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It's weird because the VPN industry is usually portrayed as having high margins (and it makes sense, considering how much money is spent on marketing by various

It's weird because the VPN industry is usually portrayed as having high margins (and it makes sense, considering how much money is spent on marketing by various VPN services). Is it a case of "winners take all", with smaller players having little revenue and profit? But then again, everyone seems to offer their own vpn now (adguard, blokada, protonmail, etc). Is it just profitable if you offer a bare minimum, almost white labeled service? (I guess I have always wondered how and why VPN offering seem to have exploded recently, and how tons of them seem to be able to afford lavish ad spend even with little VC money)

askura 4y ago
I'm seeing it more going the other way. Over the past few years so many services have been bought by bigger corps or even media companies. These bigger companies seem to be able to undercut the competition. Causing things like this I guess. Though it's anyone's guess what has happened as service over time had deteriorated quite drastically.
leros 4y ago
The barrier to entry is also pretty low. It's basically a marketing game to see who can attract customers at the best rate of return. I'm guessing there are tons of VPN startups that never get large enough to keep going and the ones that do grow probably get acquired by the bigger ones.
- askura 4y ago
  Yeah seems to be the case. Express VPN's parent corp acquired CyberGhost, Zenmate, Private Internet access over the last few years. They also paid as much as several of these put together for the marketing/affiliate websites Webselence, VPNmentor, Safety Detectives. Which shows how much money must be in these affiliate programs.
meltedcapacitor 4y ago
Sounds like a hard business for small VPN providers, getting squeezed between the cat and mouse game with content providers blocking them on one side, and users abusing the service on the other side. Same work whatever size, so better be big, or white label a big name.
- codexon 4y ago
  What work do VPN providers do get themselves unblocked?
  - CharlesW 4y ago
    Sketchy VPN providers use botnet services like Mylobot to provide residential exit nodes. https://www.bitsight.com/blog/mylobot-investigating-proxy-botnet https://www.bitsight.com/blog/mylobot-investigating-proxy-bo...
    - codexon 4y ago
      I'm talking about the mainstream ones like nordvpn and mulvad.
  - deleted 4y ago
    [deleted]
majormajor 4y ago
Those marketing costs need to be included in the margins - put concretely, it means cost of customer acquisition is very high. If you're spending two dollars to bring in one dollar, you're going to fail. Consolidation is an attempt to bring those costs down by reducing the number of players bidding for customers.
yegor 4y ago
Windscribe co-founder here. Consumer VPN industry is a shit show, especially in the last 3-5 years. The parasitic "VPN review" industry is making all the money, as the "big VPNs" are paying ridiculously high CPA rates (think gambling CPA rates of $50-$100). Most "review" sites rank VPNs based on a single metric - who pays the most. This is why vpnmentor (a review site) was acquired for more money than PrivateInternetAccess (a "major VPN). Hilariously, by the same company, Kape technologies which used used to make adware (as Crossrider), and then decided to go all in on "privacy". Then there are influencers and Youtubers, all of them peddling VPNs of the highest bidder, reading off a script and making impossible / bullshit claims about capabilities of VPNs. This outright causes harm to the industry. VPNs that don't participate in these BS schemes (or can't pay $100/signup, and wait for ROI 3 years later), have only 1 way to grow: word of mouth, based on the merits of the product. This is very difficult to do given the massive ad spend of the "big VPNs", and false advertising they engage in. Don't even get me started on the consolidation.... https://blog.windscribe.com/consolidation-of-the-vpn-industry-spells-trouble-for-the-consumer-57e638634cf0/ https://blog.windscribe.com/consolidation-of-the-vpn-industr...
- flavmartins 4y ago
  This reminds me of Web hosting and the review industry around it 20 years back and I worked for a large web hosting provider. The founder was really open about it. And back then hosting had ~$100 CPA and we had instances where we wouldn't turn a profit on a customer who purchased a shared hosting account UNLESS they renewed after 2 years given the cost to acquire. To this day, when I see lists reviewing services providers, I'm always skeptical of them and steer away from letting them influence my decision on a service provider.
- winstonprivacy 4y ago
  100% agreed with this comment. We kind of got lumped into the VPN segment back in the day, despite being a hardware product. The cutthroat nature of the existing media agreements (NordVPN and Express VPN mainly) along with the sky high CPMs they were paying made it impossible for us to acquire customers and keep them long enough to pay our bills. Pretty smart tactic... if you're them. Quite bad for the consumer though.
jfengel 4y ago
I don't know much about the industry, but I'm a bit surprised to hear about them having high margins. I'd have thought that maintaining infrastructure would be kind of a pain. You need to have outgoing access points all over the place. I assume that they mostly just rent them, but still, that's just a bunch of egress fees. And I'm sure that their customers love to stream movies through their VPN. I suppose the fact that I hear about VPNs mostly through commercials means that the margins must be high, or they wouldn't spend so much on acquisition. But it seems like an unpleasant business to be in, with a lot of overhead and customer handholding.
jstarfish 4y ago
> how and why VPN offering seem to have exploded recently, and how tons of them seem to be able to afford lavish ad spend even with little VC money) This is entirely conspiracy theory, but I suspect state sponsorship. Looking at our access logs over the same amount of time, we'd have our domestic users doing normal things, and then oddball traffic from Russia and China (and wherever else) trying to bruteforce credentials and probe for vulnerabilities. Then we started seeing our domestic users logging in from oddball places ("Bob doesn't live or work in ___..."), and these would turn out to be legit-- they'd be using ExpressVPN or whatever. Not ideal, but ok. But the vulnerability scans and spray-and-prays stopped coming in from foreign countries, and started coming in from known VPN ASNs-- the same ones as our legit users coming in from the same sources. While there used to be some divide between the really scummy providers and the more-sortof-legit ones, this problem has gotten even worse as these services consolidate. Now everybody's coming in from something M247-owned and that's that. These days, enough of our users have been enticed by the promises of the VPN industry that we can't really tell who's who anymore based on IP address, and the same thing is starting to happen with useragents and mail clients. I suspect a lot of our users are simply handing over credentials to foreign agencies running some of these apps at this point. Then said agency logs in over the VPN whenever they please and we don't even notice because they're coming in from the same location as the user themselves-- there's just no such thing as "normal" anymore. We can't ban the VPNs because inevitably some exec who thinks VPN will prevent his spouse from discovering his Grindr account will complain that he can't connect anymore, so it all gets enabled again. Again, conspiracy theory, but if I were a state agency, normalizing abnormal behavior is what I'd do.

