First, a brief introduction to the webhosting chain: the end consumer is served by about 3 upstream providers: the webhosting provider that they have direct contact with, the webhost's upstream company who maintains the servers and sells space to webhosts, and above that, the datacenter that provides the connection and houses the servers. Some webhosts are also the server admins and liase with the datacenters directly.
The webhosting industry has been claimed to be near saturation point as there are hundreds of web-hosting providers clamouring to provide cheaper and better services to businesses and individuals. This upsurge of supply is largely due to resources becoming readily available (and at cheaper costs) with plunging diskspace and data-transfer prices. The barriers to entry in the web-hosting space is low as large resellers of server space provide cheap hosting and reselling plans that create opportunites for new webhosts to join in the market. With increasing number of suppliers with ever cheaper reselling plans, more webhosting businesses are sprouting up to provide web-hosting solutions to business and individual websites due to lower fixed costs and investment. In addition, this increase in supply is not caused by factors in any particular country. The internet is global and as such, datacenters in US, or in fact, any part of the world, can provide the server and webspace for a local webhosting company. It is taking place in internet space and consumers and providers can easily find each other and exchange services in the global space.
Increasing the supply is naturally a good thing for the customer who is on the demand side. This inbalance has caused new web-hosting providers to offer extremely low prices for their webhosting plans or packages in order to compete in the tough market. Customers get to choose from a myriad of hosting providers who are constantly lowering their prices. However, this might not be a good thing. By offering low prices, companies are earning small margins that may not cover their support costs. Support is vital in the webhosting business as most customers want to be able to get help with their web-hosting accounts. If the profits do not justify the costs, web hosting companies will easily close down - and take their clients' sites with them.
So what are the factors to look at when choosing a host for your website?
Support is the single most important factor for any individual or small business looking for a webhost for their websites. Any internet web hosting provider that does not respond to emails for at most 24 hours is probably having problems providing fast and reliable support services. These services are essential to customer satisfaction and especially for customers who are new to webhosting will need guidance with publishing their websites on the webhosting account provided. The webhosting business is about relationships between webhost and webhosting customers. You should want to know that you can get help when you need, and want to be informed when your website is going to be offline for maintainance.
Stability comes in second as a factor when choosing a webhost. Stability refers to how much uptime you can expect from the webhosting provider. This actually depends on the providers' servers and network. If they do not have reliable and stable providers, it would affect their servers and cause problems for your website. An uptime of about 99.5% is considered reliable in the industry as there are external factors which may be beyond control of the provider. External agencies like Alerta.com provide server monitoring services that webhosting companies might use to proof their reliability.
Cost is a factor depending on the purpose of the website and budget. Personal /Individual websites might have smaller budget and choose to go with a cheaper webhosting provider, possibily in exchange for support and stability. Business sites might have larger budgets and should definitely place stability and support above all else. The cheaper webhosting deals that offer enormous diskspace and huge amounts of data-transfer at a dollar rates has continuously proven to be a one-off hit that attracts customers in numbers, but fail in providing quality support. Large numbers of client sites also cause sustained high server loads that might cause the server to crash and thus affecting stability.
Location of the server is generally not an important issue depending on your ISP/country's connection to the datacenter where the server is located. Pings to the server can normally tell you the network latency to expect when people from your area access your site. Lower ping rates means that your site will load faster.
Lastly, take time to identify and contact a webhost to ask about their service. This would give you an idea of the kind of support that you might receive and help you in deciding if you want to go with the web-hosting provider.