How Cloudflare Makes Money

As a user of Cloudflare domain and workers services, it was very logical to invest in it, though I sold it before the bear market, and still waiting for a good price point to enter again.

Cloudflare primarily makes money through its various cloud-based services and products. Here are some key sources of revenue for Cloudflare:

1. Content Delivery Network (CDN) Services: Cloudflare operates a global network of servers that cache and deliver web content closer to end-users. By doing so, it reduces latency and accelerates the loading of websites. Companies pay Cloudflare for CDN services to improve the performance and reliability of their websites. A competitor will be Akamai Technologies.

2. Security Services: Cloudflare provides a suite of security services to protect websites and web applications from various online threats, including DDoS attacks, malicious bot traffic, and other cyber threats. Businesses subscribe to these security services to safeguard their online assets.

3. Distributed Denial of Service (DDoS) Protection: Cloudflare offers robust DDoS protection to prevent disruptions caused by large-scale cyber attacks. Organizations, especially those with critical online operations, pay for these services to ensure the availability and stability of their online infrastructure.

4. Domain Registration and Management: Cloudflare provides domain registration services, allowing customers to register and manage domain names. While the domain registration market is competitive, Cloudflare's integrated services and security features may attract users to choose their platform. Competitors will be NameCheap and GoDaddy.

5. Cloudflare Workers: Cloudflare Workers is a serverless computing platform that allows developers to deploy and run code across Cloudflare's global network. This service enables developers to build and deploy applications on the edge. Cloudflare charges based on usage for this service. Competitors will be AWS, Google Cloud, or Microsoft Azure.

6. Enterprise Solutions: Cloudflare offers premium and enterprise-level solutions with advanced features and customization options. These solutions cater to larger businesses with specific requirements for performance, security, and scalability. Pricing for enterprise solutions is generally negotiated based on the client's needs.

7. Analytics and Performance Monitoring: Cloudflare provides analytics and performance monitoring tools that help businesses understand and optimize the performance of their web properties. This may include features such as real-time analytics, traffic insights, and performance metrics.

It's important to note that the specifics of Cloudflare's business model and services may evolve, and new services may be introduced. Cloudflare's annual report also does not break down the revenue further. It is important to note that Cloudflare is not cashflow positive and focused on growth

Cloudflare Growth Potential

Cloudflare has a decreasing YoY growth from ~50% to only ~30% according to MacroTrends. However, it is still healthier than its competitor Fastly which is growing slower at 15% to 20%. The slowdown is attributed to a combination of factors, including economic uncertainty leading to cautious business spending and the company's expanded portfolio of products and services, which has made the pitch to potential customers more complex according to Fool.com

• https://www.macrotrends.net/stocks/charts/NET/cloudflare/revenue
• https://www.macrotrends.net/stocks/charts/FSLY/fastly/revenue
• https://www.fool.com/investing/2023/06/23/cloudflare-looks-to-poach-customers-as-growth-slow/

Cloudflare used a freemium model to attract many companies. Cloudflare is like a sophisticated traffic cop for the internet. Its primary job is to manage the flow of online traffic efficiently and is a market leader in their free services such as DNS Servers, CDN, and reverse proxy, according to sources from W3Techs and BuiltWith.

• https://w3techs.com/technologies/overview/dns_server
• https://w3techs.com/technologies/history_overview/proxy/all
• https://trends.builtwith.com/cdn

Cloudflare is also useful for developers with its pay-as-you-use plans like Domain and service workers plans which I tried before. It was relatively easy and hid many of the complex charges that Amazon or Google usually have. It also provides some free services to help websites that are under DDOS or other attacks. 

Besides free plans and a pay-as-you-use plan, Cloudflare offers Pro ($20/month to $35/month + Usage), Business ($250/month or $2400/year), and a custom Enterprise plan according to its Enterprise website.

• https://www.cloudflare.com/plans/pro/
• https://www.cloudflare.com/plans/enterprise/

Based on CloudFlare, the freemium model attracted at least 50% of Cloudflare Pro customers, which provides faster traffic and security.

Over 50% of Cloudflare’s Pro plan customers started on the Free plan and eventually upgraded so they can activate more security and performance features. Ultimately the decision to upgrade is yours, but if any of the conditions below are true, you will likely find the Pro plan beneficial:

• Your website is generating revenue on a monthly basis;

• You have more than 1TB of web traffic;

• You fully manage your web server and are responsible for upgrading, patching and maintenance;

• Your website uses server-side applications (PHP, Python, Ruby, C#, JavaScript, etc.)

• There is a substantial risk if your website is hacked.

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