It took us the better part of a year, but we've found a way to not only make our price point profitable, but to do so while offering a real feature set.

It boiled down to the fact that we're all experienced Linux sys admins and have been around this stuff forever. Most of the magic that keeps the thing running and provides our extras is done by handbombed code that we wrote. I agree that most of the people at our pricepoint aren't really delivering anything above what they have to and quite likely have to oversell to make a profit.

It does all depend on scale, though. Our entire model depends on massive amounts of users and the ability to provision servers with huge RAIDed drives in a few hours. That's why we personally administer our own servers (no managed or reseller stuff, thank you very much) and write most of our own glue code.