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Neither of you explained in layman terms what they actually do.

They're a static site web host. You deploy using git, and they handle pulling your site from git and deploying it to a CDN. If you're using a static site engine like Hugo or Jekyll, they'll build the site for you as well.

I think what people are excited about is deploying a JavaScript-based frontend (probably written in React or Vue.js) using Netlify, so the client-side code is quickly distributed and accessible.

Building Javascript-based frontends are already compiling to static assets, which Netlify could already host. JAMstack is about having the javascript front-end call APIs on the backend. This is about creating an environment for all the back-end functions to be in one place, possibly with the front-end deployment. Not sure how it is going to be implemented though.

it means you set it and forget it

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