Cloudflare Before The Earnings: Valuation And Innovation_老虎社区_美港股上老虎

Cloudflare Before The Earnings: Valuation And Innovation

Seeking Alpha2021-10-29

Summary Next week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued extremely high. Despite the very expensive stock, I won't sell a single share. I explain why. More ...

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Aaden
·2021-11-13
Great sharing and inside views. Can't agree more that NETS is a great company and innovator
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Dexterine
·2021-11-03
I couldn’t agree more. The unique and silent positioning of cloud flare gives it an edge that many other companies does not have.Good article
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DMC8
·2021-10-30
Good Article 👍
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There's no doubt that Cloudflare is valued extremely high.\nDespite the very expensive stock, I won't sell a single share. I explain why.\nMore ...\n\n<a href=\"https://seekingalpha.com/article/4463158-cloudflare-net-stock-q3-earnings-preview-valuation-innovation\">网页链接</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"NET","symbol_name":"Cloudflare, Inc.","start_time":0,"source_url":"https://seekingalpha.com/article/4463158-cloudflare-net-stock-q3-earnings-preview-valuation-innovation","article_id":"1162447676","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1162447676","pubTimestamp":1635486956,"columns":[],"sourceInfo":null,"weMediaInfo":null,"summary":"Summary\n\nNext week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"NET":"Cloudflare, Inc."},"translate_title":"盈利前的Cloudflare：估值与创新","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"NET":0.9},"content_text":"Summary\n\nNext week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued extremely high.\nDespite the very expensive stock, I won't sell a single share. I explain why.\nMore and more, Cloudflare is becoming the protector of the Internet, with a huge market share of 80% for reverse proxy. This is important for the roll-out of its products.\nCloudflare has ambitions to become the fourth public cloud, next to AWS, Azure and GCP, the cloud offerings of Amazon, Microsoft and Google. There also are much more innovations.\nThe constant innovation can spur the high growth of Cloudflare for a very long time.\n\nSundry Photography/iStock Editorial via Getty Images\nIntroduction\nNext week, on Nov. 4, Cloudflare (NET) reports earnings. There's no doubt that the stock is priced extremely high, but still I won't sell before the earnings. In the first part of the article, I will explain my reasoning.\nIn the second part of this article, I will show the new developments and why investors have reacted so enthusiastically.\nMy situation might differ from yours\nFirst, I want to explain my personal situation on Cloudflare. I picked it as a Potential Multibaggers for my subscribers at $39 and as I always invest along with my subscribers, I have a low-cost basis. I don't want to brag at all here, so if it comes across as that, I'm sorry and I should have phrased it more carefully.\nThe reason why I mention my low-cost basis before you even start reading is that it says a few things about my investing and your situation. The first is obvious: I may in a completely different situation as you might be in right now. The second thing it says about my investing is that I'm a long-term investor. For me that means at least three years, but preferably much longer. That may be very different from how you try to make money in the stock market.\nDifferent strokes for different folks and I wanted to make clear from the start here that if you react in the comments (everybody who follows me knows that I love the comment section) you should know my situation, which could be very different from yours and some arguments could not make sense for me, just as some arguments in this article might not make sense for more short-term oriented investors. Having said that, I will start with the hottest item first, the expensive valuation of Cloudflare.\nExpensive Cloudflare: What do I do?\nEven as a very bullish investor, there's no denying that Cloudflare is very expensive right now. It already was, and with the 25% jump this week, it's even more. I live in Belgium and there's no capital gains tax here (don't worry, there are numerous taxes to compensate that). So why wouldn't I sell after such a huge run? After all, Cloudflare is up 226% over the last year. With capital gains tax, what I will write is true even more.\nData by YCharts\nSuppose I sell now, at $182, the price when I'm writing this near the market open on Thursday morning. In the next weeks and months, the stock continues to go up, to $250. After all, the stock market is not a rational place. If you believe that, you will probably not be very successful. How do you think I will feel at $250? I will feel stupid. But that's not all...\nSuppose after six long months Cloudflare goes down to $185. Will I still have the money to buy back my position? Would I be willing to enter again at a price a bit higher than where I sold and give up the reason why I sold in the first place? Or will I wait?\nNo, I want it to go lower before I buy again. Suppose I put a price of $155 on it. That's $27/share less or 15% from where I sold. Is that enough? Or should I wait until there is a 25% drop at $136.5? What if it never goes down to that price again? Am I supposed to not hold stock of this great company that does everything right because of an arbitrary price I drill into my head?\nSuppose I'm strict, $136.5 or no buying. But suppose in 2022, there is a drop from $300 to $210, will I not be tempted to buy, at a 10% higher price than where I sold but 30% down from its previous high? Suppose I don't buy and in five years it crosses $500 without me owning it, how do you think I will feel? Of course, like a complete idiot, because I know this company so well, I know that it does everything right and that it has a fantastic future in front of it but I still decided to not own it.\nAnd still, this scenario is what a lot of so-called specialists promote and practice. It sounds easy (buy low, sell high) but is extremely complicated in reality. I want to have the best companies of our time in my portfolio, even if they are expensive or extremely expensive, like Cloudflare is right now. If Cloudflare goes down, great, then I add a bit more. I'm not selling a single share.\nI already had written this part when I thought it would be good content for Twitter too. To my surprise and delight, I got an answer from the man himself, Cloudflare founder and CEO Matthew Prince.\n\nSo, for the earnings, the stock price could drop, it could go up or stay flat. You never know. I think that if you are a short-term oriented investor, the chance is somewhat higher that it drops because of the high valuation. But if the company posts stellar results, the price could even go up. There are no certainties in investing.\nWith all of Cloudflare's innovations (more about that later in this article) and the many products it doesn't monetize yet, the company could see very high revenue growth (40%-50%) for many, many years to come, especially if it could realize its ambition to become the fourth public cloud (again, see further in this article).\nCloudflare is becoming the gateway for the internet\nSomething else to consider here is another, much more important tweet that Matthew Prince sent out, the market share that Cloudflare has when it comes to reverse proxy services.\n\nA reverse proxy is a layer between a web server and the rest of the Internet. It provides security and better performance. Your computer doesn't have to connect to a single server, it can connect to any of the more than 250 Cloudflare's POPs (point-of-presence, a data center, which are almost always much closer to you.) That means faster and also much more secure internet, as a DDOS attacker (a bombardment of requests that make your site unusable) would need to attack all 250+ data centers of Cloudflare to be successful. I think you can see the huge advantage for customers.\nThis is a very simple visualization of how Cloudflare reverse proxy works.\n\nAs you can see on the chart that Matthew Prince shared, Cloudflare now does this for 18.4% of the whole Internet, followed by Fastly (1.7%) and AWS Cloudfront (1.2%). That's already a huge thing in and of itself. Cloudflare is 10 times bigger than its nearest competitor, which is a monster company. With edge computing and compute and storage capacities that Cloudflare is rolling out on the edge, this lead is very important. Cloudflare is in the driver's seat here and the market clearly recognizes that. That's probably one of the main reasons that it's priced so high.\nBut the huge majority of sites, 77.2%, still doesn't use a reverse proxy serve service. If you look then at the websites that use a reverse proxy, you see that Cloudflare's market share is more than 80%. Mind blowing!\nSource:Liberty Highlight's excellent newsletter\nOne of my subscribers, Irnest Kaplan, had some interesting questions about reverse proxy and, in another premium example of how communicative Matthew Prince is, the CEO answered to Irnest's question.\n\nI will answer Irnest's last question: Yes, Cloudflare monetized this, but just a small part. It generates a ton of data and insights that it gives Cloudflare an incredible competitive advantage over all of the other players in the industry. On top of that, you are a Cloudflare customer already, even if it is on a free plan, which means that if you look for another solution, Cloudflare will probably be the first vendor you'll think of, as it is much easier to have a one-stop-shop.\nCloudflare's Innovation\nI share my Birthday Week with that of Cloudflare. The company was founded in 2010, on Sept. 27, two days before I was born, years earlier, of course. Yearly, Cloudflare celebrates its Birthday Week with of new initiatives. Let's look at the most important ones here, but first the Founders' Letter, which the company also issues each year in this week.\nCloudflare's Birthday Week: the Founders' Letter\nAs part of the Birthday Week festivities, Cloudflare’s Co-Founders, Matthew Prince and Michelle Zatlyn (who is the COO and President of Cloudflare) released their annual “Founder’s Letter.”\nI really like that Matthew and Michelle talk a lot about their Mission Statement (“To Help Build a Better Internet”) and what they're actively doing to bring it to fruition.