There is always space for expansion, even in crowded markets like hosting services. At the end of the day, all that matters is whether you have a good product and whether your audience can see the value in it or not.
If you are entering into crowded market, then, the first thing to do is do a thorough analysis of your top 3 market leaders. Find answers to questions like:
What features are they selling on?
How are they selling (channels)?
How are they retaining?
After careful study of your competitors, you will have a fair idea why works.
Now, you got to figure out the pain points. What their customers want but are not getting right now. It can be better support, flexible plans, or anything else.
Now that you know what people are missing out on, sit with a pen and paper to find out how you can differentiate your product. I hope this helped. For more clarity, let's have a call. Or feel free to email me at varun@upreports.com

Since marketing is crucial to success, leaving this blog link for your reference:
https://www.upreports.com/blog/marketing-growth-strategies-hacks/
Chao!

I’ve spent nearly half my career working in the hosting and ISP business. Back then it wasn’t so crowded :) Personally I believe you can deferentiate in many ways but first you must understand what the pain points are with successful hosting companies. Also what level of customer are you servicing? DigitalOcean IMHO do an amazing job but it’s not for the novice. Providing ease of use, value for money and legendary customer service are the 3 areas I would start with first. Happy to chat more if you’re keen.

You have a choice of standing out with either these options:
1. Branding
2. You have a slight edge

I think web hosting is incredibly saturated, unless you have something nobody else has but everyone wants - do you?

If not, you should be focusing on pricing, branding, and security. I would also focus on partnerships with other website builders.

Offer an added service/value for free when someone chooses you. Do you offer 1 month of free website consultation? do you offer free logo design? Add something of value so that people can kill 2 birds with one stone.

To answer your question, first of all remind to yourself why you want to do that in that niche. You may have such a conclusion about crowded business because you are already there and all you see-your competitors.
First identify how you are different and what value you can bring to your customers, why they should chose you before your competitors. 100% of buyings are emotional decisions, what emotions your product or service brings up? How you are representing those emotional patterns to your potential customers?
There are still many businesses that just making things done. And if you master making things done even a little better than any of the mediocre competitors than you still have more chance.
It is 50/50 between your state of mind and consistency.

Good luck on your businesses!

Let me tell you a story of Nerd Fitness.

In a space that's fiercely contested, where anyone can get an exercise routine for free from YouTube, and where there's a plethora of apps and courses available, Nerd Fitness has positioned itself as a fitness resource for, you guessed it, nerds.

People who are office workers.

People who sit at desks, lead sedentary lifestyles and have never really been the athletic type.

And their whole marketing and product positioning is around that group.

So you can expect to see content around food prep tips for office workers, workout strategies for the hassled and always on the run 9-5iver and apps for tracking your fitness.

They have a thriving business, vocal fans, and what I would imagine healthy profits.

I know another fitness brand who targets only seniors.

That's a great thing about going into a crowded market- the demand is already proven, but the bigger players try to be everything for everyone and fall short.

So if you are in the hosting market, position your product for a particular subset of users, like freelancers.

Package your products in such a way that it makes sense only for them. Offer specific add-ons, tie up with other companies who are targeting only freelancers, offer discounts on products or services that they will use.

That's how you break into a crowded market.

It's good to be in a competitive market. Remember that Burger King builds next to McDonalds, because they will get a flow of customers. As my mentor says, "People don't go into McDonalds to browse." That being said, "providing the best quality" isn't enough to differentiate you. These days, people expect a certain level of quality, which is the floor, and they are skeptical that new providers can provide it. Best quality is valuable, because once they become customers and experience your high quality, they will be pleasantly surprised, and so it is valuable for keeping customers and getting repeat purchases. But, it is ineffective for attracting new clients. You need a different point of differentiation. For example, if you can provide a high level of service to a certain sub-group of clients, then you can target them with your marketing. That doesn't mean you have to turn away other customers, but just focus your initial marketing on this group that you can provide differentiated service. Alternatively, instead of better servicing an area, you might have a better process or feature. For example, if you sell ice cream and have flavors or creative sundaes that others don't offer.

Have you read the book BLUE OCEAN STRATEGY?
Answers are there.
Success!

When more people sharing the same piece of cake, you need more effort to get a very small share.

This is reflecting on what you trying to do. So if you still want to remain in the crowded market, you should expect you may still survive but cannot make a good profit.

A promising market must show the potential of growth whether it is uncharted, blue market, early stage, growth stage, it will be far more a better market than the crowded market from ROI viewpoint.

Sometimes people stay in a crowded market as there is still sufficient volume to generate decent profit in dollar sense.

So, how to make a place in already crowded business despite knowing the above?
1. increase selling by reducing the price (your competitive advantage left the low-cost advantage).
2. cut down overhead to keep you survive
3. into R&D to develop a unique product that is disruptive enough to turnaround the table in that said market.
4. Most of the competitors are veteran in the market, partner with them, be friendly with them, to explore collaboration for mutual benefits.

Frankly, if giving me a chance, I will look for a promising market to venture.