Cutting Cloud Costs at Cloudflare with Matthew P

Hello everyone,

Here is a very good podcast with Matthew Prince, Co-founder and CEO of Cloudflare, who talks about cloud costs and the multiplicitous things cloud costs are associated with.…

“Matthew Prince, Co-founder and CEO of Cloudflare, has joined Corey this week to talk about cloud costs and the multiplicitous things cloud costs are associated with. Matthew breaks down what exactly Cloudflare is up to, and how they are handling their clients cloud costs needs. Those needs that, according to Matthew, “over time and at scale, bandwidth costs go to zero.” Matthew and Corey focus on Cloudflare as a company, and the retinue of options they are bringing to their clients. They discuss their mutual concerns with some of AWS costs to include the achilles heel of egress charges. Matthew discusses Cloudflare’s suite of tools they’ve built internally, and have been making available over time. Check out the conversation for more details!”

my first post here so go easy on me please :slight_smile:


Thanks saagrawal for putting this forward,

My understanding of the rules of the board is that if we’re going to post, it should be to comment specifically on the value of the information made available.

There has been a lot of discussion on the board regarding Cloudflare and why it’s being valued so highly. After to listening to the podcast I came away with the impression that, if we take Mr. Prince’s words at face value, Cloudflare’s creation of R2 was not necessarily motivated by finding a way to cash in on AWS’s practices regarding egress fees but rather to eliminate a point of friction for internet users, in keeping with their mission statement to “build a better internet”.

Mr. Prince said something to the effect that he would “dance a jig” if AWS were to eliminate their egress fees tomorrow because such an action would eliminate a significant friction point for their customer’s and make it easier to concentrate on their mission. If AWS did that, the R2 initiative would probably not thereafter generate significant revenue but it would likely improve the internet experience of countless users.

I didn’t take notes but my recollection is that he believes that if this were to happen (unlikely), it would generate goodwill with customers. And as long as they remain focused on doing this it is possible for them to find ways to align generating goodwill with increased profits.

He went on highlight many instances where their product releases were the result of them creating ways to relieve their own pressure points and seeing how it would have value for other businesses.

If Cloudflare can continue to execute on this vision, I see how their TAM grew and would continue to do so.

I will be paying close attention to see if they can do this going forward.

Thanks again,

P.S.: Their efforts to become a “4th cloud provider” is also very well thought out but I don’t have the tech competence to comment on this. Just that it seems that they are laser focused on allowing their customers to pick what they like best from the big 3 (GCP, AWS and AZURE) and allowing them to do so on their platform. Muji does a much better job explaining Cloudflare.


My understanding of the rules of the board is that if we’re going to post, it should be to comment specifically on the value of the information made available.

Monkey would like to emphasize what Mike wrote above. Please, for the love of all things yellow and tasty, consider carefully that we are living in an age of information abundance, overload and overwhelm. It’s not finding the news that’s hard; it’s figuring out what it means and why it’s valuable.

The first violators of this are people on this board who read the earnings report for two seconds and post them three seconds thereafter–without adding their own analysis.

It’s kind of like people standing on the street giving out advertisements to passerby–“Here, you take this and throw it out for me.”

As for Cloudflare during these market rotations or hammock spins as Monkey experiences them: remember that the numbers in term of execution are backing the narrative, and the narrative is “building a better internet” which seems like a project with near infinite TAM, revenue-wise. So however much $NET may be down today, tomorrow, next week, think of your banana pile five years from now. You’ll be glad you didn’t sell. Unless you have that hard-to-come-by working crystal ball that gauges market exit and entry points accurately without smoking and running out of batteries.

Anyway, what a concept for Cloudflare: genuinely help the world and its people and your company’s value will increase.


Monkey (long NET)
@cxdDesign on the twitters


One thing that stood out to me was Matthew’s response when asked about his college thesis that the internet was a fad, and it was going to fail. Then, in light of new information, he admitted that he was wrong and that’s what pushed him to create Cloudflare to cover for his stupidity, as he put it. Some argue that management should not get into the equation when searching for a company to invest in, but we need to remember that actual people (who manage the company) drive revenues based on their decisions and someone who can admit mistakes and reevaluate should be of great importance to any team.


One last topic that I want to cover with you before we call it an episode is, back in college, you had a thesis that you have done an excellent job of effectively eliminating from the internet. And the theme of this, to my understanding, was that the internet is a fad. And I am so aligned with that because I’m someone who has said for years that emerging technologies are fads. I’ve said it about cloud, about virtualization, about containers. And I just skipped Kubernetes. And now I’m all-in on serverless, which means, of course it’s going to fail because I’m always wrong on these things. But tell me about that.


When I was seven years old in 1980, my grandmother gave me an Apple computer for Christmas. And I took to it like a just absolute duck to water and did things that made me very popular in junior high school, like going to computer camp. And my mom used to sign up for continuing education classes at the local university in computer science, and basically sneak me in, and I’d do all the homework and all that. And I remember when I got to college, there was a small group of students that would come around and help other students set their computer up, and I had it all set up and was involved. And so, got pretty deeply involved in the computer science program at college.