\nCloudflare is attracting elite talent. They have had more than 250,000 people apply in the last year but have hired less than one-half of one percent of them. This quote also shows how fast the company is growing:\n\n It's incredible to realize that more than half of Cloudflare's team today started since March 13, 2020, when we closed all our physical offices due to the pandemic.\n\nThe company now organizes social events like picnics to make social connections. At the same time, Prince and Zatlyn are really happy with work from home:\n\n Culture has little to do with fun offices, plentiful snacks, or adjustable desks. Instead, for us, it starts with hiring people who are relentlessly curious and, at the same time, empathetic. Curious people want to learn. Empathetic people love to teach. And if you put a group of them together, whether in a swanky office or on Zoom, great things will happen.\n\nOne of the aspects I like about Matthew Prince and Michelle Zatlyn is their ability to zoom out, which I also try for investing too. That's why this part stood out for me as well (my bold):\n\n A mere 11 years before Cloudflare's founding, long-distance phone calls still cost a fortune, sharing a photograph with someone in another country took weeks, and the idea that you could access the sum total of human knowledge from a device in your pocket was beyond even the fantasies of science fiction.\n\n\n (...)\n\n\n The Internet may seem static, but it is not. Eleven years ago, watching a video online was an exercise in frustration. Today, it seems almost automatic that you can push play on your TV and access nearly any movie ever made instantly. That's possible because the Internet isn't static; it gets better through innovation.\n At Cloudflare, we're optimized to catalyze exactly that innovation.\n\nThis is another great piece:\n\n Sometimes people outside the company are surprised by the products we build. In fact, predicting our roadmap is pretty easy. We look at all the steps that are required to load a web page, send an email, stream a video, login to a workstation, or anything else you do online and ask: can we make that more secure, more reliable, or faster?\n\n\n (...)\n\n\n As the Internet grows and acquires more capabilities, we believe we will continue to grow with it. An investment in Cloudflare is, fundamentally, we feel an investment in the Internet itself.\n\nI really like that quote because it aligns with Cloudflare’s mission statement. If you’re bullish on the growth of the Internet and the role it plays in our lives, then you’re inherently bullish on Cloudflare according to the founders. To me, this is backed up by their rapid rate of innovation and quality products. We will now dive into some of these new products that were released during Birthday Week.\nCloudflare is building real-time communication.\nCloudflare announced Just to remind you, Cloudflare works with POPs (points-of-presence), 250 data centers around the world. Starting out, this was a CDN (content delivery network) but Cloudflare builds more and more software and services on top of that infrastructure and that is what makes this company so much better than Fastly (FSLY), for example. The pace of innovation is incredible.\nThe POPs are meant to speed up data streams. Communication is a data stream. If you talk during your Zoom (ZM) meeting, that generates a data stream. Twitter Spaces (group audio) is another example of communication that is built on real-time communication.\nIt will be interesting to see what Cloudflare does here. Will it develop APIs that developers can use to build their own real-time communication like Agora or Twilio? Or will Cloudflare even go further and also launch a consumer product, more like Zoom?\nWe don't know what Cloudflare's plans exactly are and I think it will take them a year or even more before everything is ready for the market, although you never know with Cloudflare.\nOne of my subscribers had shared a very interesting job opening from Cloudflare (thank you GV!), so I already knew this was in the making before the announcement during Birthday Week. I share the most interesting parts here:a real-time communications platform during Birthday Week. This is the business Agora (API) and Twilio (TWLO) are in, although Twilio does much more than this alone. It means that Cloudflare will go into communications. This could become very powerful.\n\nSecure e-mail through Cloudflare\nCloudflare introduced Cloudflare Email Routing during Birthday Week. It's a simple email integration tool. As Cloudflare explains:\nThe process is simple:\n\nYou enter the email address you want to create on your domain\nYou enter the email address you want it forwarded to\n\n\nIn short, Cloudflare makes sure that your e-mail comes in the right e-mail box without losing any speed, security or privacy. It's free and just another way of branching into another business. It's a huge market, as 4 billion people have at least one e-mail address and 300 billion mails are sent around the globe every day. Some of those people and businesses will start using Cloudflare's service and get to know the company better.\nCloudflare Registrar\nCloudflare also announced that all Cloudflare customers have full Registrar access, including the ability to register new domains. The company already has introduced the most used TLDs (top-level domains) such as .com, .net and several others and extensions of countries (.uk, .de, .au etc) already are introduced or will be rolled out over the next few weeks. Cloudflare does this all at-cost, meaning you only pay what Cloudflare itself has to pay.\nThis introduction is Cloudflare at its best again, explaining sometimes difficult things in an easy-to-understand way.\n\n In the domain name world, there are two key players: Registrars and registries. Understandably, the two are often confused. One way to look at it is that registries are the wholesalers and registrars are the retailers. Registries host the centralized database of registered domains within a TLD. They are responsible for establishing the policies and business rules for the TLD. They also set the wholesale price. Registrars sell domains to end users and manage those registrations on an ongoing basis. They set the retail fee, collect payment, provide customer support, and ensure registrations are renewed and kept up to date. They often provide complementary services such as DNS, web hosting, and email.\n\nCloudflare has experience with being a registrar. It offered a high-end niche service for customers with specific needs. In 2018, it also started with more general registrar functions, but based on transferring domains.\n\n At the time, we estimated that if our customers transferred all of their domains to us, they would collectively save over \n $50 million per year in registration fees.\n\nNow Cloudflare also offers this service to register new domains. According to Cloudflare, there was a big demand for the service, especially from people who didn't have a domain name yet. And that is understandable:\n\n Since they didn’t have anything to transfer in, they would have to go through the somewhat cumbersome process of registering a new domain with another provider\n and only thentransfer their domain to Cloudflare.\n\nNow every customer of Cloudflare, including free customers, can register new domains.\nOne of my subscribers switched his domains to Cloudflare immediately and he was very enthusiastic:\n\n Going to transfer my domains to Cloudflare\n\n\n Cloudflare: - 1 year .COM renewal $8.57Godaddy: - 1 year .COM Domain Renewal $17.99\n\n\n Privacy Protection:CloudFlare: Free - I still need to test thisGoDaddy: Full Domain Privacy and Protection - Renewal - $9.99\n\n\n So domain + privacy...320% difference in price.\n\n\n And there is ZERO value in overpaying for domain services.\n\nIn the meantime, more subscribers have followed and they are all very happy with the easy transition and great service.\nThe key element here is that Cloudflare again becomes more of a one-stop shop and that it can attract new customers that can later upgrade to other products. It's another small addition to the Cloudflare universe, but all together, these things are important.\nCan Cloudflare become the fourth cloud player?\nIf you look at Cloudflare to the bone, they have created a worldwide private network that speeds up and secures the internet. Their ticker NET is no coincidence. With the announcement of R2 during Birthday Week, Cloudflare is going even deeper into the infrastructure of that network.\nR2 is a cloud object storage product. Cloudflare already had built its own cloud storage for its own use and now wants to open the storage-as-a-service for its customers too. Matthew Prince commented:\n\n We thought if we can build a storage solution that provides all the functionality that other storage solutions do, that takes advantage of our global network so it’s extremely performant and we can also then price it in a way that is very attractive to customers we should do it.\n\nMatthew Prince already had put a tweet out before the announcement:\n\nR2 is a great name with a pun, as it's both 1 less than S3 and Amazon S3 or Amazon Simple Storage Service is a service offered by Amazon Web Services that provides object storage. This is what Prince tweeted when R2 had been announced:\n\nPrince always uses the word egregious (for the non-native speakers of English, it means shocking) aboutAWS'egress,he even wrote a blog post with that title.\nCloudflare will be cheaper than AWS, charging $0.015 per GB vs. AWS' $0.023 per GB. (Note: AWS Glacier S3 Deep Archive is even cheaper at $0.00099 per GB but can only be used for long-term data storage, not for things you regularly need).\nMuji from hhhypergrowth pointed out this tweet that explains very clearly why this is a big deal, from one of the best AWS pricing specialists out there (he's built a successful company around his specialty).\n(I'm leaving out a few things here)\nI think this really shows the incredible power of R2's offering.\nNow, AWS is the clear leader, but Microsoft's Azure and GCP (Google Cloud Platform) have similar prices. The product is not out yet, but Cloudflare has made a waiting list for customers who want to beta test the product in the coming months. I think there will be a lot of interest.\nMatthew Prince wants to keep building services and he shares what his ultimate goal is:\n\n We really think we’re on the path to be the fourth major public cloud.