How Do Web Hosting Companies Make Money?


I’m fascinated by how web hosting companies make money. Maybe, it’s because I thought owning a storage unit would be the PERFECT business. Web hosting is like physical storage. 

Maybe, it’s because I’m into domain investing and affiliate marketing. 

Hosting companies make money by purchasing space on a server and renting the space. Some companies own their servers and data centers. 

Keep reading and I’ll share what you should look for in a Webhosting company and what you should avoid.

Plus, I’ll share what is the difference between shared hosting, reseller hosting, virtual private servers, and dedicated servers. 

Oh, and I’ll share how you can make money reselling hosting. 

How Webhosting Works 

To make a website live on the internet there are a few things you need to have. The first thing you need to have is a domain name. 

For computers to communicate with each other they need an IP address. This is a set of numbers, just like a home address. Here is an example of an IP address.

“204.120. 0.15” 

Instead of mesmerizing these numbers, we can use the domain name system (DNS). The DNS system takes domains we know of such as Facebook.com and turns them into IP addresses. 

When you type in a domain name on a browser or click a link the browser finds the right IP address. Then it gives you the web site associated with that IP address. 

A domain name is just like an address on a street. 

Now, that you have this domain name or street address you need to build a home on the plot of land. To build this home you need hosting to store it. 

Think of hosting like the frame of the house. 

To make your website visible on the web, your website files must be physically stored on a computer that is connected to the web.

Shared hosting is the most popular affordable type of hosting. It starts with a server that is a powerful computer that is stored in a powerful, secure building called a data center.

This data center provides network and backup systems, temperature control, fire suppression, and physical security.

This is so your website is available at all times. When you buy hosting your purchasing physical disc space on the server along with the bandwidth, the network connection with the server.

Some hosting advertise the amount of disc space and bandwidth that they are selling. The disc space covers your website and all of your files, this includes your email.

The monthly bandwidth allowance is the amount of traffic that comes in and out of your website every month.

Some web hosting companies simply buy the servers and data center then they rent out the disc space. Other web hosting companies can rent space on a shared server and then rent out the part they are not using.

This is very similar to you renting a home then renting a room to a friend.

What to Look for Hosting

Price – When it comes to hosting one of the first things to look for is the price. If all the hosting companies just make a website live then the lowest price is going to win. 

Sure, there are other things to look for, but the price is probably the first thing people look at.

You want to get hosting at the lowest possible price. Be careful because many hosting plans will start at a low price then increase it after so much time. They do say they increase the price, but it’s in the fine print.

Another thing is a money-back guarantee, the longer the better. All the money-back guarantee does is provide confidence in the service.

Next, you want as many beneficial features as possible.

SSL Certificate – Ideally you want this as a free feature. Godaddy the largest hosting company does not make this free. You can do it yourself, but it’s extra work.

All an SSL certificate does is put some code on your website that encrypts data. This means that it is more secure.

It’s just like sealing an envelope before giving it to the post office. If you don’t have this certificate that a big warning will flash and some people will not visit your website.

Automatic Backups – Nothing is more frustrating than losing a website. Imagine building a website then something happens and you have to start over again?

This is why you need to backup your website. Automatic backups daily and if they are free are even better.

This is one of those features I look for.

Having a way to backup your website every day on autopilot is very nice. If this feature is free that is even better.

Support – It’s nice to be able to contact your hosting company for questions or concerns. If support is available 24 hours a day, 7 days a week then that is even better.

There is nothing more to say about this.

Bandwith – Bandwith is how much traffic flows through your website. Ideally, you want unmetered. This means they don’t charge you if you do your job and get lots of visitors to your website.

The higher the bandwidth the better it’s going to be for you.

Storage Space – If you’re just starting with a blog or small website 50 GB of storage space is plenty. If you upload tons and tons of videos then you might need more storage space.

You can always start small and move up

Email Addresses – Email is another nice feature, but let’s be honest you can create a free email account on Yahoo, Gmail, Proton, Zoho, and many others.

I don’t put too much value on a free mail address for hosting.

Privacy Protection – If your web hosting has free privacy protection this is another nice feature. This feature blocks people from knowing who owns your website.

The hosting I use and recommend has all these features and costs less than half the price of Godaddy. The only thing it doesn’t have is a free email address, but there are many places to get a free email address.

It’s also very easy to switch hosting if you have a current website. They made a way to transfer your website over and look at it before it goes live.

It only took me a few minutes and they walk you through it. When I canceled my old hosting company they gave me a full refund.

You can view the price of the hosting I recommend by clicking on the link HERE.

Different Types of Hosting 

There are different types of hosting.

Shared hosting – This the most common type of hosting plan and the lowest price. This is where your website will be on the same server as multiple other websites.

Since you are on the same server as other websites this means a surge in traffic to one site can affect the user experience of all the websites.

Still, if you’re just starting shared hosting is all you need. Think of it like renting out a room in an apartment building.

Reseller hosting – Just like the name implies this type of plan allows you to sell some of your space. Think of it like renting out a house and then renting out a room.

Virtual Private Servers – A virtual private server or (VPS) is on the same server as other websites, but is more private.

A VPS hosting creates a virtual environment that is like a dedicated server, but without the cost. This is the middle ground between shared hosting and dedicated hosting.

Dedicated Hosting – Dedicated hosting means you own and control the entire server. Usually, if you have a giant website with lots of traffic you might want to own the server.

Also, other websites will not affect your website. These benefits do come with a cost and they are more expensive. The price starts at $100 a month for a dedicated server but can go up to $500 a month and higher.

Another drawback of a dedicated server is that more technical knowledge is required to install and run the server.

Cloud Hosting – Instead of your website being on 1 server, with cloud hosting it’s on multiple servers and machines. 

You can manage your website through a virtual machine that accesses all the different servers on the cloud.

Cloud meaning that it’s virtual like a cloud is something you can’t touch. The largest benefit of cloud hosting is scalability and how easier it is.

There can also be reduced cost by using a cloud.

How to Resell Hosting 

The easiest way to start a Webhosting business is with shared hosting. This is the easiest type of Webhosting to get into. 

You first need to get a reseller account from another hosting provider.

After you get the hosting you can host an unlimited amount of accounts. Now, you have a product to sell, the easiest part is done. 

Next, you need to market your product. It’s a good idea to build a website to sell your hosting services. Can you guess what the next part is? 

Yes, you need to drive traffic to your service. One idea is to use Webhosting forums and start to build relationships with people. You could also try Facebook and Linkedin Groups

Once you start to get clients then you incorporate an easier way to bill your clients. In the beginning, you can just use a paypal subscription. 

I hope this blog post on how do web hosting companies make money has been helpful to you. Have a nice day. 

Kevin

Affiliate marketer for 10 years, domain investor for 2 years and part time surfer. Hopefully this blog can benefit you.

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