This is one of those questions which I have the privilege misfortune of having to answer on almost a daily basis. There seems to be a lot of misinformation going around on this topic, spouted mostly by self-proclaimed ‘SEO gurus’, but I’d like to lay this baby to rest once and for all. (If only.)
Since we’re all primarily concerned with our Google search engine rankings, let’s first start by looking at what the ‘Big G’ themselves have to say on the matter:
Similiarly, Google’s John Mueller had the following to say in response to a user’s question on Google Groups:
“For search, specifically for geotargeting, the server’s location plays a very small role, in many cases it’s irrelevant. If you use a ccTLD or a gTLD together with Webmaster Tools, then we’ll mainly use the geotargeting from there, regardless of where your server is located. You definitely don’t need to host your website in any specific geographic location — use what works best for you, and give us that information via a ccTLD or Webmaster Tools.”
So there you have it folks, straight from the horse’s mouth. Google quite clearly indicating that so long as your website is set to target a specific local audience, server location is completely irrelevant. And how do you target said audience? Your first method is to purchase a domain with a local TLD (e.g. co.za for South Africa). You can also create a Google Webmaster Tools account for your website (you should be doing this irrespective) through which you can set the geographic location to your country. And even if you fail to adhere to the above steps, so long as the content and language of your website are strongly indicative of a specific country bias, you should be safe. Failing all of the above, server location might have a role to play, but even then, the answer as to how much of a role is very unclear.
In fact, we have hosted many of our own websites on European servers and have successfully ranked a number of these websites on page 1 of Google.co.za for almost every relevant keyword.
The bottom line is that there is simply no evidence whatsoever supporting the claim that hosting a website on a locally based server will have any real positive effect on your website’s search engine rankings.
If SEO is a top priority – and it should be – then ditch the server location paranoia, and start focusing your efforts on building better websites with more high-quality, optimized content and better back-links.