\n\nYou know what? I think that Cloudflare really has a chance of succeeding if it keeps innovating like this. Of course, this will take years but I think that's one of the reasons why Cloudflare's stock price has surged so much in the last month since this was announced. The market is a forward-looking place.\nData by YCharts\nWeb3\nCloudflare starts working on Web3 already. It's actually the decentralization of the internet based on the principles of the blockchain:\n\n The last two decades have proven that building a scalable system that decentralizes content is a challenge. While the technology to build such systems exists, no content platform achieves decentralization at scale.\n\n\n There is one notable exception: Bitcoin. Bitcoin was conceptualized in a 2008 whitepaper by Satoshi Nakamoto as a type of distributed ledger known as a blockchain designed so that a peer-to-peer (...) network could transact in a public, consistent, and tamper-proof manner.\n\nThis quote shows you the evolution toward Web3 and Cloudflare's role in it:\n\n The early Web was static. Then Web 2.0 came to provide interactiveness and service we use daily at the cost of centralisation. Web3 is a trend that tries to challenge this. With distributed networks built on open protocols, users of the web are empowered to participate.\n\n\n At Cloudflare, we are embracing this distributed future. Applying the knowledge and experience we have gained from running one of the largest edge networks, we are making it easier for users and businesses to benefit from Web3. This includes operating a distributed web product suite, contributing to open standards, and moving privacy forward.\n\nIf you don't totally understand Web3 yet,you are not alone:\n\nWhat I like about this is that Cloudflare already is thinking about the future. It doesn't wait until ithasto follow, it works proactive, a typical trait of an innovator.\nCloudflare for Offices\nCloudflare For Offices: Cloudflare will extend its network in more than 1,000 of the busiest office buildings in the world. Examples are 4 Times Square and 520 Madison in New York City, the Salesforce Tower in San Francisco and the Willis Tower in Chicago. This will be rolled out globally. This is a schematic overview of how it works:\n\nCloudflare explains that the edge will become much more like local computing and Zero Trust will be introduced in all of these offices. Remarkable is that Cloudflare built its own hardware to introduce this.\nTV As A Service\nCloudflare has been streaming video since June 2020, 24/7 on Cloudflare TV. During Birthday Week, it announced that it will now make the technology available to any other business that wants to run its own 24/7 streaming network.\n\n We didn’t initially set out to build Cloudflare TV from scratch. But as we explored our available options, we quickly realized that few solutions were designed for 24/7 linear streaming, and fewer still were optimized to be managed by a globally-distributed team. Thankfully, at Cloudflare, we like to build.\n\nStream Live\n\n With Stream Live, you can painlessly grow your streaming app to scale to millions of concurrent broadcasters and millions of concurrent users.\n\nThis is another great addition. It will power live video broadcasting. You can stream to millions of viewers instantly from mobile or desktop. It works with programs like OBS or Zoom. On top of that:\n\n Your broadcasts are automatically recorded, optimized and delivered using the Stream player.\n\n\nWith most webinars, there is a latency of about 15 to 20 seconds and that is the minimum now. Cloudflare wants to make this much better:\n\n We’re on a mission to reduce the latency Stream Live adds to near-zero.\n\nThat's especially important for conversations like a Q&A.\nCloudflare is also very clear about the pricing:\n\n It costs $5 per 1,000 minutes of video storage capacity per month. Live-streamed videos are automatically recorded. There is no additional cost for ingesting the live stream.\n\n\n It costs $1 per 1,000 minutes of video viewed.\n\nThoughts about Cloudflare's Innovation\nThere was also an interesting blog post about why and how Cloudflare can innovate so fast. It's an interesting read. A few interesting quotes from the blog post.\nInnovation starts with the people working at Cloudflare:\n\n The seeds of innovative ideas start with our team. One of the core things we look for when hiring in every role at Cloudflare — be it engineering and product or sales or account — is curiosity. (...)\n\n\n There’s an important attribute that partners with curiosity, however. To innovate, we listen. One of the things I screen for when we hire product managers is their ability to listen and synthesize the information they are hearing and then their ability to distill it into actionable problems for us to tackle.\n\nThe second important factor is that Cloudflare is a user of all of its products.\n\n We like to say Cloudflare was built on Cloudflare and for Cloudflare. This means we eat our own dog food with a glass of our own champagne on the side.\n\nAs a side note, I can't help but wonder if Cloudflare uses Fiverr for these drawings\nHow the company is structured is also very important:\n\n At Cloudflare, it is not unusual for an initial product idea to start with a team small enough to split a pack of Twinkies and for the initial proof of concept to go from whiteboard to rolled out in days. We intentionally staff and structure our teams and our backlogs so that we have flexibility to pivot and innovate. Our Emerging Technology and Incubation team is a small group of product managers and engineers solely dedicated to exploring new products for new markets.\n\n\n Our Research team is dedicated to thinking deeply and partnering with organizations across the globe to define new standards and new ways to tackle some of the hardest challenges.\n\n\n (...)\n\n\n We ship software for businesses like a consumer software company. Traditional B2B software development typically follows longer development cycles and focuses on delivering more fully featured and deeply integrated offerings out of the gate. This cautious approach yields fewer more fully featured offerings shipped less frequently.\n\nThe fact that so many Cloudflare products are free is also an integral part of the reason why Cloudflare is innovative:\n\n There’s one more aspect to all of this — because we’ve innovated in the way we’ve built our network — making it highly scalable and cost-effective — we’re able to pass these savings on to our customers. In a lot of instances, these savings amount to a pretty good price for our products and services: nothing at all.\n\n\n (...)\n\n\n Typically, in B2B enterprise software companies, the big customers and the multi-million dollar contracts get 99.99% of the focus. Here’s what I would say: our free customers are the secret sauce to our innovation. (...)\n\n\n We’re fortunate to have millions of free sites and applications on our network. Like a consumer app developer, we typically roll out new capabilities to pods of these users first. These users give us the volume and scale to get confident in what we’ve delivered. The more confident we get, the more broadly we roll out, such that by the time it hits broad rollout, our customers can feel confident in the quality and stability.\n\nConclusion\nCloudflare is a company that keeps innovating at an incredible speed and Birthday Week showed this again. With so many new products that are being rolled out or will be rolled out in the next weeks and months, we don't have to worry that Cloudflare's revenue will slow down growing at high speed any time soon.\nWhat especially stood out to me during this Birthday Week is that quite a bit of Cloudflare's innovations are on the infrastructural level, which I really like. Infrastructure is the basis for all the rest of the innovative expansions.\nIn the meantime, keep growing!","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":879532593,"gmtCreate":1636734993925,"gmtModify":1636734994036,"author":{"id":"3576299146818908","authorId":"3576299146818908","name":"Aaden","avatar":"https://static.tigerbbs.com/0badbe7763ff2fb009c583446388ad99","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3576299146818908","authorIdStr":"3576299146818908"},"htmlText":"Great sharing and inside views. Can't agree more that NETS is a great company and innovator","listText":"Great sharing and inside views. Can't agree more that NETS is a great company and innovator","text":"Great sharing and inside views. Can't agree more that NETS is a great company and innovator","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/879532593","repostId":1162447676,"repostType":2,"repost":{"id":"1162447676","kind":"news","pubTimestamp":1635486956,"share":"https://www.laohu8.com/m/news/1162447676?lang=&edition=full","pubTime":"2021-10-29 13:55","market":"us","language":"en","title":"Cloudflare Before The Earnings: Valuation And Innovation","url":"https://stock-news.laohu8.com/highlight/detail?id=1162447676","media":"Seeking Alpha","summary":"Summary\n\nNext week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued ","content":"Summary\n<ul>\n <li>Next week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued extremely high.</li>\n <li>Despite the very expensive stock, I won't sell a single share. I explain why.</li>\n <li>More and more, Cloudflare is becoming the protector of the Internet, with a huge market share of 80% for reverse proxy. This is important for the roll-out of its products.</li>\n <li>Cloudflare has ambitions to become the fourth public cloud, next to AWS, Azure and GCP, the cloud offerings of Amazon, Microsoft and Google. There also are much more innovations.</li>\n <li>The constant innovation can spur the high growth of Cloudflare for a very long time.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/b5bc6245a3d372e9254b36065d3ea143\" tg-width=\"1536\" tg-height=\"1024\" width=\"100%\" height=\"auto\">Sundry Photography/iStock Editorial via Getty Images\nIntroduction\nNext week, on Nov. 4, Cloudflare (NET) reports earnings. There's no doubt that the stock is priced extremely high, but still I won't sell before the earnings. In the first part of the article, I will explain my reasoning.\nIn the second part of this article, I will show the new developments and why investors have reacted so enthusiastically.\nMy situation might differ from yours\nFirst, I want to explain my personal situation on Cloudflare. I picked it as a Potential Multibaggers for my subscribers at $39 and as I always invest along with my subscribers, I have a low-cost basis. I don't want to brag at all here, so if it comes across as that, I'm sorry and I should have phrased it more carefully.