Web 2.0 Crashes: When Eyeballs Don't Pay The Hosting Bills

I came across this article on the web today.  It describes the death of “CouchSurfing” (an Internet business).  What was the issue?  Not lack of user interest or running out of cash or strong competition or any of the usual reasons that startups die.  It was because of a series of infrastructure problems


It describes how a software entrepreneur basically lost his business because of a hard drive crash and the lack of proper backups and a recovery plan.  He had thousands of users and what seems like a relatively popular offering.  If you haven’t heard of the story yet, it’s worth reading.  It’s quite depressing.  I’m sure Casey Fenton, the founder, like many entrepreneurs, poured his heart and soul into his company.  To see it washed away so quickly and easily is sad and depressing.  But, there is a lesson to be learned here for the rest of us.

Some time ago, I wrote an article titled “Startup Reality Distortion #5:  Web Hosting Is Not Free” where I discuss how startups should recognize the reality that web hosting is not free.  One of the biggest challenges with many Web 2.0 startups is that they are relying on the classic “attention economy” dynamics to grow their business.  

Unfortunately, I don’t know a single web hosting provider that is willing to be paid in eyeballs.

I’m wondering now what percentage of the current generation of Web 2.0 companies out there are taking adequate measures to protect their businesses and their customers?  I’m guessing precious few.  When I read about someone claiming to start a Web 2.0 business in a week and less than $500, I can’t help but smile at the reality distortion.  I mentioned in that last article how the hosting costs for my new startup, HubSpot, are now up to about $2,000/month.  Trust me, if I didn’t think this was a necessary expense, I wouldn’t be spending it.  But it is, so I do.

Reasons Why I Spend $2,000/Month On Web Hosting
  1. Real Customers:  I have real customers that I charge real money (i.e. cash).  They pay me to provide a service, I owe it to them to do what I can to continue that service and recover from disasters.  In the “attention economy” of Web 2.0, eyeballs don’t pay the hosting bills.

  1. Restful Nights:  As a startup entrepreneur, there are enough things that keep me up at night (like competition, market movements, early-stage product issues, etc.).  I don’t need yet another thing to worry about.

  1. Competitive Advantage:  I rarely ever think that one can “outspend” the competition as a way to win.  This is one of the exceptions.  Maintaining a reliable infrastructure costs money.  You don’t want to overspend on hardware and infrastructure too early – but what’s worse is spending too late.    Customers can often smell unreliability.

  1. Playing The Odds:  If you are in the web software hosting business long enough, you will have a disaster (minor or major) someday.  It’s just a matter of time.  To not have a reliable recovery plan (including backups, multiple servers, etc.) is simply foolish.  What point is there in building a user community of thousands of people, if it can all be washed away?  I’m just playing the odds, and I don’t like the risk of having something I’ve poured my heart and soul into die for stupid reasons (there are enough good reasons for my startup to die out there).

Don’t let what happened to CouchSurfing happen to you.  Save money elsewhere, but make sure you are doing right by your customers and your business when it comes to infrastructure.  It’s painful, but that’s reality.  Closing your eyes and hoping it won’t happen to you is not a particularly effective strategy.

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