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I want to ask if I can host a small blog hosting service using Worpress MU on a shared hosting server? What is the minimal requirement to launch such a service?

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For something like this, you'd be much better off just finding a big hosting company that provdes wordpress mu, and selling it on, or simply referring the client to them. You don't want to get into managing a huge community server that's got a ton of spam on it because users don't manage their comments correctly, or you didn't get the latest update done since a vulnerability was announced just yesterday. If you really want to be responsible for it, set one up, see how it works, measure the memory use after loading in a fake blog or twenty, and charge on a scale depending on the traffic, space used, number of blogs, etc.

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There are no minimal requirements as such. I run a Wordpress MU installation on a dedicated box. The issue is that the database starts growing very fast since it creates 7-8 tables per user. And over time this can become very hard to manage.

I would suggest looking at something more lightweight for a shared server. Drupal would be a good choice.

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