\nThe reason why I mention my low-cost basis before you even start reading is that it says a few things about my investing and your situation. The first is obvious: I may in a completely different situation as you might be in right now. The second thing it says about my investing is that I'm a long-term investor. For me that means at least three years, but preferably much longer. That may be very different from how you try to make money in the stock market.\nDifferent strokes for different folks and I wanted to make clear from the start here that if you react in the comments (everybody who follows me knows that I love the comment section) you should know my situation, which could be very different from yours and some arguments could not make sense for me, just as some arguments in this article might not make sense for more short-term oriented investors. Having said that, I will start with the hottest item first, the expensive valuation of Cloudflare.\nExpensive Cloudflare: What do I do?\nEven as a very bullish investor, there's no denying that Cloudflare is very expensive right now. It already was, and with the 25% jump this week, it's even more. I live in Belgium and there's no capital gains tax here (don't worry, there are numerous taxes to compensate that). So why wouldn't I sell after such a huge run? After all, Cloudflare is up 226% over the last year. With capital gains tax, what I will write is true even more.\n<img src=\"https://static.tigerbbs.com/393403b594ce293798b0e37f7b2399d3\" tg-width=\"635\" tg-height=\"417\" width=\"100%\" height=\"auto\">Data by YCharts\nSuppose I sell now, at $182, the price when I'm writing this near the market open on Thursday morning. In the next weeks and months, the stock continues to go up, to $250. After all, the stock market is not a rational place. If you believe that, you will probably not be very successful. How do you think I will feel at $250? I will feel stupid. But that's not all...\nSuppose after six long months Cloudflare goes down to $185. Will I still have the money to buy back my position? Would I be willing to enter again at a price a bit higher than where I sold and give up the reason why I sold in the first place? Or will I wait?\nNo, I want it to go lower before I buy again. Suppose I put a price of $155 on it. That's $27/share less or 15% from where I sold. Is that enough? Or should I wait until there is a 25% drop at $136.5? What if it never goes down to that price again? Am I supposed to not hold stock of this great company that does everything right because of an arbitrary price I drill into my head?\nSuppose I'm strict, $136.5 or no buying. But suppose in 2022, there is a drop from $300 to $210, will I not be tempted to buy, at a 10% higher price than where I sold but 30% down from its previous high? Suppose I don't buy and in five years it crosses $500 without me owning it, how do you think I will feel? Of course, like a complete idiot, because I know this company so well, I know that it does everything right and that it has a fantastic future in front of it but I still decided to not own it.\nAnd still, this scenario is what a lot of so-called specialists promote and practice. It sounds easy (buy low, sell high) but is extremely complicated in reality. I want to have the best companies of our time in my portfolio, even if they are expensive or extremely expensive, like Cloudflare is right now. If Cloudflare goes down, great, then I add a bit more. I'm not selling a single share.\nI already had written this part when I thought it would be good content for Twitter too. To my surprise and delight, I got an answer from the man himself, Cloudflare founder and CEO Matthew Prince.\n<img src=\"https://static.tigerbbs.com/01d0bf4a2f03b11e7e01cd8cfd6e5344\" tg-width=\"552\" tg-height=\"113\" width=\"100%\" height=\"auto\">\nSo, for the earnings, the stock price could drop, it could go up or stay flat. You never know. I think that if you are a short-term oriented investor, the chance is somewhat higher that it drops because of the high valuation. But if the company posts stellar results, the price could even go up. There are no certainties in investing.\nWith all of Cloudflare's innovations (more about that later in this article) and the many products it doesn't monetize yet, the company could see very high revenue growth (40%-50%) for many, many years to come, especially if it could realize its ambition to become the fourth public cloud (again, see further in this article).\nCloudflare is becoming the gateway for the internet\nSomething else to consider here is another, much more important&nbsp;tweet&nbsp;that Matthew Prince sent out, the market share that Cloudflare has when it comes to reverse proxy services.\n<img src=\"https://static.tigerbbs.com/b40ce06aa804ec7b58a45973c471350b\" tg-width=\"600\" tg-height=\"273\" width=\"100%\" height=\"auto\">\nA reverse proxy is a layer between a web server and the rest of the Internet. It provides security and better performance. Your computer doesn't have to connect to a single server, it can connect to any of the more than 250 Cloudflare's POPs (point-of-presence, a data center, which are almost always much closer to you.) That means faster and also much more secure internet, as a DDOS attacker (a bombardment of requests that make your site unusable) would need to attack all 250+ data centers of Cloudflare to be successful. I think you can see the huge advantage for customers.\nThis is a very simple visualization of how Cloudflare reverse proxy works.\n<img src=\"https://static.tigerbbs.com/199f44b4cd59831986852ac9707d09d0\" tg-width=\"640\" tg-height=\"322\" width=\"100%\" height=\"auto\">\nAs you can see on the chart that Matthew Prince shared, Cloudflare now does this for 18.4% of the whole Internet, followed by Fastly (1.7%) and AWS Cloudfront (1.2%). That's already a huge thing in and of itself. Cloudflare is 10 times bigger than its nearest competitor, which is a monster company. With edge computing and compute and storage capacities that Cloudflare is rolling out on the edge, this lead is very important. Cloudflare is in the driver's seat here and the market clearly recognizes that. That's probably one of the main reasons that it's priced so high.\nBut the huge majority of sites, 77.2%, still doesn't use a reverse proxy serve service. If you look then at the websites that use a reverse proxy, you see that Cloudflare's market share is more than 80%. Mind blowing!\n<img src=\"https://static.tigerbbs.com/bb5bbfb621eb9935bc83b037a8e24f27\" tg-width=\"469\" tg-height=\"597\" width=\"100%\" height=\"auto\">Source:Liberty Highlight's excellent newsletter\nOne of my subscribers, Irnest Kaplan, had some interesting questions about reverse proxy and, in another premium example of how communicative Matthew Prince is, the CEO answered to Irnest's question.\n<img src=\"https://static.tigerbbs.com/41da49470d4e441fe66b0f9a25c3600b\" tg-width=\"613\" tg-height=\"537\" width=\"100%\" height=\"auto\">\nI will answer Irnest's last question: Yes, Cloudflare monetized this, but just a small part. It generates a ton of data and insights that it gives Cloudflare an incredible competitive advantage over all of the other players in the industry. On top of that, you are a Cloudflare customer already, even if it is on a free plan, which means that if you look for another solution, Cloudflare will probably be the first vendor you'll think of, as it is much easier to have a one-stop-shop.\nCloudflare's Innovation\nI share my Birthday Week with that of Cloudflare. The company was founded in 2010, on Sept. 27, two days before I was born, years earlier, of course. Yearly, Cloudflare celebrates its Birthday Week with of new initiatives. Let's look at the most important ones here, but first the Founders' Letter, which the company also issues each year in this week.\nCloudflare's Birthday Week: the Founders' Letter\nAs part of the Birthday Week festivities, Cloudflare’s Co-Founders, Matthew Prince and Michelle Zatlyn (who is the COO and President of Cloudflare)&nbsp;released their annual “Founder’s Letter.”\nI really like that Matthew and Michelle talk a lot about their Mission Statement (“To Help Build a Better Internet”) and what they're actively doing to bring it to fruition.\nCloudflare is attracting elite talent. They have had more than 250,000 people apply in the last year but have hired less than one-half of one percent of them. This quote also shows how fast the company is growing:\n<blockquote>\n It's incredible to realize that more than half of Cloudflare's team today started since March 13, 2020, when we closed all our physical offices due to the pandemic.\n</blockquote>\nThe company now organizes social events like picnics to make social connections. At the same time, Prince and Zatlyn are really happy with work from home:\n<blockquote>\n Culture has little to do with fun offices, plentiful snacks, or adjustable desks. Instead, for us, it starts with hiring people who are relentlessly curious and, at the same time, empathetic. Curious people want to learn. Empathetic people love to teach. And if you put a group of them together, whether in a swanky office or on Zoom, great things will happen.\n</blockquote>\nOne of the aspects I like about Matthew Prince and Michelle Zatlyn is their ability to zoom out, which I also try for investing too. That's why this part stood out for me as well (my bold):\n<blockquote>\n A mere 11 years before Cloudflare's founding, long-distance phone calls still cost a fortune, sharing a photograph with someone in another country took weeks, and the idea that you could access the sum total of human knowledge from a device in your pocket was beyond even the fantasies of science fiction.\n</blockquote>\n<blockquote>\n (...)\n</blockquote>\n<blockquote>\n The Internet may seem static, but it is not. Eleven years ago, watching a video online was an exercise in frustration. Today, it seems almost automatic that you can push play on your TV and access nearly any movie ever made instantly. That's possible because the Internet isn't static; it gets better through innovation.\n At Cloudflare, we're optimized to catalyze exactly that innovation.\n</blockquote>\nThis is another great piece:\n<blockquote>\n Sometimes people outside the company are surprised by the products we build. In fact, predicting our roadmap is pretty easy. We look at all the steps that are required to load a web page, send an email, stream a video, login to a workstation, or anything else you do online and ask: can we make that more secure, more reliable, or faster?