Comment by shubhamjain
3 days ago
> Additionally, there's plenty of "Upgrade to Pro" buttons sprinkled about. It's the freemium model at work.
I don't think they care much about few "Pro" upgrades here and there. The real money, and their focus as a company, is in enterprise contracts. Note that, Matthew Prince, the CEO, had outlined a few reasons why they have such a generous free tier on an Stack Exchange answer[1]. I think the biggest reason is this:
> Bandwidth Chicken & Egg: in order to get the unit economics around bandwidth to offer competitive pricing at acceptable margins you need to have scale, but in order to get scale from paying users you need competitive pricing. Free customers early on helped us solve this chicken & egg problem. Today we continue to see that benefit in regions where our diversity of customers helps convince regional telecoms to peer with us locally, continuing to drive down our unit costs of bandwidth.
Cloudflare had decided long ago that they wanted to work at an incredible scale. I would actually be very interested in understanding how this vision came to be. Hope Matthew writes that book someday.
I think there are a few other benefits (even if that was the main benefit/driving force behind the decision).
When you have low-paying (or zero-paying) customers, you need to make your system easy. When you're enterprise-only, you can pay for stuff like dedicated support reps. A company is paying you $1M+/year and you hire someone at $75,000 who is dedicated to a few clients. Anything that's confusing is just "Oh, put in a chat to Joe." It isn't the typical support experience: it's someone that knows you and your usage of the system. By contrast, Cloudflare had to make sure that its system was easy enough to use that free customers would be able to easily (cheaply) make sense of it. Even if you're going to give enterprise customers white-glove service, it's always nice for them when systems are easy and pleasant to use.
When you're carrying so much free traffic, you have to be efficient. It pushes you to actually make systems that can handle scale and diverse situations without just throwing money at the problem. It's easy for companies to get bloated/lazy when they're fat off enterprise contracts - and that isn't a good recipe for long-term success.
Finally, it's a good way to get mindshare. I used Cloudflare for years just proxying my personal blog that got very little traffic. When my employer was thinking about switching CDNs, myself and others who had used Cloudflare personally kinda pushed the "we should really be looking at Cloudflare." Free customers may never give you a dollar - but they might know someone or work for someone who will give you millions. Software engineers love things that they can use for free and that has often paid dividends for companies behind those free things.
I built my website on Cloudflare Pages and ended up using basically their entire suite of tools - Pages, D1, Analytics, Rules, Functions. The DX was pretty good because all of these features worked well together.
Cloudflare offered all of this for free because it gets them positive mentions (like the one you’re reading right now) and they’re educating a bunch of developers on their entire product portfolio. And what does it cost to host my blog that 1000-2000 views a month? Literally nothing.
This approach is good as long as the tech stack is open source and portable to other platforms. Otherwise, no matter how good a company/CEO seems ATM, you are ultimately at their mercy if they decide to raise prices significantly.
By using an open, interoperable tech stack, you maintain the freedom to switch to another cloud provider at will.
This shared fluid power also creates a compelling reason for cloud providers to remain honest and competitive in their dealings with customers.
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I have been bitten many times by this usage of free stuff that suddenly starts to cost money so it took a while before I dared to use cloudflare. Have been using it for a few years now without any surprise bills so still happy. Hope I didn't jinx it now. :-)
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I feel like there might be an additional motivation too, which is that this investment in a better internet (free SSL for everyone before LetsEncrypt came around, generous free tiers for users, etc. etc.) means that Cloudflare builds a reputation of being a steward of the ecosystem while also benefitting indirectly from wider adoption of good, secure practices.
In some ways it's analogous to investing in your local community and arguably paying tax: it's rare that you would directly and personally benefit from this, but if the environment you live in improves from it, crime is reduced, more to do, etc. then you can enjoy a better quality of life.
Have they made a better internet? Many would say that made it worse.
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Reminds me of the School -> Pro pipeline where companies sell cheaply or even give away their software to learning institutions so that students who go pro are familiar with their tools and then later recommend it for their work.
That’s absolutely true for things like MS Office and Adobe - but it also works in the other direction: I’m sure making kids use Java for AP computer-science or for undergrad contributed to its uncool status today.
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Autocad 10-12 back in college. Cost thousands of dollars in 80s/90s dollars, Not officially allowed to copy, but in reality effortless to copy and run at home for free.
There were other products aiming to be just as good at the same time that were actually protected with dongles and such.
The one that everyone could run at home is the one that took over the world.
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This is exactly our thinking with authentik (open source IdP), and it's played out in practice so far. Enterprise sales conversations are so much easier when they start with "we all use you in our homelabs already." We're much more focused on giving those individual users a positive early experience (in hopes that some small percentage will really pay off down the road) than in extracting a few dollars from each of them.