askura 4y ago

I'm seeing it more going the other way. Over the past few years so many services have been bought by bigger corps or even media companies. These bigger companies seem to be able to undercut the competition. Causing things like this I guess. Though it's anyone's guess what has happened as service over time had deteriorated quite drastically.

leros 4y ago

The barrier to entry is also pretty low. It's basically a marketing game to see who can attract customers at the best rate of return. I'm guessing there are tons of VPN startups that never get large enough to keep going and the ones that do grow probably get acquired by the bigger ones.

askura 4y ago
Yeah seems to be the case. Express VPN's parent corp acquired CyberGhost, Zenmate, Private Internet access over the last few years. They also paid as much as several of these put together for the marketing/affiliate websites Webselence, VPNmentor, Safety Detectives. Which shows how much money must be in these affiliate programs.

meltedcapacitor 4y ago

Sounds like a hard business for small VPN providers, getting squeezed between the cat and mouse game with content providers blocking them on one side, and users abusing the service on the other side. Same work whatever size, so better be big, or white label a big name.

codexon 4y ago
What work do VPN providers do get themselves unblocked?
- CharlesW 4y ago
  Sketchy VPN providers use botnet services like Mylobot to provide residential exit nodes. https://www.bitsight.com/blog/mylobot-investigating-proxy-botnet https://www.bitsight.com/blog/mylobot-investigating-proxy-bo...
  - codexon 4y ago
    I'm talking about the mainstream ones like nordvpn and mulvad.
- deleted 4y ago
  [deleted]

majormajor 4y ago

Those marketing costs need to be included in the margins - put concretely, it means cost of customer acquisition is very high. If you're spending two dollars to bring in one dollar, you're going to fail. Consolidation is an attempt to bring those costs down by reducing the number of players bidding for customers.