\n</blockquote>\n<blockquote>\n (...)\n</blockquote>\n<blockquote>\n As the Internet grows and acquires more capabilities, we believe we will continue to grow with it. An investment in Cloudflare is, fundamentally, we feel an investment in the Internet itself.\n</blockquote>\nI really like that quote because it aligns with Cloudflare’s mission statement. If you’re bullish on the growth of the Internet and the role it plays in our lives, then you’re inherently bullish on Cloudflare according to the founders. To me, this is backed up by their rapid rate of innovation and quality products. We will now dive into some of these new products that were released during Birthday Week.\nCloudflare is building real-time communication.\nCloudflare&nbsp;announced&nbsp;Just to remind you, Cloudflare works with POPs (points-of-presence), 250 data centers around the world. Starting out, this was a CDN (content delivery network) but Cloudflare builds more and more software and services on top of that infrastructure and that is what makes this company so much better than Fastly (FSLY), for example. The pace of innovation is incredible.\nThe POPs are meant to speed up data streams. Communication is a data stream. If you talk during your Zoom (ZM) meeting, that generates a data stream. Twitter Spaces (group audio) is another example of communication that is built on real-time communication.\nIt will be interesting to see what Cloudflare does here. Will it develop APIs that developers can use to build their own real-time communication like Agora or Twilio? Or will Cloudflare even go further and also launch a consumer product, more like Zoom?\nWe don't know what Cloudflare's plans exactly are and I think it will take them a year or even more before everything is ready for the market, although you never know with Cloudflare.\nOne of my subscribers had shared&nbsp;a very interesting job opening&nbsp;from Cloudflare (thank you GV!), so I already knew this was in the making before the announcement during Birthday Week. I share the most interesting parts here:a real-time communications platform during Birthday Week. This is the business Agora (API) and Twilio (TWLO) are in, although Twilio does much more than this alone. It means that Cloudflare will go into communications. This could become very powerful.\n<img src=\"https://static.tigerbbs.com/054a3c8e95a94a34fc4e32909ef74567\" tg-width=\"632\" tg-height=\"197\" width=\"100%\" height=\"auto\">\nSecure e-mail through Cloudflare\nCloudflare&nbsp;introduced&nbsp;Cloudflare Email Routing&nbsp;during Birthday Week. It's a simple email integration tool. As Cloudflare explains:\nThe process is simple:\n<ol>\n <li>You enter the email address you want to create on your domain</li>\n <li>You enter the email address you want it forwarded to</li>\n</ol>\n<img src=\"https://static.tigerbbs.com/70007928efbac8c6c1b6100068e6134d\" tg-width=\"1084\" tg-height=\"156\" width=\"100%\" height=\"auto\">\nIn short, Cloudflare makes sure that your e-mail comes in the right e-mail box without losing any speed, security or privacy. It's free and just another way of branching into another business. It's a huge market, as 4 billion people have at least one e-mail address and 300 billion mails are sent around the globe every day. Some of those people and businesses will start using Cloudflare's service and get to know the company better.\nCloudflare Registrar\nCloudflare also&nbsp;announced&nbsp;that all Cloudflare customers have full Registrar access, including the ability to register new domains. The company already has introduced the most used TLDs (top-level domains) such as .com, .net and several others and extensions of countries (.uk, .de, .au etc) already are introduced or will be rolled out over the next few weeks. Cloudflare does this all at-cost, meaning you only pay what Cloudflare itself has to pay.\nThis introduction is Cloudflare at its best again, explaining sometimes difficult things in an easy-to-understand way.\n<blockquote>\n In the domain name world, there are two key players: Registrars and registries. Understandably, the two are often confused. One way to look at it is that registries are the wholesalers and registrars are the retailers. Registries host the centralized database of registered domains within a TLD. They are responsible for establishing the policies and business rules for the TLD. They also set the wholesale price. Registrars sell domains to end users and manage those registrations on an ongoing basis. They set the retail fee, collect payment, provide customer support, and ensure registrations are renewed and kept up to date. They often provide complementary services such as DNS, web hosting, and email.\n</blockquote>\nCloudflare has experience with being a registrar. It offered a high-end niche service for customers with specific needs. In 2018, it also started with more general registrar functions, but based on transferring domains.\n<blockquote>\n At the time, we estimated that if our customers transferred all of their domains to us, they would collectively save over&nbsp;\n $50 million per year&nbsp;in registration fees.\n</blockquote>\nNow Cloudflare also offers this service to register new domains. According to Cloudflare, there was a big demand for the service, especially from people who didn't have a domain name yet. And that is understandable:\n<blockquote>\n Since they didn’t have anything to transfer in, they would have to go through the somewhat cumbersome process of registering a new domain with another provider\n and only thentransfer their domain to Cloudflare.\n</blockquote>\nNow every customer of Cloudflare, including free customers, can register new domains.\nOne of my subscribers switched his domains to Cloudflare immediately and he was very enthusiastic:\n<blockquote>\n Going to transfer my domains to Cloudflare\n</blockquote>\n<blockquote>\n Cloudflare: - 1 year .COM renewal $8.57Godaddy: - 1 year .COM Domain Renewal $17.99\n</blockquote>\n<blockquote>\n Privacy Protection:CloudFlare: Free - I still need to test thisGoDaddy: Full Domain Privacy and Protection - Renewal - $9.99\n</blockquote>\n<blockquote>\n So domain + privacy...320% difference in price.\n</blockquote>\n<blockquote>\n And there is ZERO value in overpaying for domain services.\n</blockquote>\nIn the meantime, more subscribers have followed and they are all very happy with the easy transition and great service.\nThe key element here is that Cloudflare again becomes more of a one-stop shop and that it can attract new customers that can later upgrade to other products. It's another small addition to the Cloudflare universe, but all together, these things are important.\nCan Cloudflare become the fourth cloud player?\nIf you look at Cloudflare to the bone, they have created a worldwide private network that speeds up and secures the internet. Their ticker NET is no coincidence. With the announcement of R2 during Birthday Week, Cloudflare is going even deeper into the infrastructure of that network.\nR2 is a cloud object storage product. Cloudflare already had built its own cloud storage for its own use and now wants to open the storage-as-a-service for its customers too. Matthew Prince&nbsp;commented:\n<blockquote>\n We thought if we can build a storage solution that provides all the functionality that other storage solutions do, that takes advantage of our global network so it’s extremely performant and we can also then price it in a way that is very attractive to customers we should do it.\n</blockquote>\nMatthew Prince already had&nbsp;put a tweet out&nbsp;before the announcement:\n<img src=\"https://static.tigerbbs.com/0a3d8428d39351182677597001026fef\" tg-width=\"602\" tg-height=\"182\" width=\"100%\" height=\"auto\">\nR2 is a great name with a pun, as it's both 1 less than S3 and Amazon S3 or Amazon Simple Storage Service is a service offered by Amazon Web Services that provides object storage. This is what Prince&nbsp;tweeted&nbsp;when R2 had been announced:\n<img src=\"https://static.tigerbbs.com/36df309cd563e21fce893fa29801ba1f\" tg-width=\"588\" tg-height=\"311\" width=\"100%\" height=\"auto\">\nPrince always uses the word egregious (for the non-native speakers of English, it means shocking) aboutAWS'egress,he even wrote a blog post with that title.\nCloudflare will be cheaper than AWS, charging $0.015 per GB vs. AWS' $0.023 per GB. (Note: AWS Glacier S3 Deep Archive is even cheaper at $0.00099 per GB but can only be used for long-term data storage, not for things you regularly need).\nMuji from&nbsp;hhhypergrowth&nbsp;pointed out this tweet that explains very clearly why this is a big deal, from one of the best AWS pricing specialists out there (he's built a successful company around his specialty).\n<img src=\"https://static.tigerbbs.com/d46017456e01dc1be31b5544c98542f8\" tg-width=\"587\" tg-height=\"466\" width=\"100%\" height=\"auto\">(I'm leaving out a few things here)<img src=\"https://static.tigerbbs.com/7e778ac6df472fbe78f095e6e5e83202\" tg-width=\"597\" tg-height=\"258\" width=\"100%\" height=\"auto\">\nI think this really shows the incredible power of R2's offering.\nNow, AWS is the clear leader, but Microsoft's Azure and GCP (Google Cloud Platform) have similar prices. The product is not out yet, but Cloudflare has made a waiting list for customers who want to beta test the product in the coming months. I think there will be a lot of interest.\nMatthew Prince wants to keep building services and&nbsp;he shares&nbsp;what his ultimate goal is:\n<blockquote>\n We really think we’re on the path to be the fourth major public cloud.\n</blockquote>\nYou know what? I think that Cloudflare really has a chance of succeeding if it keeps innovating like this. Of course, this will take years but I think that's one of the reasons why Cloudflare's stock price has surged so much in the last month since this was announced. The market is a forward-looking place.\n<img src=\"https://static.tigerbbs.com/b2a46af3c4e7098301aecb0a8c4226fb\" tg-width=\"635\" tg-height=\"417\" width=\"100%\" height=\"auto\">Data by YCharts\nWeb3\nCloudflare&nbsp;starts working on Web3 already. It's actually the decentralization of the internet based on the principles of the blockchain:\n<blockquote>\n The last two decades have proven that building a scalable system that decentralizes content is a challenge. While the technology to build such systems exists, no content platform achieves decentralization at scale.