What is overselling? Overselling is basically the hosting company selling hosting packages more than their server could handle. This problem often happens in shared hosting as there are a lot of users sharing resources of one server.
Just take this scenario as an example.
Hosting Company A is providing a shared hosting package and the server used for the shared hosting package is as follows:
2 TB bandwidth
400 GB space
512 MB ram
while the shared hosting package are as follows:
2 GB space
3 addon domain
After some calculations, you will notice that this server is only capable of sharing resources with 200 users(based on what the hosting package promotes). However, these are merely the marketing skills made by the hosting company.
Why hosting company oversell? The main reason is to maximise profit as the hosting company know that most of their users will not use all of the resources allocated to them. Even if there are users who managed to use most of the resources as promoted by the package, the hosting company will notify the user and request them to upgrade to a better hosting package such as vps hosting or dedicated server hosting.
To maximise the profit, a hosting company will oversell to a number of users larger than 200(maybe 400,500 and some even until 1000 or even more) so that they can earn the most profit out of it.
I will take the situation where the hosting company oversells until 500 users as it is quite a common number in reality.
Hosting Company View - Profit Factor
Let's consider that the price of hosting for a year is RM 50.
Revenue = Price x Number of users, it is also the total sales amount.
Revenue of 500 users: 50 * 500 = RM 25000
Additional Profit: RM 25000 - RM 10000 = RM 15000
End User View - Speed, Uptime Factor
Average ram for each user for 200 user: 512 / 200 = 2.56mb ram
Average ram for each user for 500 user: 512 / 500 = 1.024mb ram
Average cpu allocation of each user for 500 user: 2000 / 500 = 40 mhz
These calculations are made based on the fact that every user is utilising their resources to the maximum which is not true in the reality. This figure is just to show you what will happen when the company oversells and why you will gain a slowdown in performance and sometimes even a downtime as the server is overloaded.
In conclusion, a hosting company gains a whooping amount of profit and the end users gain a slowdown in performance and a more frequent downtime as well.
NOTE: Not every hosting company oversells. Some of them don't but in the reality, many of them do.
Lesson gained: Do not buy cheap webhosting packages for the sake of $$ and please do some research on the hosting company before buying any hosting package.
This post has been edited by wcypierre: Aug 26 2011, 12:24 PM