yegor 4y ago

Windscribe co-founder here. Consumer VPN industry is a shit show, especially in the last 3-5 years. The parasitic "VPN review" industry is making all the money, as the "big VPNs" are paying ridiculously high CPA rates (think gambling CPA rates of $50-$100). Most "review" sites rank VPNs based on a single metric - who pays the most. This is why vpnmentor (a review site) was acquired for more money than PrivateInternetAccess (a "major VPN). Hilariously, by the same company, Kape technologies which used used to make adware (as Crossrider), and then decided to go all in on "privacy". Then there are influencers and Youtubers, all of them peddling VPNs of the highest bidder, reading off a script and making impossible / bullshit claims about capabilities of VPNs. This outright causes harm to the industry. VPNs that don't participate in these BS schemes (or can't pay $100/signup, and wait for ROI 3 years later), have only 1 way to grow: word of mouth, based on the merits of the product. This is very difficult to do given the massive ad spend of the "big VPNs", and false advertising they engage in. Don't even get me started on the consolidation.... https://blog.windscribe.com/consolidation-of-the-vpn-industry-spells-trouble-for-the-consumer-57e638634cf0/ https://blog.windscribe.com/consolidation-of-the-vpn-industr...

flavmartins 4y ago
This reminds me of Web hosting and the review industry around it 20 years back and I worked for a large web hosting provider. The founder was really open about it. And back then hosting had ~$100 CPA and we had instances where we wouldn't turn a profit on a customer who purchased a shared hosting account UNLESS they renewed after 2 years given the cost to acquire. To this day, when I see lists reviewing services providers, I'm always skeptical of them and steer away from letting them influence my decision on a service provider.
winstonprivacy 4y ago
100% agreed with this comment. We kind of got lumped into the VPN segment back in the day, despite being a hardware product. The cutthroat nature of the existing media agreements (NordVPN and Express VPN mainly) along with the sky high CPMs they were paying made it impossible for us to acquire customers and keep them long enough to pay our bills. Pretty smart tactic... if you're them. Quite bad for the consumer though.

jfengel 4y ago

I don't know much about the industry, but I'm a bit surprised to hear about them having high margins. I'd have thought that maintaining infrastructure would be kind of a pain. You need to have outgoing access points all over the place. I assume that they mostly just rent them, but still, that's just a bunch of egress fees. And I'm sure that their customers love to stream movies through their VPN. I suppose the fact that I hear about VPNs mostly through commercials means that the margins must be high, or they wouldn't spend so much on acquisition. But it seems like an unpleasant business to be in, with a lot of overhead and customer handholding.

jstarfish 4y ago

> how and why VPN offering seem to have exploded recently, and how tons of them seem to be able to afford lavish ad spend even with little VC money) This is entirely conspiracy theory, but I suspect state sponsorship. Looking at our access logs over the same amount of time, we'd have our domestic users doing normal things, and then oddball traffic from Russia and China (and wherever else) trying to bruteforce credentials and probe for vulnerabilities. Then we started seeing our domestic users logging in from oddball places ("Bob doesn't live or work in ___..."), and these would turn out to be legit-- they'd be using ExpressVPN or whatever. Not ideal, but ok. But the vulnerability scans and spray-and-prays stopped coming in from foreign countries, and started coming in from known VPN ASNs-- the same ones as our legit users coming in from the same sources. While there used to be some divide between the really scummy providers and the more-sortof-legit ones, this problem has gotten even worse as these services consolidate. Now everybody's coming in from something M247-owned and that's that. These days, enough of our users have been enticed by the promises of the VPN industry that we can't really tell who's who anymore based on IP address, and the same thing is starting to happen with useragents and mail clients. I suspect a lot of our users are simply handing over credentials to foreign agencies running some of these apps at this point. Then said agency logs in over the VPN whenever they please and we don't even notice because they're coming in from the same location as the user themselves-- there's just no such thing as "normal" anymore. We can't ban the VPNs because inevitably some exec who thinks VPN will prevent his spouse from discovering his Grindr account will complain that he can't connect anymore, so it all gets enabled again. Again, conspiracy theory, but if I were a state agency, normalizing abnormal behavior is what I'd do.