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Remember: Cloudflare has been loosing millions of dollars each year they existed. https://www.sec.gov/Archives/edgar/data/1477333/000119312519222176/d735023ds1

Remember: Cloudflare has been loosing millions of dollars each year they existed. https://www.sec.gov/Archives/edgar/data/1477333/000119312519222176/d735023ds1.htm https://www.sec.gov/Archives/edgar/data/1477333/000119312519... "As we continue to invest in our business, we have incurred net losses of $17.3 million, $10.7 million, and $87.2 million for 2016, 2017, and 2018, respectively. For the six months ended June 30, 2018 and 2019, our revenue increased from $87.1 million to $129.2 million, an increase of 48%, and we incurred net losses of $32.5 million and $36.8 million, respectively. " The fact that they are injecting themselves into more and more basic internet infrastructure is genuinely scary.

ocdtrekkie 6y ago
Amazon has historically lost money yearly while investing in their business. A lot of Cloudflare's various new inroads offer a lot of areas they can charge money. My guess is they could turn on the profit faucet whenever they want to. Of course, for that reason it may also be uncomfortable to jump on some Cloudflare products: Presumably some prices are going to go up sooner or later.
MikeCapone 6y ago
That's a misunderstanding of how companies at this phase of growth work. They are only "loosing" money because they invest so much in growth. If they slowed down growth, they could be profitable (they have 78% gross margins), but over time, it creates more value to keep investing at this phase of things and become profitable later, when they're more mature and the land-grab phase is over.
- danShumway 6y ago
  I'm not sure I understand how that's different than what GP is saying. Cloudflare is aggressively investing into growth during the 'land-grab' phase of development so that they can become one of, if not the, dominant player in regards to this kind of core Internet infrastructure. They view the 'land' of Internet infrastructure as a limited resource, and they want to own all of it. I'm seeing a comparison to Amazon, but that doesn't make me feel better. Amazon's aggressive expansion has been a net negative for multiple segments of the market -- particularly e-books and audio books. What makes Cloudflare's growth strategy less concerning when compared to companies like Amazon and Uber? Aren't they all still basically trying to become indispensable private monopolies within their given niches?
  - treis 6y ago
    They make a profit of 30 million in 6 months before Sales and marketing expenses. So they charge more money than it costs to provide their services. When you look at Sales/Marketing expenses it changes depending on your perspective (and underlying facts). It could be that they are spending ~60 million a year to get ~100 million NPV worth of customers. In that case, they're not losing money. They're making an investment that will return cash in future years. On the other hand, that 60 million could represent a bunch of discounts and incentives. Then they'd be selling $1 worth of stuff for $0.90 and once they stop doing that their market share evaporates.

ocdtrekkie 6y ago

Amazon has historically lost money yearly while investing in their business. A lot of Cloudflare's various new inroads offer a lot of areas they can charge money. My guess is they could turn on the profit faucet whenever they want to. Of course, for that reason it may also be uncomfortable to jump on some Cloudflare products: Presumably some prices are going to go up sooner or later.

MikeCapone 6y ago

That's a misunderstanding of how companies at this phase of growth work. They are only "loosing" money because they invest so much in growth. If they slowed down growth, they could be profitable (they have 78% gross margins), but over time, it creates more value to keep investing at this phase of things and become profitable later, when they're more mature and the land-grab phase is over.

danShumway 6y ago
I'm not sure I understand how that's different than what GP is saying. Cloudflare is aggressively investing into growth during the 'land-grab' phase of development so that they can become one of, if not the, dominant player in regards to this kind of core Internet infrastructure. They view the 'land' of Internet infrastructure as a limited resource, and they want to own all of it. I'm seeing a comparison to Amazon, but that doesn't make me feel better. Amazon's aggressive expansion has been a net negative for multiple segments of the market -- particularly e-books and audio books. What makes Cloudflare's growth strategy less concerning when compared to companies like Amazon and Uber? Aren't they all still basically trying to become indispensable private monopolies within their given niches?
- treis 6y ago
  They make a profit of 30 million in 6 months before Sales and marketing expenses. So they charge more money than it costs to provide their services. When you look at Sales/Marketing expenses it changes depending on your perspective (and underlying facts). It could be that they are spending ~60 million a year to get ~100 million NPV worth of customers. In that case, they're not losing money. They're making an investment that will return cash in future years. On the other hand, that 60 million could represent a bunch of discounts and incentives. Then they'd be selling $1 worth of stuff for $0.90 and once they stop doing that their market share evaporates.