If by now you start to see this overselling practice as unfair, I have to point you to another "real life" example: telecommunications companies. They have millions of customers, but if all (or just too many) of their customers would decide to use the phone at the same time, they would not be able to give them all the service they have paid for. I don't know about you, but where I live, the New Year's Eve is a time when the lines get very busy. So busy in fact that it becomes very hard if not impossible to get the tone. You're basically cutoff.

Overselling however, keeps prices at low rates. If there would be no overselling, few of us would have phones and those who would have, would pay some hefty fees to have use them.

Even the bandwidth providers oversell. Sure, just like the other telecommunications companies, they are closely watched by the state. In fact there are strict regulations that they have to obey to.

My point so far is that overselling is not necessarily a good thing, but it's not necessarily bad either. The only problem is that is has to be done right, with careful planning.

Now, getting back to the hosting business, I can assure you that you'll rarely see web hosting companies willingly admitting on their website that they oversell. The reason is that overselling in the web hosting business has been abused in the past and is still abused of by many companies.

There are people (even in the web hosting business) who see overselling as bad as "unlimited bandwidth" or even worse. These are often the ones that do not oversell at all and they feel very strongly that they're right about this matter. Unfortunately they forget that they are overselling too.

Yes, they are overselling because their upstream oversells. If the upstream oversells, their bandwidth quota is oversold, so if they were given the right to use 700 GB of bandwidth, the upstream in fact estimated that they would use lets say 600 GB. So, if that hosting company promises a total of 700GB, it is in fact overselling.

Now the bad part of overselling is that it's being abused by hosts who don't know what they're doing. Often the host assumes that it's bandwidth and space that it sells. But that's not all it sells! That kind of host thinks that as long as it provides bandwidth and space (and sometimes support ) everything will be OK. If that's the plan, the host risks to lose everything because a server is more that space and bandwidth.

When the host plans how many websites to host on a website, the first limit is the processing power of the processor (combined with memory usage, maximum transfer speed etc.). What I'm saying is that although on paper the server might host even lets say 300 websites, in reality that's not always possible. If the websites are all busy forums or use databases and scripts (SSI, PHP, PERL etc.) the computing power of the machine might be exceeded long before reaching the bandwidth limit (a too high server load). In fact this might happen even if the company was not overselling.

This is way very often the host will close accounts before they reach their bandwidth limit. Not because of bandwidth consumption, but because of overuse of other resources.

Conclusion: overselling should be done only when it's possible. It is often a server by server thing, depending on the processor (computing power) and the actual websites that are hosted.

Because the vast majority of web hosting companies to do not state that they are overselling you have to figure this out on your own. The few hosts that mention overselling are usually the ones that are not overselling. They are very proud of it and they've realized that they could use this policy to their advantage. Remember that they are in fact full-selling resources that are oversold by their upstream. So they're not overselling themselves, but the fact is that they are overselling.

To conclude, overselling is OK if it's being done carefully and based on experience. So I would not rule out companies that are overselling as long as they do it right. Searching for "non-overselling" web hosting companies would also make it very hard to find a host.

Because usually it's bandwidth that is oversold and because most of the costs are bandwidth related, you can get an idea on how much it is oversold by looking at the price per GB of bandwidth ratio. From what I've read, if the ratio goes under $0.40/GB over-overselling might be right term for their practice. So I would try to select companies with prices over $0.40/GB of bandwidth.

However, as long as the servers are powerful (something like dual Xeon) and the customer reviews do not reveal any problems, you should be fine. You may even ask some of those customers for some inside information such as average server load, highest server load etc.

I hope this article helped you in making a good decision. Whatever you do, try to stay under your plan's bandwidth limit. It's always good to play it safe. And if you have a script based website, ask the host about resources limitations and account cancellations.

Article re-produced with kind permission from Daniel Ionut Lemnaru owner of WHReviews.com