Website, DB, & Software Developers

It's my understanding that even Facebook had 3rd party hosted servers, until they became a multi-million dollar company (based on the movie I watched anyway.).

It's very unlikely to be cost effective to create your own web server.

If you are paying too much for hosting, there are lots of cheap options. I posted recently on how I've been more satisfied with the large hosting companies (Networksolutions, Godaddy (Some people dislike GD for some reason), etc), compared to the mom and pop shops. Larger companies seem to know how to maximize resources to provide the best technology at the lowest prices. Their servers should be able to scale to fit your needs, so you don't need to ask someone in their underwear sitting in their living room, when you are having trouble.

But I'm no expert. I asked a similar question recently and the responses were kind of vague. I get the impression, when you are talking about handling traffic, that it's sort of a wait and see what happens scenario. As I said, I trust larger companies to have the resources at hand, when they are needed.