I ask because before DO was around it was prgmr, linode and slicehost who were the most reputable vps services. Slicehost went away and linode was always more expensive. prgmr served a portion of the market for those who wanted more control at a fair price. But now with DO the prices have dropped.
But low-end hosting offers a good low-cost entry point for companies looking to enter IaaS/PaaS business like DO. Sooner or later DO will move upward in IaaS/PaaS vacating the low end hosting. Personally, I don't see DO catering to low-end for more than 3 years when the need for equipment replacement will come up to stay competitive.
The competition has to survive couple of years by managing the expenses, managing customer churn, and extracting some additional life out of equipment. Once DO equipment ages, the competition can install new equipment investment and beat up DO on aging equipment and speed and feeds. It is very important in this business to not replace your equipment at the same time as your competition because value prop is always speed and feed at reasonable cost.
It's pretty easy to do if you are (1) doing everything yourself (meaning not paying people who know less than you and don't work as hard as you) and (2) you don't think about capital investments the way a 'real' business does.
(Some people, with $X in their pocket, will spend it on servers and so long as the cash flow stays positive after that they aren't going to be concerned about getting what they 'deserve' for their investment.)
I was the "technical cofounder" for Brazil's #1 chat service back around 2000, and the nontechnical guy was always finding the cheap hosting service of the week. (We were always hosting in the U.S. because this was cheaper and it would have been hard for the Brazillians to stop us from running a competitor to the state phone company)
We got some incredible deals, maybe 50% or 1/3 the price of "normal" web hosting, but there were some times when we had the move the site in a hurry, even once restore it from backup.