Special offer: 99% off
by Andrew Smith on 09/08/07 at 10:22 am
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If you can see the images in this post then you’re witnessing an example of Geo-Arbitrage. Let me explain.
This blog is hosted with Hetzner, a South African hosting company who consistently deliver the best customer service that we have experienced anywhere. We can’t speak highly enough about them. We prefer to host our sites within South Africa because browsing speeds are better, and South African-centric search engines (like Google.co.za) give preference to sites hosted here.
However, bandwidth for servers in South Africa is quite expensive, and Ideate is not exactly raking in the dosh at this point. The couple of Gigs a month that the site uses is starting to cost us a bit of money. If you don’t understand terms like “bandwidth”, “hosting” and “traffic”, don’t worry too much. This post will hopefully still have value by the time you get to the end.
Here is what Hetzner charges for traffic to this site:
That works out to about R90 per Gig, just for the bandwidth (there is also the load on the server and other factors).
About half of the Ideate traffic is for the text on the site, and the other half is for the images. These images are largely eye-candy, and it is less important that they are hosted in South Africa.
Amazon (yes, the book people) have been rolling out a number of services so that other companies can make use of their vast infrastructure. They have a hosting-type offering called “Simple Storage Service” where you can host files in their massive date-centres and pay a small amount for whatever is stored and downloaded. Their rates for downloaded traffic are….
which is about R1.26 per Gig. That’s a whopping 99% cheaper than hosting files with Hetzner South Africa. In theory the download speeds for these files to come from America will be a bit slower, but did you notice it while reading this story?
I won’t dwell on the technical aspects of this story, but if you are a Wordpress blogger, have a look at this.
So, getting back to Geo-Arbitrage. I came across the term in Timothy Ferriss’ book, The 4-Hour Workweek, but it is better explained in Thomas Friedman’s The World Is Flat. The concept is that products and services cost different amounts of money depending on where you buy them. A litre of drinking water is practically free in urban-South Africa, but in the middle of a desert you would pay a handsome price for the same commodity. Of course, transport costs keep the desert-dweller and his water far apart, but with services and digital products distance is no longer an issue. If General Electric set up a call centre in India to support their customers from there because it’s much cheaper, you would say that they are making use of Geo-Arbitrage to buy the service from the cheapest source.
As a small business it hasn’t been as easy to take advantage of this, but things are changing.
- Send a lot of physical letters internationally? Try Postful.com.
- Do you teach english in a place with too many english teachers? Tutor eager foreign students at BuddySchool.com.
- Looking for a highly-qualified but very cheap PA? Try YourManInIndia.com.
There are many, many more examples if you look for them. Try taking your monthly list of company income and expenses and asking yourself (and Google) if you could sell the same item for more in another geographic location, or buy the same item for less somewhere else.
Welcome to business in the 21st century.
Andrew Smith is the pedantic systems guy behind Live Alchemy, a SA e-commerce company. Andrew writes for Ideate in an attempt to make the world a more efficient place. View more articles by Andrew Smith.
