Understanding the proxy market

Much like Adam Smith’s often criticized “invisible hand,” the best proxies also play a nearly imperceptible, but influential role in the business world. Almost all of us interact with proxies on a daily basis, yet few people understand the far-reaching implications of the technology.

Some skepticism regarding proxies is understandable – they’ve historically been used for niche applications, some of which wouldn’t have been considered to be of the highest ethical caliber. While the skeptical public perception continues to follow proxies, the best proxy servers are now considered to be an essential part of many business models.

A simple technology with far-reaching benefits

In the simplest possible terms, a proxy is an internet-connected device that can relay traffic for another machine. Much of the same technological foundation is used for a better-known type of product – a virtual private network (VPN).

VPNs, however, come laden user experience benefits that make the service easy to use for consumers and businesses alike. Many of them nowadays grant lots of additional services such as cyber threat protection.

Proxies would be considered a bare bones product by many consumers. After all, most proxy products are a set of IP addresses, ports, and some basic configuration options. Yet, the same bare bones nature of proxies makes them more modular.

Due to the way networking has been established, any IP address brings with itself some additional information such as the predicted location – something that is of high importance in some business applications.

All of these aspects create unique business applications for proxies. But they also make the same product largely irrelevant for day-to-day consumer use, leading to an environment where the general public never notices them while businesses are reliant on the product.

That may be why proxies have an air of skepticism surrounding them. When they are operated properly, consumers never notice that proxies are being used.

When something goes awry, however, proxies will receive a lot of media attention. Since most of that attention will be negative, such a news cycle leads to an unintentionally pessimistic outlook on proxies.

Uncovering proxy procurement practices

Another area that’s veiled under a curtain of mystery is the procurement process. Since every proxy is acquired from a device someone owns, specific software has to be installed into that machine.

Procurement practices differ based on the proxy type, since they are largely defined by the nature of the device. Two of the most common and widely used types are datacenter and residential proxies.

Datacenter proxy procurement has never been controversial. Data centers are business-owned collections of servers. All a proxy provider needs to do is sign a business agreement with the company.

Residential proxies, however, are acquired from consumer-owned devices such as personal computers or mobile phones. Practices for residential proxy acquisition differ across the industry.

We perform our residential proxy procurement through our sister-company, where users can voluntarily turn their device into a proxy and get monetarily rewarded. Some proxy providers have used other means such as implementing software development kits in popular mobile applications.

An important aspect of any proxy is that it only serves as a traffic relay. No control over the device itself is provided to the buyer and only the absolutely necessary information about it is granted (such as the type and location).

Once an IP address pool is established, a proxy provider will generally perform cost analysis to determine the proper pricing for the product. Typically, proxies will be sold per IP or per GB of bandwidth.

Businesses that purchase proxies will then get access to a set amount of IPs or the entire pool (if bandwidth is used). It should be noted that, in a technical sense, proxies are sold as a service, not as a product. Ownership, management, and many other aspects remain on the side of the proxy provider.

Part of the reason is that proxies are just a means to an end. They can be used for legitimate, consumer-centric purposes, but they can also be misused. As such, proxy providers will often implement strict controls, restrictions, and risk management practices to minimize abuse.

Consumer-centric applications

Travel fare aggregation: Fare aggregation is one of the most lauded and well-known applications of proxies. Most of us have used these services to plan a business trip or vacation.

One of the primary challenges is that travel fare data is location-based. Since there’s users from all over the world, a travel fare aggregator would have a hard time acquiring accurate data for every possible location. Proxies allow them to completely circumvent the expensive process.

They can use a proxy, matching your location, to collect accurate data with automated tools. The process is then repeated as many times as necessary, all of the data is aggregated, compared, and provided to the user.

Without proxies, it’s unlikely that such a business model would be at all viable. Yet, as I’ve alluded to above, the usage of proxies is completely hidden from the consumer.

Brand protection services: Counterfeit goods are a surprisingly common occurrence. Online and peer-to-peer marketplaces make it hard for businesses to keep tabs on everyone who might be attempting to sell counterfeit items.

Automated data collection and monitoring processes are used to discover potential offenders across a wide array of websites. Since some of these websites may be geographically restricted, only serving customers within a specific region, proxies become a vital part of data collection. Proxies also allow them to circumvent unintentional bans caused by automation.

Conclusion

No one intends to keep proxies a secret. Yet, as they form the very foundational layer of many practices and business models, consumers never get to interact with them directly.

All of the practices outlined above are a small sample of the various ways in which proxies are used, most of which ultimately benefit everyone. It’s definitely one of the most interesting industries in various ways – treated as something suspicious while being beneficial to everyone.

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