Because the companies make MORE profit by selling to you at inflated prices.  These companies are just as capable of doing the mining calculations as the rest of us.  They've spent quite a bit of time analyzing things to come up with a price point that minimizes their own risk, and transfers it solely onto the shoulders of the consumers.  Let's look at the latest offering from Bitmain/Hashnest.  They are offering 0.00135BTC per GH/s, and $0.0032422/GHS/Day in maintenance fees.  If you break that down, you'll see it translates into the same thing as purchasing an S2 for 1.35BTC and paying somebody $98.62 a month to host it.  In order for you as the consumer to have a prayer of turning a profit, the network difficulty adjustments must be 5% or less consistently at current USD->BTC conversions.

This is the game they play, and how they transfer that risk to you.  They are betting the difficulty adjustments will be greater than 5%, and also that the fiat->BTC conversion does not inflate dramatically at present.  By purchasing such a contract, you are betting against the house and hoping that either the difficulty adjustments stay absurdly low, or that BTC increases dramatically in value at the beginning of your contract and then continues to trend upwards throughout the timeframe of your contract.

Other cloud mining providers offer a fixed rate contract.  They're doing the very same thing, except charging you everything up front instead of amortizing the "maintenance" fees over time.  As an example, let's look at MegaMine.  They are charging $3100 for a 12 month contract of 2TH/s.  That's actually a bit cheaper than the same from HashNest (2TH/s at HashNest = 2.7BTC@$479 + 197.24*12 = $3660.18).  Regardless, the outcome is the same: you are betting against the house (in this case, you're betting that MegaMine is wrong in their predictions).

You've got an interestingly convoluted view on things.  If your sole intention of cloud mining is to obtain coins and sell once profitable, why would you even bother with the cloud mining at all?  Just buy some coin outright and hold it.  Also, if you think you're not paying inflated platform prices by cloud mining you're delusional.

And they're incorrect.  Bitmain's officially listed specs are 441GH/s at 340W from the wall.  Initially announced specs were 504GH/s at 390W, which were reduced to 478GH/s at 366W and finally when the product was released it was 441GH/s at 340W.  The new S3+ is 453GH/s at 355W.

S3 is 440GH/s at 340W.

LOL... did you really just revive a 9 month old post to refer them to coinium?  Nice... either the OP has already created their own pool, or has given up and moved on.

Many discussions on this topic.  DrG has a great post about cloud mining here: https://bitcointalk.org/index.php?topic=739510.0.

The short of it is that cloud mining companies are businesses, and the goal of any business is to make a profit.  As such, they have designed their services in such a way as to minimize the risk on themselves and transfer it to you.  You, as the consumer, have little to no chance to ever profit.

Congratulations.  Over 270BTC an hour isn't a bad payday

Pretty much exactly what every cloud mining provider does.  They exist to make themselves profit.  They've done plenty of calculations, believe me.  They arrived at their price point to minimize risk to themselves as much as possible.  Like I wrote previously, that 1TH/s contract needs difficulty jumps of less than 5% to turn a profit for the customer.

So, is it impossible for a consumer to profit?  No.  It's just exceptionally unlikely.

The 1TH/s limit was removed.  You can purchase as much as you want.

You're right, and I had edited my post while you were replying

Thanks for your answers.  Are you a representative of Hashnest or Bitmain?  I'm sorry if you've answered this previously in another posting, but I am trying to gauge the validity of your answers (either it's speculation by a well-informed customer, or it's fact by an employee).

I'll certainly agree that the price per GH/s is much lower than other competing cloud mining operations; however, the maintenance fees are just about on par with them (including cex.io).

EDIT: my mistake on the maintenance fee comparison to ghash.io.  They charge $0.18 per GH/s per month, which would translate to $180 a month for 1TH/s, compared to approximately $98 a month with hashnest.

Failure to convert the countdown on their webpage to your local timezone.  They launched at 22:00UTC+8 (which was an hour and 22 minutes ago).

So they can make a profit...

Think of the structure like this: they are asking you to purchase an S2 for 1.35BTC and then charging you $98 a month to host it.  Run that through any calculator out there and you'll find the difficulty increases need to be lower than 5% for you to even break even.

Are the fees static, or will they adjust during the term of the contract?  For example, currently they are listed as $0.0032422/GHS/Day.  Is that price locked in?  

I understand from your posting in the announcement thread that the contract length is for as long as the earned BTC is greater than the maintenance fee.  How is this calculated - is it real time based upon some exchange, or averaged out?  What happens if today the fees end up being greater than what is mined, but tomorrow the price of BTC increases to make it that the earnings are now greater than the fees again?

There is currently a limit of 1TH/s per person.  There is also the ability to enter some kind of code to unlock more.  How does one get this code?

What's to stop a person from creating multiple identities and purchasing more than 1TH/s of hashing?

Will this new service be added to the p2pool network, or is it going to be mining on some proprietary pool (like AntPool)?

So, Bitmain changed the price of their new cloud mining contract to 0.00135BTC, down from 0.0016BTC.  Still never going to make a positive ROI.  It's just another cloud mining scheme designed to put money into the pockets of the service providers.  Ask yourself this: would you purchase an S2 right now for 1.35BTC?  Even with $0.10/kWh electric costs, you'll need the difficulty jumps to be under 6.5% to turn a profit.  Good luck.  Now, look at Bitmain's offering.  They'll sell you 1TH/s of mining, but charge you 37% fees.  That 37% will change as the price of BTC fluctuates.

As for the p2pool impact, I sure hope Bitmain has figured out how to deal with the variance problem.  Throwing another 4PH/s onto the network will mean share difficulties of about 50M.

No, the miner does not have to be present to determine which transactions to process.  Can you imagine having to sit in front of your computer constantly checking some decision manager to determine whether or not to process a transaction?  Thanks, but no thanks.  You set the parameters in your bitcoin.conf file.  For example, you can set min and max block size, min transaction fee, etc.  I highly suggest you take a look at the Bitcoin wiki here: https://en.bitcoin.it/wiki/Running_Bitcoin#Command-line_arguments and also here: https://en.bitcoin.it/wiki/Transaction_fees

There is absolutely nothing wrong with your calculations, and you've discovered exactly why cloud mining is a money making machine for the provider of the service - not for you.

1) brute force attempts.  Your miner attempts many solutions in the hopes of finding one that works
2) the more attempts you make the more likely you are to find a valid solution
3) whichever solution propagates throughout the network first is the accepted one.

Sorry about the short answers but typing a reply on my phone is unpleasant

The Chinese are putting up farms in 25 days start to finish: http://www.thecoinsman.com/2014/08/bitcoin/inside-one-worlds-largest-bitcoin-mines/
Cement isn't even dry yet and they're hashing away...

As for the pattern, it's just statistical noise.  Like you state, nobody is turning stuff on and off.

I know murdof was running some nodes in the EU (Amsterdam maybe?).  He, at one point, had an Iceland node setup as well.  Not sure what's left of them, though.

While you're ssh'd into your S1, can you ping any outside IP addresses?  Does the cgminer process show as actively running?  Have you tried a hard reset?