I had this exact conversation with a Cloudflare rep a year or two ago, after I told her how I user their free DNS service. She said, "that free service was the best thing we ever did". And we wound up buying their bot management and DDOS services.
I went back and reread that reply by Matthew. Essentially, nothing has changed; the free customers are very important to us for all the reasons that he outlined. See also this blog post on us and free customers from 2024: https://blog.cloudflare.com/cloudflares-commitment-to-free/
^ CTO of Cloudflare for reference
> I don't think they care much about few "Pro" upgrades here and there. The real money, and their focus as a company, is in enterprise contracts.
Cloudflare's enterprise customer acquisition strategy seems to be offering free or extremely cheap flat-rate plans with "no limits", then when a customer gets a sizeable amount of traffic they will try to sell them an enterprise plan and cut them off if they don't buy (see https://robindev.substack.com/p/cloudflare-took-down-our-web...). IMO this is pretty shrewd, as it means that companies can't do real price comparisons between Cloudflare and other CDNs until they already have all their infrastructure plugged into Cloudflare.
That particular story / case had a lot more context to it that we weren't given. I wouldn't be ready to place any kind of merit on it without hearing more. I also think given the OP's industry it's likely there were issues with IP reputation. Could it have been handled differently? Probably. In this case I think it would have been smarter to just part ways upfront and let the client know it's not going to work out. I suspect the contract was designed to say.. we don't see the value in this relationship.. but at this price we'll make it work type deal. I don't think that's the right way to go, but I hardly believe this is how they operate.
I've used their free -> enterprise services in multiple companies and clients. Haven't had a single bad experience with them yet. Always helpful, if a bit delayed at times.
It doesn't seem like Cloudflare has any problems with online gambling, especially since the first email the author got from Cloudflare came from someone in their "Gaming & iGaming" division. There's people in this thread in other industries who have had similar experiences with them.
IMO the biggest problems are how Cloudflare kept inventing excuses like "issues with account settings" to get the customer on the phone with their sales team, and the mixing of "trust and safety" with sales (like deleting their account for ToS violations after the CEO mentioned talking to a competing CDN).
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Yep, and if you contact their sales directly because you've been bitten before and tell them your traffic they will be happy to tell you that yes, other than a short trial you have to pay them for huge bandwidth from month one. It's actually surprising to me people would believe it's fully free. Like think for a bit that if that was the case Netflix would just move to Cloudflare free tier and Cloudflare would go bankrupt immediately.
Like think for a bit that if that was the case Netflix would just move to Cloudflare free tier and Cloudflare would go bankrupt immediately.
Cloudflare's free tier specifically excludes video. See https://www.cloudflare.com/service-specific-terms-applicatio...:
Content Delivery Network (Free, Pro, or Business) Cloudflare’s content delivery network (the “CDN”) Service can be used to cache and serve web pages and websites. Unless you are an Enterprise customer, Cloudflare offers specific Paid Services (e.g., the Developer Platform, Images, and Stream) that you must use in order to serve video and other large files via the CDN. Cloudflare reserves the right to disable or limit your access to or use of the CDN, or to limit your End Users’ access to certain of your resources through the CDN, if you use or are suspected of using the CDN without such Paid Services to serve video or a disproportionate percentage of pictures, audio files, or other large files. We will use reasonable efforts to provide you with notice of such action.
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I haven't heard about this in particular but based entirely on your depiction here it sounds more like fraud to me.
If I was paying a flat rate for a no limit plan, that company tried to sell me an Enterprise plan which I declined, then they cut me off, we'd be in court as soon as the clerk would schedule it.
If you were rotating IPs against the TOS I don't think you'd have a leg to stand on
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I remember this story and it missed the entire point.
The customer ( a casino) was using dubious actions in different countries which impacted Cloudflare's IP trust. Tldr: Cloudflare didn't want an IP ban in their IP's due to government regulation.
The fix was to bring their own IP which is an Enterprise feature, as they weren't allowed to use Cloudflare's IPs anymore.
> Bandwidth Chicken & Egg: in order to get the unit economics around bandwidth to offer competitive pricing at acceptable margins you need to have scale, but in order to get scale from paying users you need competitive pricing. Free customers early on helped us solve this chicken & egg problem.
I'm not really sure how this works.
Suppose you have paying customers and for that you need X amount of bandwidth. If you add a bunch of free customers then you need X + Y bandwidth. But the price of X + Y is never going to be lower than the price of X, is it? So even if the unit cost is lower, the total cost is still higher and you haven't produced any additional revenue in exchange, so how can this produce any net profit?
