What is Overselling?
Ever wonder why some web hosting companies are able to offer shared hosting services at ridiculously low prices? These companies are more than likely engaging in the act of overselling.
Overselling is when a hosting company sells more disk space and bandwidth on a server than actually exists. The basic idea of overselling is assuming that majority of the clients are only going to use a fraction of the resources allocated to them, so there is going to be a lot of wasted bandwidth and space. Overselling involves taking a gamble and selling more than the hosting company can handle with the assumption that the unused resources will cover it.
For example, a server hard drive is 80GB and has 1200GB of bandwidth. The hosting company has a look around and decides to offer plans with 2GB of disk space and 40GB bandwidth. With these figures, they can only offer 30 hosting packages per server. This will leave quite a bit of wasted disk space. Assuming that their users are not going to use all of the allocated bandwidth, the hosting company may sell 20 more packages on the one server. As a result, the hosting company will be able to make more money off each server than they otherwise normally would be able to. The advantage for the client is that this extra revenue is usually transferred on (at least in theory) by cheaper hosting packages.
However, when the server is oversold and if every single client were to build their website up to maximum capacity, the hosting company would then not be able to handle the sudden increase in demand without adding extra hard drives, buying more bandwidth, or perhaps even another server. This would most likely lead to a fair amount of downtime.
It will generally be quite difficult for you to find out whether or not a host oversells unless they specifically advertise it, or they are well known for having problems due to excessive overselling. Just make sure you do some research and choose a reliable host, not necessarily the one that appears to offer ridiculous amounts of bandwidth or disk space for far too little money.
Punch, D. (2005) Overselling Web Hosting: What does it mean to you? Developer Tutorials.
Anon (2008) Beware of Web Hosting Overselling. Host Voice.