How Free Hosting Works

Woman-and-Compute-hostingYour grandma may tell you if it is too good to be true, it usually is.

Yes, there is no free lunch in hosting industry. If the hosting is given to you freely, it just means the free hosting provider can get revenue from other sources.

Currently, most free hosting providers generate revenue from two major sources: advertisement (third-party or own network) and upgrading.

Advertisement can be from third party, for example, Google Adsense and some affiliate ads, or from the owner himself who has a sales team. Most small or new free hosting provider do not afford the second ad solution, due to operation scale. Because Google only allows the webmaster to put Adsense on their “own” pages, the free hosting provider cannot put Adsense on customer’s web pages. They can only put Adsense ad on the main site, e.g., directory page, sign up page, FAQs page. Therefore, most free hosting providers also have some affiliate ads. As such ads are commission-based, they can be put on any pages.

Another revenue source for free hosting providers is upgrading. Usually free hosting comes with limited resources (e.g., disk space, bandwidth) or limited functions/features (e.g., MySQL, ftp). When the users are happy with the free services, they will very likely upgrade to get more resources and more features. There are a few successful cases on this and we will show you some of them in subsequent free hosting case studies.

The relationship among hosting provider, users, and advertisement providers is illustrated in the figure below.

Illustration of the relationship among freehosting provider, user and advertiser

Illustration of the relationship among freehosting provider, user and advertiser

As a free hosting provider, you need make sure you can generate sufficient revenue to offset your cost. This is not a simple task. The advertisement revenue generally is not sufficient to keep your free hosting services spinning. For upgrading, you cannot expect it will be autopilot. You need provide decent services to build confidence on the potential customers. Your offering should be also well designed so that the customers can see the real values easily. Just remember, big companies like Yahoo even cannot make their free hosting services viable.

For free hosting users, the good news is that you have many choices in the market. There are so many providers hunting for users. The bad news is that about 50% of free hosting providers die within 1 year; 40% die within 1-3 years. So, it is hard to find a reputable free hosting provider. In the subsequent guides, I will share with you some experiences on choosing a good free hosting provider.

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