If you send 10Gbit/s to an ISP you have to pay for transit to reach it. But if you send 100Gbit/s+ the ISP suddenly is willing to not only peer for free with you but may even host the servers for you in their data center for free. [0][1][2] So yes being bigger can absolutely save you costs.
[0]: https://www.cloudflare.com/partners/peering-portal/
[1]: https://openconnect.netflix.com/en/
[2]: https://support.google.com/interconnect/answer/9058809?hl=en
Don't forget about the Bandwidth Alliance, which is agreements for free or cheap egress between peers.
https://www.cloudflare.com/bandwidth-alliance/
Can't you just send random generated packets. Or by requesting content from other hosting provider with free or cheap egress. Or sending to another hosting provider.
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The thing with ISPs is the small guys are more likely to have to pay, and the smaller you are the more likely you are to pay more.
If you are a Tier 1 ISP, everyone is willing to pay you to carry their traffic and other Tier 1s just make peering agreements with you.
If you're johnscheapvps.com, you're likely to pay all your upstream ISPs for your traffic. If you're GCP or, say, digitalocean.com, everyone would love to be paying you to get faster access to all the sites hosted on your platform (and because paying you is probably going to be cheaper than their regular upstream)
Imagine you're an ISP. If your customer has slow bandwidth to some random website, they will blame the website. If they have a slow connection to YouTube, they will blame you.
So YouTube gets more favorable terms on transit bandwidth than the random site does.
it may be, especially if the ISP in question just does direct peering with you, your unit cost can drop to ~ $0/MB, and you stop paying Cogent/Verizion/HE unit cost for facilitating the connection from you to the ISP.
Works for the ISP too, one off cost for them to drop there side of the bill down
The point is that that you get your paid offering down to a lower price point because you have the volume to get the cheaper peering deals. Because your paid offering is cheap you get even more volume from paying customers which offsets the loss you made.
And this works IME
I use Cloudflare for hobby projects 90% of the time because it’s free. That dramatically increases the likelihood I advocate for their offerings in the enterprise
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Cloudflare generally seems to have a really smart strategy team. There's a really excellent Stratechery article about Cloudflare's strategy team more generally:
(Stratechery is down now, but the web archive is up.) https://web.archive.org/web/20250108182845/https://strateche...
https://stratechery.com/2021/cloudflares-disruption/
It's a very elegant business strategy because you have one clear focus (handle loads of bandwidth), but it can be expressed in so many ways (DNS/Caching, object storage, video delivery/streaming, static site hosting).
I've always wondered if there is an accounting benefit for them. Can the free tier be charged as 'marketing'? No idea how you would internally break up the costs, but it could make your margins look better.
Another likely reason: the process of metering bandwidth accurately enough to use as input for a billing process costs money. On their distributed setup it's probably seriously expensive to do accurate bandwidth metering per site. Probably more expensive than they expect to make by pricing bandwidth.
The hidden purpose of a free tier is to discourage competition
Expand on this please?
Let’s say you’re looking to break into the Fun as a Service market. The incumbent offers 100 hours of Fun per year as a free service and charges enterprise prices above that. If you want to start a Fun as a Service competitor, to have any chance of competing for new signups you also have to front 100 hours/year for anyone who wants to try it at a 100% loss, before you can even start making money.
It’s the same principle behind predatory pricing, which is illegal but rarely enforced. The goal is to make it too expensive for new players to enter the market, or to force existing competitors out.
That's not the complete story.
Cloudflare's main income is DDOS, which is incoming traffic they pay for.
They pay for that pipeline (which you pay for up and down traffic), so they have a generous free CDN because they already pay for it.
( Unrelated to workers, ... )
I think this is the important part
> Today we continue to see that benefit in regions where our diversity of customers helps convince regional telecoms to peer with us locally, continuing to drive down our unit costs of bandwidth
If you can peer your traffic you can send it for free.
So lots of small customers, despite not paying anything, is helping to reduce bandwidth costs for Cloudflare to zero.
If they've reduced bandwidth costs to zero then they can afford to give it away for free.
I can tell you from personal experience that getting some ISPs to peer with you is hard unless you are exchanging lots of traffic already.
This is a clever playbook that has made Cloudflare a tier 1 ISP in an age when that is extremely difficult.
- Not every peering is free. - You still have to pay for the fibre and router.
Power and rent too
> Cloudflare had decided long ago that they wanted to work at an incredible scale.
This reminds me of the story of how Jeff Bezos bought relentless.com. The rest is history. https://pluralistic.net/2022/11/28/enshittification/