Hacker News Reader

Comment by AtlasBarfed | Hacker News Reader

Uh, so how does cloudflare do it, since the answer is basically "cloudflare".

They have sweet deals with the cloud providers?

Cloudflare has their own hardware and so pays a "market price" for bandwidth (which is much lower than what clouds (over)charge) and their business model relies on other value-add products rather than just bandwidth. I wouldn't be surprised if they actually lose money on this deal, but I guess it sometimes pays off to provide loss leaders.

Cloudflare subsidizes the small guys in hopes they'll turn into big guys. Bandwidth isn't that expensive in the first place though, that's just a myth perpetuated by AWS/Azure/Google.

Bandwidth Alliance, a consortium of companies that offer free (or steeply discounted) bandwidth between participants.

https://www.cloudflare.com/bandwidth-alliance/

They don't have a cloud computing business to put a walled garden around (yet).

Also see their post about it https://blog.cloudflare.com/aws-egregious-egress/

The biggest costs of server bandwidth are due to transmitting data over large distances (since the internet backbone operates on a sender-pays model when unbalanced traffic is involved in peering). By locating CDN nodes globally, Cloudflare can ensure data is sent near the last mile and thus inexpensive to send. Unless ISPs decide to shake it down the way they do with Netflix of course.

Cloudflare is currently operating at a close to break-even loss.

Sure, because we're hiring like crazy to build new things. As we said during our last earnings call, we intend to stay at break even as long as we can achieve extraordinary revenue growth and continue to deliver innovative new products.

The more relevant number for this comparison would be our gross margin — much we have to spend on things like bandwidth and servers to service our customers divided by the revenue those customers generate — which in Q3 2021 (our last reported quarter) was 78%. Which is… pretty good for a services business like ours.

I don't know the specifics of this customer, but I don't see anything that leads me to believe our margins would be out of the ordinary with them. There are a lot of scale economics in our business. In other words, we can definitely do things for less money because we service a lot of customers than any one customer could hope to do it on their own.

I love HN and it’s always amazing to see the founders answer the questions themselves and most importantly care a lot about the product.

Do you see you offering more dynamic hosting in the future? Things like elastic databases, GPUs etc

It's super nice that you're here and your transparency is appreciated, but don't waste time in people like GP. Just walk your way and don't mind the naysayers.

My two cents from a regular guy to a billionaire, :).

>don't mind the naysayers

Noting they are operating at a slight loss, during a period where they want to drive growth, isn't "naysaying". The question is whether the current pricing is tied at all to the "operating at a slight loss". He replied to say it mostly wasn't.

Remember, for example, when Uber rides were really cheap?

You're right about that but in this case I think they have that covered. Bandwidth is not really that expensivea and they already have the network and scale effects on their favor; so, if anything, I believe their opex (per customer or w/e) will continue to go down.

Have anything in infrastructure/operations/Linux sysadmin type areas?

Bandwidth is cheap. Cloud providers are insanely expensive for bandwidth. Cloudflare is peering in a lot of locations, making it even cheaper for them.

Reply on news.ycombinator.com