Why Annual Only

A

AbbieRose

New member
I have noticed that some hosting companies only offer hosting for a period of a year. Why is this? Are they not so good and want to lock you in for a year no matter how unhappy you are?

It seems to me that a good hosting company would win its customer's loyalty and not need to do this.
 
I think like you - don't make people make that much of a choice up front, give them the options - but maybe this person wants to minimize the back-end tracking?

I don't know why they're doing this. Well, scratch that...I can't come up with a *positive* reason for doing this. (If there actually is one, I'd love to hear it. It's always good to hear different opinions and thought patterns.)
 
What about a "lifetime" hosting for one-time payment? I have seen that done before from a number of companies.

Most of the time, though, there are positive reasons for following this strategy. Usually it is done so that the company can collect more cash in order to expand or improve their infracture in one way or another, or create a fund to market their services further.

Consider this: a company will provide lifetime hosting to first 500 clients for $250 each (most of the time the company will not offer refunds as part of promotional terms). They place these clients on a single server, but instead of collecting monthly payments, they raise $125,000 within a short period of time - funds they can use not to just sustain their current clientbase, but to advertise and grow.
 
I personally don't like those one-time hosting. If the company doesn't get enough one time sales, then the company could close and you can lose your one time hosting.
 
I will never do a lifetime hosting gimmick again. The last time I did that (when I was much more green than I am now) the company screwed six months in. I won't do a one year either and there are a lot of companies now going that route. I don't mind switching to annually later on but I want to see how a company operates for a good time period before committing to them.
 
SclekHosting said:
I personally don't like those one-time hosting. If the company doesn't get enough one time sales, then the company could close and you can lose your one time hosting.
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Unfortunately, there are never any guarantees in any business.

Having said that, I have seen lifetime hosting promotional offers work in some cases, if the company is managed well. Micfo.com, for example, a company that currently hosts this forum, had a share of its problems during which they raised money to fix them exactly this way. Today Micfo is a lot more stable.
 
The use annuall hosting for reasons its easier to manage ont heir end. Instead of worrying if your going to pay each month, send you bills, reminders suspend service get payment reactivate and do it all over again next month... Anually they only have to do it once.

Plus its an advantage for you, because you dont have to worry about making a pyment monthly.
 
I suppose it is less costly to have yearly billing. Lower payment processing fees, and only one occassion per year per customer to run into a billing issue (be it non payment or somethingelse).

Some companies also have high paying affiliate programs - up to two years worth of hosting fees or so. They might need the funds in advance, to pay the affiliates.
 
Hello,

I completely agree. I have wondered this questions myself since I started in the Web Hosting Industry. I think you are right, they are not good and want to lock you in for a year no matter how unhappy you are. Even if you where to cancel after 6 months they still made money off you. Also, they might not want to waste the time generating invoices and suspending / unsespending accounts. Great topic.
 
Ok, I can see the problems with frequent billing meaning that you have more opportunities to fail to take payment, the basic premise being that you are minimizing the risks and the work needed to suspend many accounts if they don't get paid for. But again if the customer is really happy with what they are getting I think they are less likely to let payment slip, unless they are struggling financially at the time.

I have never heard of lifetime hosting before and see huge problems potentially. I am glad it works sometimes, but if a company is struggling and thus needing to use a scheme like that, I would not be wanting to hand over a large chunk of money to them.
 
From my point of view, it would be a great way to reduce the "billing-departments" cost in hours and fees (paypal, credit card company etc)..

If we are talking about a big amount of clients, you could easily "save" around 100 to 200 $ each month on management...

I would never do it myself, simply because you may lose sales for the same amount that you save, because people don't wanne take the chance...
 
Lesli said:
I think like you - don't make people make that much of a choice up front, give them the options - but maybe this person wants to minimize the back-end tracking?

I don't know why they're doing this. Well, scratch that...I can't come up with a *positive* reason for doing this. (If there actually is one, I'd love to hear it. It's always good to hear different opinions and thought patterns.)
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They do this to increase their immediate cash flow which can then be used for new servers & advertising to attract more customers. It also reduces the amount of billing issues overall. The less transactions they run on a yearly basis will lower the amount of declines they receive and merchant fees they have to pay.
 
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Micfo.com, for example, a company that currently hosts this forum, had a share of its problems during which they raised money to fix them exactly this way.
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I recall Asmallorange having a lifetime offer (running for a limited time only), and the stated reason was basically, to raise capital. It can be a way of borrowing really, in the hope that profits will more than cover the repeated and potentially never ending costs. Can it really work? I suppose it can, if accounts are not upgraded in any way, at some point they become deprecated. With technological advance, they will be ever cheaper to host too. It's less risky for the host in a way too, for lifetime is usually defined as the life of the company. Company fails, lifetime ends, end of story, no banks chasing to get the debt.
 
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Just to lock a customer in I would say. But say all there customers pay the anual fee what happens when somebody or the owner of the company blows his budget. All of hist customers are paid up and no revenue is comming it to cover itself. What happens. Lets just say mad customers call them mean names.
 
jcarney1987 said:
Just to lock a customer in I would say. But say all there customers pay the anual fee what happens when somebody or the owner of the company blows his budget. All of hist customers are paid up and no revenue is comming it to cover itself. What happens. Lets just say mad customers call them mean names.
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Hosts that only offer yearly hosting depend on new customer sign-ups for their cash flow. As long as they are consistently getting new customers they shouldn't have any cash flow problems.
 
I don't think signing up yearly is necessarily a bad idea. It can often save the customer some real money. However, I would look at their TOS to see that if the customer were not happy and decided to cut their losses and leave, do they offer a prorated refund. If not, I wouldn't sign up for a yearly account, but I think any hosting business that is willing to back up their service with cold hard cash, would offer a prorated refund to those customers.
 
Another reason for a host to offer an annual or even lifetime payment is to cut down on transaction fees of a few percent on every charge. The percentages are relatively high for small amounts.

For this reason, we offer clients the choice of monthly flexibility or annual savings.
 
This is a common practice by Hosting companies now a days.
however there are some hosting companies that offer hosting solutions at monthly payments too.
I generally think that hosting companies that offer monthly payment opportunities are more sure and concrete about their services.
They generally provide better support as well.
 
One time hosting scares me and its not something we offer, if we need to we might consider it but as a client I would never want it. I would rather have more choices to fit me, not the company - thats not my job as a client.
 
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