\n</blockquote>\n<blockquote>\n There is one notable exception: Bitcoin. Bitcoin was conceptualized in a 2008 whitepaper by Satoshi Nakamoto as a type of distributed ledger known as a blockchain designed so that a peer-to-peer (...) network could transact in a public, consistent, and tamper-proof manner.\n</blockquote>\nThis quote shows you the evolution toward Web3 and Cloudflare's role in it:\n<blockquote>\n The early Web was static. Then Web 2.0 came to provide interactiveness and service we use daily at the cost of centralisation. Web3 is a trend that tries to challenge this. With distributed networks built on open protocols, users of the web are empowered to participate.\n</blockquote>\n<blockquote>\n At Cloudflare, we are embracing this distributed future. Applying the knowledge and experience we have gained from running one of the largest edge networks, we are making it easier for users and businesses to benefit from Web3. This includes operating a distributed web product suite, contributing to open standards, and moving privacy forward.\n</blockquote>\nIf you don't totally understand Web3 yet,you are not alone:\n<img src=\"https://static.tigerbbs.com/8b08b7d260f89edae78a292900aa93d1\" tg-width=\"600\" tg-height=\"208\" width=\"100%\" height=\"auto\">\nWhat I like about this is that Cloudflare already is thinking about the future. It doesn't wait until ithasto follow, it works proactive, a typical trait of an innovator.\nCloudflare for Offices\nCloudflare For Offices: Cloudflare will extend its network in more than 1,000 of the busiest office buildings in the world. Examples are 4 Times Square and 520 Madison in New York City, the Salesforce Tower in San Francisco and the Willis Tower in Chicago. This will be rolled out globally. This is a schematic overview of how it works:\n<img src=\"https://static.tigerbbs.com/7cd1a9f3e977b5fb5784840c24efc09a\" tg-width=\"640\" tg-height=\"348\" width=\"100%\" height=\"auto\">\nCloudflare explains that the edge will become much more like local computing and Zero Trust will be introduced in all of these offices. Remarkable is that Cloudflare built its own hardware to introduce this.\nTV As A Service\nCloudflare has been streaming video since June 2020, 24/7 on&nbsp;Cloudflare TV. During Birthday Week, it announced that it will now make the technology available to any other business that wants to run its own 24/7 streaming network.\n<blockquote>\n We didn’t initially set out to build Cloudflare TV from scratch. But as we explored our available options, we quickly realized that few solutions were designed for 24/7 linear streaming, and fewer still were optimized to be managed by a globally-distributed team. Thankfully, at Cloudflare, we like to build.\n</blockquote>\nStream Live\n<blockquote>\n With Stream Live, you can painlessly grow your streaming app to scale to millions of concurrent broadcasters and millions of concurrent users.\n</blockquote>\nThis is another great addition. It will power live video broadcasting. You can stream to millions of viewers instantly from mobile or desktop. It works with programs like OBS or Zoom. On top of that:\n<blockquote>\n Your broadcasts are automatically recorded, optimized and delivered using the Stream player.\n</blockquote>\n<img src=\"https://static.tigerbbs.com/19270e26bb1ff73c07a288a1bf3e6ee5\" tg-width=\"640\" tg-height=\"230\" width=\"100%\" height=\"auto\">\nWith most webinars, there is a latency of about 15 to 20 seconds and that is the minimum now. Cloudflare wants to make this much better:\n<blockquote>\n We’re on a mission to reduce the latency Stream Live adds to near-zero.\n</blockquote>\nThat's especially important for conversations like a Q&amp;A.\nCloudflare is also very clear about the pricing:\n<blockquote>\n It costs $5 per 1,000 minutes of video storage capacity per month. Live-streamed videos are automatically recorded. There is no additional cost for ingesting the live stream.\n</blockquote>\n<blockquote>\n It costs $1 per 1,000 minutes of video viewed.\n</blockquote>\nThoughts about Cloudflare's Innovation\nThere was also an interesting blog post about why and how Cloudflare can innovate so fast. It's&nbsp;an interesting read. A few interesting quotes from the blog post.\nInnovation starts with the people working at Cloudflare:\n<blockquote>\n The seeds of innovative ideas start with our team. One of the core things we look for when hiring in every role at Cloudflare — be it engineering and product or sales or account — is curiosity. (...)\n</blockquote>\n<blockquote>\n There’s an important attribute that partners with curiosity, however. To innovate, we listen. One of the things I screen for when we hire product managers is their ability to listen and synthesize the information they are hearing and then their ability to distill it into actionable problems for us to tackle.\n</blockquote>\nThe second important factor is that Cloudflare is a user of all of its products.\n<blockquote>\n We like to say Cloudflare was built on Cloudflare and for Cloudflare. This means we eat our own dog food with a glass of our own champagne on the side.\n</blockquote>\n<img src=\"https://static.tigerbbs.com/f3c860b9be8ba80430c0161d168527c2\" tg-width=\"280\" tg-height=\"192\" width=\"100%\" height=\"auto\">As a side note, I can't help but wonder if Cloudflare uses Fiverr for these drawings\nHow the company is structured is also very important:\n<blockquote>\n At Cloudflare, it is not unusual for an initial product idea to start with a team small enough to split a pack of Twinkies and for the initial proof of concept to go from whiteboard to rolled out in days. We intentionally staff and structure our teams and our backlogs so that we have flexibility to pivot and innovate. Our Emerging Technology and Incubation team is a small group of product managers and engineers solely dedicated to exploring new products for new markets.\n</blockquote>\n<blockquote>\n Our Research team is dedicated to thinking deeply and partnering with organizations across the globe to define new standards and new ways to tackle some of the hardest challenges.\n</blockquote>\n<blockquote>\n (...)\n</blockquote>\n<blockquote>\n We ship software for businesses like a consumer software company. Traditional B2B software development typically follows longer development cycles and focuses on delivering more fully featured and deeply integrated offerings out of the gate. This cautious approach yields fewer more fully featured offerings shipped less frequently.\n</blockquote>\nThe fact that so many Cloudflare products are free is also an integral part of the reason why Cloudflare is innovative:\n<blockquote>\n There’s one more aspect to all of this — because we’ve innovated in the way we’ve built our network — making it highly scalable and cost-effective — we’re able to pass these savings on to our customers. In a lot of instances, these savings amount to a pretty good price for our products and services: nothing at all.\n</blockquote>\n<blockquote>\n (...)\n</blockquote>\n<blockquote>\n Typically, in B2B enterprise software companies, the big customers and the multi-million dollar contracts get 99.99% of the focus. Here’s what I would say: our free customers are the secret sauce to our innovation. (...)\n</blockquote>\n<blockquote>\n We’re fortunate to have millions of free sites and applications on our network. Like a consumer app developer, we typically roll out new capabilities to pods of these users first. These users give us the volume and scale to get confident in what we’ve delivered. The more confident we get, the more broadly we roll out, such that by the time it hits broad rollout, our customers can feel confident in the quality and stability.\n</blockquote>\nConclusion\nCloudflare is a company that keeps innovating at an incredible speed and Birthday Week showed this again. With so many new products that are being rolled out or will be rolled out in the next weeks and months, we don't have to worry that Cloudflare's revenue will slow down growing at high speed any time soon.\nWhat especially stood out to me during this Birthday Week is that quite a bit of Cloudflare's innovations are on the infrastructural level, which I really like. Infrastructure is the basis for all the rest of the innovative expansions.\nIn the meantime, keep growing!","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Cloudflare Before The Earnings: Valuation And Innovation</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCloudflare Before The Earnings: Valuation And Innovation\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-10-29 13:55 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4463158-cloudflare-net-stock-q3-earnings-preview-valuation-innovation>Seeking Alpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nNext week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued extremely high.\nDespite the very expensive stock, I won't sell a single share. I explain why.\nMore ...\n\n<a href=\"https://seekingalpha.com/article/4463158-cloudflare-net-stock-q3-earnings-preview-valuation-innovation\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NET":"Cloudflare, Inc."},"source_url":"https://seekingalpha.com/article/4463158-cloudflare-net-stock-q3-earnings-preview-valuation-innovation","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1162447676","content_text":"Summary\n\nNext week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued extremely high.\nDespite the very expensive stock, I won't sell a single share. I explain why.\nMore and more, Cloudflare is becoming the protector of the Internet, with a huge market share of 80% for reverse proxy. This is important for the roll-out of its products.\nCloudflare has ambitions to become the fourth public cloud, next to AWS, Azure and GCP, the cloud offerings of Amazon, Microsoft and Google. There also are much more innovations.\nThe constant innovation can spur the high growth of Cloudflare for a very long time.\n\nSundry Photography/iStock Editorial via Getty Images\nIntroduction\nNext week, on Nov. 4, Cloudflare (NET) reports earnings. There's no doubt that the stock is priced extremely high, but still I won't sell before the earnings. In the first part of the article, I will explain my reasoning.\nIn the second part of this article, I will show the new developments and why investors have reacted so enthusiastically.\nMy situation might differ from yours\nFirst, I want to explain my personal situation on Cloudflare. I picked it as a Potential Multibaggers for my subscribers at $39 and as I always invest along with my subscribers, I have a low-cost basis. I don't want to brag at all here, so if it comes across as that, I'm sorry and I should have phrased it more carefully.