And then I remember there was a group of three other students—so they were four of us—and they wanted to start an online digital magazine. And at the time, this was pre-web, or right in the early days of the web; it was sort of nineteen… ninety-three. And we built it originally on old Apple technology called HyperCard. And we used to email out the old HyperCard stacks. And the HyperCard stacks kept getting bigger and bigger and bigger, and we’d send them out to the school so [laugh] that we—so we kept crashing the mail servers.

But the college loved this, so they kept buying bigger and bigger mail servers. But they were—at some point, they said, “This won’t scale. You got to switch technologies.” And they introduced us to two different groups. One was a printer company based out in San Francisco that had this technology called PDF. And I was a really big fan of PDF. I thought PDF was the future, it was definitely going to be how everything got published.

And then the other was this group of dorky graduate students at the University of Illinois that had this thing called a browser, which was super flaky, and crashed all the time, and didn’t work. And so of the four of us, I was the one who voted for PDF and the other three were like, “Actually, I think this HTML thing is going to be a hit.” And we built this. We won an award from Wired—which was only a print magazine at the time—that called us the first online-only weekly publication. And it was such a struggle to get anyone to write for it because browsers sucked and, you know, trying to get students on campus, but no one on campus cared.

We would get these emails from the other side of the world, where I remember really clearly is this—in broken English—email from Japan saying, “I love the magazine. Please keep writing more for the magazine.” And I remember thinking at the time, “Why do I care if someone in Japan is reading this if the girl down the hall who I have a crush on isn’t?” Which is obviously what motivates dorky college students like myself. And at that same time, you saw all of this internet explosion.

I remember the moment when Netscape went public and just blew through all the expectations. And it was right around the time I was getting ready to graduate for college, and I was kind of just burned out on the entire thing. And I thought, “If I can’t even get anyone to write for this dopey magazine and yet we’re winning awards, like, this stuff has to all just be complete garbage.” And so wrote a thesis on—ehh, it was not a very good [laugh] thesis. It’s—but one of the things I said was that largely the internet was a fad, and that if it wasn’t, that it had some real risks because if you enabled everyone to connect with whatever their weird interests and hobbies were, that you would very quickly fall to the lowest common denominator. And predicted some things that haven’t come true. I thought for sure that you would have both a liberal and conservative search engine. And it’s a miracle to this day, I think that doesn’t exist.


Now, that you said it, of course, it’s going to.


Well, I don’t know I’ve… [sigh] we’ll see. But it is pretty amazing that Google has been able to, again, thread that line and stay largely apolitical. I’m surprised there aren’t more national search engines; the fact that it only Russia and China have national search engines and France and Germany don’t is just strange to me. It seems like if you’re controlling the source of truth and how people find it, that seems like something that governments would try and take over. There are some things that in retrospect, look pretty wise, but there were a lot more things that looked really, really stupid. And so I think at some level, I had to build Cloudflare to atone for that stupidity all those years ago.


There’s something to be said for looking back and saying, “Yeah, I had an opinion, and with the light of new information, I am changing my opinion.” For some reason, in some circles, it feels like that gets interpreted as a sign of weakness, but I couldn’t disagree more, it’s, “Well, I had an opinion based upon what I saw at the time. Turns out, I was wrong, and here we are.” I really wish more people were capable of doing that.

[This sums up the top, in my opinion, rule of successful investing. Whenever new info comes in, we need to quickly reevaluate and if we were wrong to take appropriate measures. This is why we don’t just buy, hold and pray.]


It’s one of the things we test for in hiring. And I think the characteristic that describes people who can do that well is really empathy. The understanding that the experiences that you have lead you to have a unique set of insights, but they also create a unique set of blind spots. And it’s rare that you find people that are able to do that. And whenever you do—whenever we do we hire them.


To that end, as far as hiring and similar topics go, if people want to learn more about how you view things, and how you see the world, and what you’re releasing—maybe even potentially work with you—where can they find you?


[laugh]. So, the joke, sometimes, internal at Cloudflare is that Cloudflare is a blogging company that runs this global network just to have something to write about. So, I think we’re unlike most corporate blogs, which are—if our corporate blog were typical, we’d have articles on, like, “Here are the top six reasons you need a fast website,” which would just be, you know, shoot me. But instead, I think we write about the things that are going on online and our unique view into them. And we have a core value of transparency, so we talk about that. So, if you’re interested in Cloudflare, I’d encourage you to—especially if you’re of the sort of geekier variety—to check out, and I think that’s a good place to learn about us. And I still write for that occasionally.


You’re one of the only non-AWS corporate blogs that I pay attention to, for that exact reason. It is not, “Oh, yay. More content marketing by folks who just feel the need to hit a quota as opposed to talking about something valuable and interesting.” So, it’s appreciated.

[Another parallel I find with this board is that nobody is directly getting paid to contribute their personal time and efforts that drive the success of this fine board. I think this makes it the single most important place on the web for discussing hypergrowth investing.]


The secret to it was we realized at some point that the purpose of the blog wasn’t to attract customers, it was to attract potential employees. And it turns out, if you sort of change that focus, then you talk to people like their peers, and it turns out then that the content that you create is much more authentic. And that turns out to be a great way to attract customers as well.

[Correct me if I’m wrong, but this is how I see this board too. The more critical readers it attracts, the better it gets as a lot more people can contribute their own ideas/thoughts and get the discussion going.]