I'm planning a software based service. To give it a bit of context (type of traffic), assume it similar to facebook in nature (with a little GitHub thrown in).

I've been trying to understand my different hosting options. I've been using a shared host with GoDaddy for years just fine. I currently host a Wordpress web site there and I've not had any problems. Quite frankly, they've taken good care of me.

However, the nature of a shared hosting environment is limited in nature. For example, I can't do anything but host a web site there. For example, I can not run a Mercurial server.

Last time I attempted to build a web application with the intention of eventually launching it via GoDaddy, I ran in to all sorts of troubles because it was shared-hosted. Assembly issues, etc. At the time, the cost and time sank my project. (The lack of direct access was also frustrating.) (to be fair to godaddy, this was over 3 years ago)

I've been looking at Rackspace or Amazon as a possible cloud solution but it seems to be just processing power and bandwidth (and an OS). From what I understand, I'd need to get Apache and MySQL Working on my own. The way cloud hosting is priced, however, seems appealing.

I figure my final option might be to use a virtual private host. I think this would be more flexible than a shared-host site but less scalable than a cloud based server.

So, I guess my question is what is an appropriate solution for someone who intends to build a web application service? I figure that I need to establish a hosting environment now rather than later so I can plan to effectively use the environment.

I'd prefer to be fairly economical to start out with. I really can't afford to pay $999 (or even $99) while I build up the site and get the core functionality online but at the same time, I'd like to have the selected environment grow as needed.

Thank you.