The Unit Economics of Proxy Providers

Inside the proxy industry: Sky-high markups, razor-thin margins, and cutthroat competition

At a glance, the proxy industry looks like a money-printing machine. Providers acquire internet bandwidth for a few cents and resell it for dollars — often charging 20x to 80x the acquisition cost. It's a compelling incentive that has attracted countless entrepreneurs, investors, and even shady players. But dig deeper, and the picture becomes far more complex.

In this article, we’ll break down how proxy companies acquire their "inventory", how they monetize it, and why the real costs of running a proxy business go far beyond bandwidth. We’ll also share real numbers from Proxidize to illustrate how these margins work in practice.

How Proxy Providers Source Bandwidth

To procure IPs and bandwidth, proxy providers don’t create new infrastructure by, for example, laying fiberoptic cables or building ISPs. Instead, they tap into existing consumer internet infrastructure using two main methods.

1. SDK-Based Integration

Some providers partner with app developers to embed software development kits (SDKs) into their applications. These SDKs quietly turn end-user devices into proxy nodes, routing internet traffic through them in exchange for compensation to the developer.

Many SDKs’ websites are intentionally separate domains from the parent company, usually focusing — almost exclusively — on how easy it is for a developer to monetize their user base. The FAQs are vague, even with industry knowledge. In one instance, the only time the purpose of the SDK was ever plainly stated was in the site’s privacy policy.

This method scales quickly and yields high IP diversity, especially on mobile. Many free mobile games are “monetized” in this way, particularly those that seem to be marketed towards children. This method often lacks transparency, and many users unknowingly participate.

Regulatory scrutiny and ethical backlash are growing, for reasons that should be apparent.

2. Bandwidth Sharing Apps (e.g., Honeygain, Pawns.app)

Another method of acquiring “inventory” is through bandwidth sharing apps. While the marketing of these apps is equally geared towards monetization and “passive income”, these platforms are more transparent. Users install a dedicated app to share their internet connection in return for small payouts. The proxy company then sells access to that connection to its clients.

While this method is more transparent and ethical, it can be harder to scale and usually limits IP diversity to specific device types or locations. It requires a conscious choice by an end user to install the app rather than the more intentionally vague “opt-in” policies of SDK integration.

Monetization: Turning Bandwidth Into Revenue

Once a user’s device is part of the network, bandwidth through it can be sold to proxy buyers in a few ways:

• By bandwidth (e.g. $/GB)

• By time (e.g. $/hour for static sessions)

• By concurrent IPs or port

The most common and straightforward model is selling traffic by the gigabyte. Here’s where things get interesting: A gigabyte of residential or mobile bandwidth might cost the provider $0.10–0.20, yet it can be sold to the end user for $4–8 per GB, an almost 4,000% markup. This suggests absurdly high gross margins — on paper. However, running a business is more than just procuring inventory.

The Real Unit Economics: It’s Not Just Bandwidth

The reality is that bandwidth is only a fraction of the cost of running a proxy company. The real expenses are less obvious. Beyond “inventory”, providers have to cover a host of other expenses:

• Engineering & Infrastructure: Maintaining a robust, secure, and scalable proxy platform requires a strong backend team, DevOps infrastructure, rotation logic, dashboards, and failover systems.

• Customer Acquisition: Marketing, advertising, and sales commissions can — and often do — eat up a huge portion of the budget. Proxy buyers are a niche market, and acquiring them isn’t cheap.

• Support & Compliance: Proxies are used for everything from web scraping to sneaker bots, and managing abuse, refunds, compliance, and legal exposure is both difficult and expensive.

In practice, customer acquisition cost (CAC) alone can account for 40–60% of revenue, even at scale. And this is true across most proxy companies — despite the illusion of "free money" from reselling internet bandwidth.

Let’s take a look at a real-world example to put this into perspective.

A Real Example: Proxidize

At Proxidize, we operate one of the largest direct mobile proxy networks in the United States. We don’t resell bandwidth from third parties or rely on SDKs — we run our own infrastructure, with full control over every SIM, modem, and IP in our fleet.

We sell proxy traffic at $1 per GB, which may seem cheap compared to typical market rates.

But here’s what that $1 actually looks like:

• $0.20 goes toward mobile data and network costs

• $0.50 is spent on customer acquisition — ads, partnerships, sales, and content

• $0.25 covers infrastructure, servers, support, and ongoing R&D

That leaves us with just $0.05 in margin per GB, or 5% profitability, and we’re considered lucky in the industry. The only reason our model works at all is because we move thousands of terabytes of traffic every month.

We operate at scale, and we sell in bulk. That scale gives us efficiency, but it’s also what makes proxy businesses viable in the first place. Without massive traffic volume and tight operational discipline, even the most attractive pricing models collapse under overhead.

Proxidize is built for high-throughput use cases like web scraping, SEO monitoring, web automation, and more, where performance and IP quality matter. Our users choose us because we offer fully U.S.-based mobile proxies with real device IPs and exceptional speed.

If you’re looking for scalable, reliable proxy infrastructure, we’re one of the few providers who can actually deliver at scale.

Conclusion

At face value, the proxy industry looks like a profitable cash-grab; a license to print money, where you can convert pennies worth of bandwidth into dollars worth of sales. Behind the curtain, the illusion of the “cash machine” collapses under scrutiny.

The real costs in this business aren’t just bandwidth — they’re engineering, compliance, infrastructure, and most of all, customer acquisition. It’s easy to sell 1 GB. It’s brutally hard to sell 10 million.

Key Takeaways:

• Tight Margins: The enticing margins on bandwidth hide the expensive reality of running a proxy company, including everything from infrastructure to technical support.

• Bandwidth Acquisition Methods: SDK-based integrations, though scalable, come with ethical and regulatory questions, while bandwidth-sharing apps offer transparency but scale more slowly.

• Highly Competitive Industry: Customer acquisition alone typically consumes between 40% and 60% of revenue to compete.

• Scale is Essential: Efficiencies of scale are what keeps companies afloat; volume is a numbers game if you want profit.

• Transparent and Ethical Sourcing: A cursory glance at acquisition methods show that while slow and steady growth is harder to achieve, it is more transparent and ethical.

As discussed, margins in this industry are razor-thin, competition is cutthroat, and success requires massive upfront investment in both infrastructure and brand. An upcoming proxy company faces an incredibly steep uphill battle in establishing itself and acquiring bandwidth to sell. Profit is possible, but only if you build a machine capable of operating at industrial scale.

At Proxidize, we’ve built that machine. And we’re just getting started.