Why Some Hosting Providers Avoid Emerging Markets

Emerging markets for hosting providers are regions where internet penetration, digital transformation, and entrepreneurial activities are rapidly increasing. These markets are attractive for hosting providers because they present significant growth potential due to their expanding online presence and their demand for digital infrastructure. But why do some hosting providers avoid these emerging markets?

Examples of Emerging Markets in 2025

Southeast Asia is a rapidly growing market due to high smartphone adoption and government initiatives to digitize economies. There has been notable growth in e-commerce, startups, and small-to-medium enterprises needing websites and other digital platforms in countries like Indonesia, Vietnam, the Philippines, and Thailand. E-commerce market revenue in Southeast Asia is projected to reach $116.5 billion in 2024, increasing by more than 10% a year between 2024 and 2029. Its market volume is expected to exceed $191 billion in 2029. This region exhibits high demand for affordable and scalable web hosting solutions, cloud hosting, and managed services.

Rapid urbanization, expanding mobile internet access, and a youthful, tech-savvy population make Africa another emerging market for hosting providers. Sub-Saharan African countries went against a notable internet-related trend in 2022. The mobile internet connectivity growth rate declined globally, but approx. 30 million people started to use mobile internet in sub-Saharan Africa that year, matching the growth seen in 2021.

Despite these statistics, the internet usage gap in sub-Saharan countries was 59%, with a 15% coverage gap. Almost 200 million people in these countries lack mobile broadband coverage. That is, they represent half of the 400 million that lack coverage worldwide.

There is an increase in tech hubs, fintech startups, and government initiatives for digital inclusion in rapidly developing countries like Nigeria and Kenya. Demand for entry-level hosting services, domain registration, and localized content delivery is increasing correspondingly.

The concept of emerging markets extends to regions other than those mentioned above, including countries like Canada. Purchasing power, internet backbone infrastructure, and the number of local data centers are sufficient to make Canada a target region for hosting providers.

Infrastructure Issues

While emerging markets like Southeast Asia and Latin America can present significant growth opportunities, some hosting providers are cautious about entering them. Frequent power outages in some regions can affect data centers’ uptime and increase operational costs.

Limited or inconsistent internet backbone infrastructure can lead to slower data transfer speeds. A lack of local data centers forces users to rely on distant servers, causing poor performance.

Low Purchasing Power in Emerging Markets

Many small businesses and individuals in emerging markets may not be able to afford premium hosting services, which can affect the host’s profitability. Setting up infrastructure or partnering with local entities can be capital-intensive.

Operational Challenges

Recruiting and training skilled IT professionals locally can be difficult and expensive in emerging markets. Language or cultural barriers add further complexity in terms of the ability to provide effective customer support. Excessive red tape can hinder the process of importing equipment for data centers.

Market Education and User Adoption Challenges

Beyond infrastructure and financial barriers, hosting providers face the challenge of market education in emerging regions. Many potential customers in these markets lack awareness about the benefits of professional hosting services, making customer acquisition more resource-intensive.

Small businesses and entrepreneurs in emerging markets often operate with minimal digital literacy, requiring hosting providers to invest heavily in educational content, simplified interfaces, and extensive onboarding support. This educational burden increases customer acquisition costs significantly compared to mature markets where users already understand hosting fundamentals.

Furthermore, potential customers in these regions frequently undervalue web hosting services, perceiving them as unnecessary technical expenses rather than business investments. Hosting providers must, therefore, allocate substantial resources to demonstrate the return on investment from professional hosting.

The prevalence of informal digital solutions also complicates market penetration. Many businesses in emerging markets rely on free platforms or social media for their online presence, creating an additional hurdle for hosting providers seeking to convert users to paid professional services. Overcoming this preference for free alternatives requires compelling differentiation that goes beyond what’s typically needed in developed markets.

Security Risks and Payments in Emerging Markets

In 2023, the daily average of cyberattacks experienced by Southeast Asian businesses exceeded 36,000. Other emerging markets also face relatively high risks of cyberattacks, including data breaches and distributed denial-of-service attacks. Adoption of secure online payment systems may remain limited, leading to a higher risk of fraud and payment disputes. However, 85% of the population lives in emerging markets, which are also home to almost 90% of people under 30. These population trends favor online transaction growth, stimulating economic development and curtailing the gray economy.

Regulatory Uncertainty and Compliance Challenges

Navigating the regulatory landscape in emerging markets presents significant challenges for hosting providers. Unlike established markets with well-defined digital regulations, many emerging regions have evolving or inconsistent legal frameworks governing data sovereignty, privacy, and content restrictions.

Hosting providers face the risk of sudden regulatory changes that could disrupt their operations or force costly compliance measures. For instance, data localization laws requiring customer data to be stored within national borders may necessitate unexpected infrastructure investments. Data sovereignty regulations have become increasingly stringent in countries like Indonesia and Vietnam, requiring foreign hosting providers to establish local data centers or partnerships.

Compliance with varying privacy standards across different jurisdictions increases operational complexity. While the EU has GDPR, emerging markets often have their own developing frameworks that may conflict with international standards. This regulatory fragmentation forces hosting providers to implement region-specific policies and technical measures, significantly increasing compliance costs.

Content restrictions and censorship policies in some emerging markets can also create operational and ethical dilemmas for hosting providers. Companies may find themselves caught between complying with local laws and upholding their commitment to digital freedom, potentially damaging their global reputation.

Recapping

Hosting providers face multiple challenges in emerging markets, including:

Frequent power outages are a significant barrier.
Limited internet backbone infrastructure is another big challenge.
Users in emerging markets may not be able to afford premium hosting.
Language barriers make providing customer support challenging.
User adoption and education can be costly.
Excessive red tape hinders the import of data center equipment.
Emerging markets face a relatively high risk of cyberattacks.
Emerging markets bring in new policies and restrictions to learn and maintain.

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