\nThe reason why I mention my low-cost basis before you even start reading is that it says a few things about my investing and your situation. The first is obvious: I may in a completely different situation as you might be in right now. The second thing it says about my investing is that I'm a long-term investor. For me that means at least three years, but preferably much longer. That may be very different from how you try to make money in the stock market.\nDifferent strokes for different folks and I wanted to make clear from the start here that if you react in the comments (everybody who follows me knows that I love the comment section) you should know my situation, which could be very different from yours and some arguments could not make sense for me, just as some arguments in this article might not make sense for more short-term oriented investors. Having said that, I will start with the hottest item first, the expensive valuation of Cloudflare.\nExpensive Cloudflare: What do I do?\nEven as a very bullish investor, there's no denying that Cloudflare is very expensive right now. It already was, and with the 25% jump this week, it's even more. I live in Belgium and there's no capital gains tax here (don't worry, there are numerous taxes to compensate that). So why wouldn't I sell after such a huge run? After all, Cloudflare is up 226% over the last year. With capital gains tax, what I will write is true even more.\nData by YCharts\nSuppose I sell now, at $182, the price when I'm writing this near the market open on Thursday morning. In the next weeks and months, the stock continues to go up, to $250. After all, the stock market is not a rational place. If you believe that, you will probably not be very successful. How do you think I will feel at $250? I will feel stupid. But that's not all...\nSuppose after six long months Cloudflare goes down to $185. Will I still have the money to buy back my position? Would I be willing to enter again at a price a bit higher than where I sold and give up the reason why I sold in the first place? Or will I wait?\nNo, I want it to go lower before I buy again. Suppose I put a price of $155 on it. That's $27/share less or 15% from where I sold. Is that enough? Or should I wait until there is a 25% drop at $136.5? What if it never goes down to that price again? Am I supposed to not hold stock of this great company that does everything right because of an arbitrary price I drill into my head?\nSuppose I'm strict, $136.5 or no buying. But suppose in 2022, there is a drop from $300 to $210, will I not be tempted to buy, at a 10% higher price than where I sold but 30% down from its previous high? Suppose I don't buy and in five years it crosses $500 without me owning it, how do you think I will feel? Of course, like a complete idiot, because I know this company so well, I know that it does everything right and that it has a fantastic future in front of it but I still decided to not own it.\nAnd still, this scenario is what a lot of so-called specialists promote and practice. It sounds easy (buy low, sell high) but is extremely complicated in reality. I want to have the best companies of our time in my portfolio, even if they are expensive or extremely expensive, like Cloudflare is right now. If Cloudflare goes down, great, then I add a bit more. I'm not selling a single share.\nI already had written this part when I thought it would be good content for Twitter too. To my surprise and delight, I got an answer from the man himself, Cloudflare founder and CEO Matthew Prince.\n\nSo, for the earnings, the stock price could drop, it could go up or stay flat. You never know. I think that if you are a short-term oriented investor, the chance is somewhat higher that it drops because of the high valuation. But if the company posts stellar results, the price could even go up. There are no certainties in investing.\nWith all of Cloudflare's innovations (more about that later in this article) and the many products it doesn't monetize yet, the company could see very high revenue growth (40%-50%) for many, many years to come, especially if it could realize its ambition to become the fourth public cloud (again, see further in this article).\nCloudflare is becoming the gateway for the internet\nSomething else to consider here is another, much more important tweet that Matthew Prince sent out, the market share that Cloudflare has when it comes to reverse proxy services.\n\nA reverse proxy is a layer between a web server and the rest of the Internet. It provides security and better performance. Your computer doesn't have to connect to a single server, it can connect to any of the more than 250 Cloudflare's POPs (point-of-presence, a data center, which are almost always much closer to you.) That means faster and also much more secure internet, as a DDOS attacker (a bombardment of requests that make your site unusable) would need to attack all 250+ data centers of Cloudflare to be successful. I think you can see the huge advantage for customers.\nThis is a very simple visualization of how Cloudflare reverse proxy works.\n\nAs you can see on the chart that Matthew Prince shared, Cloudflare now does this for 18.4% of the whole Internet, followed by Fastly (1.7%) and AWS Cloudfront (1.2%). That's already a huge thing in and of itself. Cloudflare is 10 times bigger than its nearest competitor, which is a monster company. With edge computing and compute and storage capacities that Cloudflare is rolling out on the edge, this lead is very important. Cloudflare is in the driver's seat here and the market clearly recognizes that. That's probably one of the main reasons that it's priced so high.\nBut the huge majority of sites, 77.2%, still doesn't use a reverse proxy serve service. If you look then at the websites that use a reverse proxy, you see that Cloudflare's market share is more than 80%. Mind blowing!\nSource:Liberty Highlight's excellent newsletter\nOne of my subscribers, Irnest Kaplan, had some interesting questions about reverse proxy and, in another premium example of how communicative Matthew Prince is, the CEO answered to Irnest's question.\n\nI will answer Irnest's last question: Yes, Cloudflare monetized this, but just a small part. It generates a ton of data and insights that it gives Cloudflare an incredible competitive advantage over all of the other players in the industry. On top of that, you are a Cloudflare customer already, even if it is on a free plan, which means that if you look for another solution, Cloudflare will probably be the first vendor you'll think of, as it is much easier to have a one-stop-shop.\nCloudflare's Innovation\nI share my Birthday Week with that of Cloudflare. The company was founded in 2010, on Sept. 27, two days before I was born, years earlier, of course. Yearly, Cloudflare celebrates its Birthday Week with of new initiatives. Let's look at the most important ones here, but first the Founders' Letter, which the company also issues each year in this week.\nCloudflare's Birthday Week: the Founders' Letter\nAs part of the Birthday Week festivities, Cloudflare’s Co-Founders, Matthew Prince and Michelle Zatlyn (who is the COO and President of Cloudflare) released their annual “Founder’s Letter.”\nI really like that Matthew and Michelle talk a lot about their Mission Statement (“To Help Build a Better Internet”) and what they're actively doing to bring it to fruition.\nCloudflare is attracting elite talent. They have had more than 250,000 people apply in the last year but have hired less than one-half of one percent of them. This quote also shows how fast the company is growing:\n\n It's incredible to realize that more than half of Cloudflare's team today started since March 13, 2020, when we closed all our physical offices due to the pandemic.\n\nThe company now organizes social events like picnics to make social connections. At the same time, Prince and Zatlyn are really happy with work from home:\n\n Culture has little to do with fun offices, plentiful snacks, or adjustable desks. Instead, for us, it starts with hiring people who are relentlessly curious and, at the same time, empathetic. Curious people want to learn. Empathetic people love to teach. And if you put a group of them together, whether in a swanky office or on Zoom, great things will happen.\n\nOne of the aspects I like about Matthew Prince and Michelle Zatlyn is their ability to zoom out, which I also try for investing too. That's why this part stood out for me as well (my bold):\n\n A mere 11 years before Cloudflare's founding, long-distance phone calls still cost a fortune, sharing a photograph with someone in another country took weeks, and the idea that you could access the sum total of human knowledge from a device in your pocket was beyond even the fantasies of science fiction.\n\n\n (...)\n\n\n The Internet may seem static, but it is not. Eleven years ago, watching a video online was an exercise in frustration. Today, it seems almost automatic that you can push play on your TV and access nearly any movie ever made instantly. That's possible because the Internet isn't static; it gets better through innovation.\n At Cloudflare, we're optimized to catalyze exactly that innovation.\n\nThis is another great piece:\n\n Sometimes people outside the company are surprised by the products we build. In fact, predicting our roadmap is pretty easy. We look at all the steps that are required to load a web page, send an email, stream a video, login to a workstation, or anything else you do online and ask: can we make that more secure, more reliable, or faster?\n\n\n (...)\n\n\n As the Internet grows and acquires more capabilities, we believe we will continue to grow with it. An investment in Cloudflare is, fundamentally, we feel an investment in the Internet itself.\n\nI really like that quote because it aligns with Cloudflare’s mission statement. If you’re bullish on the growth of the Internet and the role it plays in our lives, then you’re inherently bullish on Cloudflare according to the founders. To me, this is backed up by their rapid rate of innovation and quality products. We will now dive into some of these new products that were released during Birthday Week.\nCloudflare is building real-time communication.\nCloudflare announced Just to remind you, Cloudflare works with POPs (points-of-presence), 250 data centers around the world. Starting out, this was a CDN (content delivery network) but Cloudflare builds more and more software and services on top of that infrastructure and that is what makes this company so much better than Fastly (FSLY), for example. The pace of innovation is incredible.