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Should You Start a Hosting Company in 2023? No. Unless...

Young Entrepreneur

My original Midjourney prompt was “young hosting entrepreneur starting a company”. After trying multiple generations, I had to explicitly set it to “starting her company” before MJ generated any image with a woman.

We often have people posting on LowEndTalk with their ideas for starting a hosting company.

You can start a hosting company for $20.  You can start one for $20,000 and put it into hardware and datacenter leasing.  But it’s all pointless unless you have customers.

Is the hosting market oversaturated?  Yes.  Note that I didn’t specify shared hosting, VPS hosting, cloud hosting, dedicated server hosting, or anything else.  It’s all oversold.

Hosting is the classic “low barrier to entry” market.  You’re not going to start a car company in 2023 without billions of dollars.  But you can start a hosting company just by grabbing a web page template, signing up for the cheapest reseller hosting package you can find, registering a domain, and throwing some ads out.

Times Have Changed, But…

That would have worked in 1995 when the market was expanding so fast there was an ocean of business for everyone.  In 2023, the situation is reversed: an ocean of hosting companies are chasing a smaller market.

That’s not to say that hosting itself is shrinking.  But you have these enormous companies (Microsoft, Google, etc.) taking a huge chunk to start with, and then the billions of smaller hosting companies which are practically cookie cutter.

So if your plan is to rent a server and find some nounhost.com that isn’t registered and try to match your competitor’s prices, you’re lost before you start.  You’ll never stand out in the marketplace and even if you do, the cost of customer acquisition is very high.

That by itself wouldn’t be so bad if customers were sticky, but they’re not.  You’re probably deploying cPanel or DirectAdmin for your cheap shared hosting.  Guess what?  So do billions (trillions?) of other hosting companies, and every one says “we’ll move your site for free” because it’s so easy.

Even for VMs and dedicated servers, there isn’t much stickiness.  Someone who’s smart enough to admin their own server is smart enough to move it.  And if they’re not, then the next managed server company they hire will move it.

One Critical Question You Must Answer

In rapidly expanding markets (hosting in the 90s), you can be a cookie cutter.  In 2023, you need to be able to explain

What differentiates you from every other host on the planet?

Some examples:

  • You are a web designer, and you offer an all-in-one kind of service where you design, maintain, and host web sites.
  • You have some add-on or unique software offering included in the hosting.  Something like “I’ve developed some custom Odoo ERP modules for the refrigeration equipment resellers and I can provide an all-in-one solution for web hosting and inventory management”.
  • You’ve targeted some niche that has specialized hosting needs and you tailor your services for that niche.   “Gamers” is not a niche.  “We offer support in Basque” might be.

One LowEndTalk Member Nailed It

In a recent thread on this topic, LowEndTalk member @rcy026 (since 2020!) said:

If it was easy, everyone would do it.

But seriously, there are offers here that sell lifetime hosting for €15 or sometimes even less. Let that sink in. €15 for a lifetime. Do you think you are able to run a business on that? Very few people are.
The margins in this industry is simply non-existing, so forget competing with price.

Compete with good service? Well, everyone claims they have the best service and most friendly support. True, most of them are lying, but they still claim it.

And really good service is expensive. You can forget competing in the low end if you aim to provide good service. You cant do it alone, and hiring good people costs money.

Stability and performance? A lot of low end providers are actually just reseller of the big players, so the infrastructure is often as good as it gets. I have vps’s that haven’t had a second of downtime for many many years and they are connected to some of the best backbones in the world, and I still pay only a few euros a month for them.

I don’t mean to discourage you, I’m just letting you know that it is a very saturated market. If you can find a niche, a way to stand out, go for it! I wish you the best of luck! But if you just try to copy what everyone else is doing, you will most likely fail.



  1. I’ve run several businesses over my 45 years and the hardest thing is to get real customers. my older brother has always told me not to go into a business with low barrier of Entry. you have to be unique and this business is definitely cookie cutter. find something where you truly can be different.

    May 15, 2023 @ 6:55 am | Reply
  2. paul:

    new to this hosting idea. what are your thoughts on the GPU hosting market? is it overstated?

    May 16, 2023 @ 8:41 pm | Reply
    • paul:

      oversaturated, i meant to say

      May 16, 2023 @ 9:03 pm | Reply

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