Bad neighborhood is a simple concept .. The idea is that when you're using shared hosting you also share a single IP address. Some hosting providers might have 5, 10, 50 or more websites on a single server and single IP assignment.
If you're on a shared web hosting server environment with 999 other websites that are spammy blogs, black hat abuses, etc - some people think the easiest thing for Google to do is penalize that IP address.
The problem is that IP addresses can be changed easily and quickly, thus causing Google to constantly chase the mouse.
Google doesn’t pay much attention to IP address as a factor for SEO on it’s own for this reason. If they were to blacklist IP addresses, they encounter numerous problems. If they ban an IP that had 100 bad sites on it, those 100 sites would disappear. When the IP is reused, 100 good sites take their place. Google would have to repeatedly check their list to ensure the accuracy in penalizing only websites who deserve it.
Matt Cutts, from Google, addressed the myth that shared IP addresses are worse than unique or dedicated IP addresses in this video from Matt Cutts from 2010.
- “I understand, and Google understands, that shared web hosting happens, you can’t really control or help who else is on that IP address or Class C subnet. The other thing is that if you were to take action just on that Class C subnet or IP address, the spammers are pretty savvy and the spammers would often migrate and go to a new IP address. So typically it’s not the most scalable way to tackle things.”
He does mention that being the “good” site on a server full of "bad" sites will invite further scrutiny. Google will examine closer that site to see if it’s a spammer trying to use that page. In theory, by being the one good site in a bad neighborhood, you’re inviting further investigation.
If you want another opinion, one that might matter to you is using Cloudflare. The way Cloudflare works is by inserting itself between the user and your server, which means your IP is shown as a Cloudflare IP shared between a wide variety of sites. They say in their FAQ that generally speaking you won’t be penalized for using that kind of shared IP address.
Other Risks of Shared IP
You aren’t going without risk when using a shared web host server. It’s possible that your web host doesn’t have your server configured properly. If your host configuration is wrong, you might get penalties meant for other websites.
More importantly, you run risks of malware and of being the target of spoofing when using shared IP web hosting.
As far as malware is concerned, you’re on a shared server with unknown how many other websites. The typical way to do this is for each website to be segregated from each other. However, if your web host isn’t using proper segregation and security, a breach of the server could be a breach of all sites using that shared hosting.
There are also potential issues with email spoofing. I’m no expert in the technical aspects of email, but it’s possible that someone can make legitimate-looking spoofed emails to phish people. It’s also possible that your IP address gets used for a spam email campaign. If that IP address is added to a blacklist for spam, your company would be included.
Dedicated IP Address Benefits
One of the biggest benefits of a dedicated IP address is that it’s a lot easier to set up SSL. In the past, SSL required a unique IP address, because the certificate was for that specific IP address.
You also have the site speed concern. When on a shared web hosting server, you're sharing server resources with an unknown number of other websites. Unless proper measures are in place by the hosting provider, usually not, then there is no allocation of resources specific to each website. This means some websites can suck the resources dry while the remaining websites on that server suffer. Real world example, If a post on a website goes viral and it crashes the server that your site is also on ... your site goes down too.
With a dedicated server and a dedicated IP address, you don’t have to worry about any of that. It's your server and your IP address to utilize how you see fit.
Many of the associated problems with shared servers are easier to mitigate on a dedicated server. If you’re on a shared IP and your email or website stops working, you have to troubleshoot extensively. You could spend hours troubleshooting your website and email just to find out the next day it wasn't anything of yours. It was a different website on your shared environment that affected you and you had no control over it.
If your budget doesn't allow for a dedicate server, then by all means go shared until you can afford it. This should be one of the first things you budget for as far as your website goes.
Shared hosting will work - but go dedicated when the budget allows.