\nThe POPs are meant to speed up data streams. Communication is a data stream. If you talk during your Zoom (ZM) meeting, that generates a data stream. Twitter Spaces (group audio) is another example of communication that is built on real-time communication.\nIt will be interesting to see what Cloudflare does here. Will it develop APIs that developers can use to build their own real-time communication like Agora or Twilio? Or will Cloudflare even go further and also launch a consumer product, more like Zoom?\nWe don't know what Cloudflare's plans exactly are and I think it will take them a year or even more before everything is ready for the market, although you never know with Cloudflare.\nOne of my subscribers had shared a very interesting job opening from Cloudflare (thank you GV!), so I already knew this was in the making before the announcement during Birthday Week. I share the most interesting parts here:a real-time communications platform during Birthday Week. This is the business Agora (API) and Twilio (TWLO) are in, although Twilio does much more than this alone. It means that Cloudflare will go into communications. This could become very powerful.\n\nSecure e-mail through Cloudflare\nCloudflare introduced Cloudflare Email Routing during Birthday Week. It's a simple email integration tool. As Cloudflare explains:\nThe process is simple:\n\nYou enter the email address you want to create on your domain\nYou enter the email address you want it forwarded to\n\n\nIn short, Cloudflare makes sure that your e-mail comes in the right e-mail box without losing any speed, security or privacy. It's free and just another way of branching into another business. It's a huge market, as 4 billion people have at least one e-mail address and 300 billion mails are sent around the globe every day. Some of those people and businesses will start using Cloudflare's service and get to know the company better.\nCloudflare Registrar\nCloudflare also announced that all Cloudflare customers have full Registrar access, including the ability to register new domains. The company already has introduced the most used TLDs (top-level domains) such as .com, .net and several others and extensions of countries (.uk, .de, .au etc) already are introduced or will be rolled out over the next few weeks. Cloudflare does this all at-cost, meaning you only pay what Cloudflare itself has to pay.\nThis introduction is Cloudflare at its best again, explaining sometimes difficult things in an easy-to-understand way.\n\n In the domain name world, there are two key players: Registrars and registries. Understandably, the two are often confused. One way to look at it is that registries are the wholesalers and registrars are the retailers. Registries host the centralized database of registered domains within a TLD. They are responsible for establishing the policies and business rules for the TLD. They also set the wholesale price. Registrars sell domains to end users and manage those registrations on an ongoing basis. They set the retail fee, collect payment, provide customer support, and ensure registrations are renewed and kept up to date. They often provide complementary services such as DNS, web hosting, and email.\n\nCloudflare has experience with being a registrar. It offered a high-end niche service for customers with specific needs. In 2018, it also started with more general registrar functions, but based on transferring domains.\n\n At the time, we estimated that if our customers transferred all of their domains to us, they would collectively save over \n $50 million per year in registration fees.\n\nNow Cloudflare also offers this service to register new domains. According to Cloudflare, there was a big demand for the service, especially from people who didn't have a domain name yet. And that is understandable:\n\n Since they didn’t have anything to transfer in, they would have to go through the somewhat cumbersome process of registering a new domain with another provider\n and only thentransfer their domain to Cloudflare.\n\nNow every customer of Cloudflare, including free customers, can register new domains.\nOne of my subscribers switched his domains to Cloudflare immediately and he was very enthusiastic:\n\n Going to transfer my domains to Cloudflare\n\n\n Cloudflare: - 1 year .COM renewal $8.57Godaddy: - 1 year .COM Domain Renewal $17.99\n\n\n Privacy Protection:CloudFlare: Free - I still need to test thisGoDaddy: Full Domain Privacy and Protection - Renewal - $9.99\n\n\n So domain + privacy...320% difference in price.\n\n\n And there is ZERO value in overpaying for domain services.\n\nIn the meantime, more subscribers have followed and they are all very happy with the easy transition and great service.\nThe key element here is that Cloudflare again becomes more of a one-stop shop and that it can attract new customers that can later upgrade to other products. It's another small addition to the Cloudflare universe, but all together, these things are important.\nCan Cloudflare become the fourth cloud player?\nIf you look at Cloudflare to the bone, they have created a worldwide private network that speeds up and secures the internet. Their ticker NET is no coincidence. With the announcement of R2 during Birthday Week, Cloudflare is going even deeper into the infrastructure of that network.\nR2 is a cloud object storage product. Cloudflare already had built its own cloud storage for its own use and now wants to open the storage-as-a-service for its customers too. Matthew Prince commented:\n\n We thought if we can build a storage solution that provides all the functionality that other storage solutions do, that takes advantage of our global network so it’s extremely performant and we can also then price it in a way that is very attractive to customers we should do it.\n\nMatthew Prince already had put a tweet out before the announcement:\n\nR2 is a great name with a pun, as it's both 1 less than S3 and Amazon S3 or Amazon Simple Storage Service is a service offered by Amazon Web Services that provides object storage. This is what Prince tweeted when R2 had been announced:\n\nPrince always uses the word egregious (for the non-native speakers of English, it means shocking) aboutAWS'egress,he even wrote a blog post with that title.\nCloudflare will be cheaper than AWS, charging $0.015 per GB vs. AWS' $0.023 per GB. (Note: AWS Glacier S3 Deep Archive is even cheaper at $0.00099 per GB but can only be used for long-term data storage, not for things you regularly need).\nMuji from hhhypergrowth pointed out this tweet that explains very clearly why this is a big deal, from one of the best AWS pricing specialists out there (he's built a successful company around his specialty).\n(I'm leaving out a few things here)\nI think this really shows the incredible power of R2's offering.\nNow, AWS is the clear leader, but Microsoft's Azure and GCP (Google Cloud Platform) have similar prices. The product is not out yet, but Cloudflare has made a waiting list for customers who want to beta test the product in the coming months. I think there will be a lot of interest.\nMatthew Prince wants to keep building services and he shares what his ultimate goal is:\n\n We really think we’re on the path to be the fourth major public cloud.\n\nYou know what? I think that Cloudflare really has a chance of succeeding if it keeps innovating like this. Of course, this will take years but I think that's one of the reasons why Cloudflare's stock price has surged so much in the last month since this was announced. The market is a forward-looking place.\nData by YCharts\nWeb3\nCloudflare starts working on Web3 already. It's actually the decentralization of the internet based on the principles of the blockchain:\n\n The last two decades have proven that building a scalable system that decentralizes content is a challenge. While the technology to build such systems exists, no content platform achieves decentralization at scale.\n\n\n There is one notable exception: Bitcoin. Bitcoin was conceptualized in a 2008 whitepaper by Satoshi Nakamoto as a type of distributed ledger known as a blockchain designed so that a peer-to-peer (...) network could transact in a public, consistent, and tamper-proof manner.\n\nThis quote shows you the evolution toward Web3 and Cloudflare's role in it:\n\n The early Web was static. Then Web 2.0 came to provide interactiveness and service we use daily at the cost of centralisation. Web3 is a trend that tries to challenge this. With distributed networks built on open protocols, users of the web are empowered to participate.\n\n\n At Cloudflare, we are embracing this distributed future. Applying the knowledge and experience we have gained from running one of the largest edge networks, we are making it easier for users and businesses to benefit from Web3. This includes operating a distributed web product suite, contributing to open standards, and moving privacy forward.\n\nIf you don't totally understand Web3 yet,you are not alone:\n\nWhat I like about this is that Cloudflare already is thinking about the future. It doesn't wait until ithasto follow, it works proactive, a typical trait of an innovator.\nCloudflare for Offices\nCloudflare For Offices: Cloudflare will extend its network in more than 1,000 of the busiest office buildings in the world. Examples are 4 Times Square and 520 Madison in New York City, the Salesforce Tower in San Francisco and the Willis Tower in Chicago. This will be rolled out globally. This is a schematic overview of how it works:\n\nCloudflare explains that the edge will become much more like local computing and Zero Trust will be introduced in all of these offices. Remarkable is that Cloudflare built its own hardware to introduce this.\nTV As A Service\nCloudflare has been streaming video since June 2020, 24/7 on Cloudflare TV. During Birthday Week, it announced that it will now make the technology available to any other business that wants to run its own 24/7 streaming network.\n\n We didn’t initially set out to build Cloudflare TV from scratch. But as we explored our available options, we quickly realized that few solutions were designed for 24/7 linear streaming, and fewer still were optimized to be managed by a globally-distributed team. Thankfully, at Cloudflare, we like to build.\n\nStream Live\n\n With Stream Live, you can painlessly grow your streaming app to scale to millions of concurrent broadcasters and millions of concurrent users.\n\nThis is another great addition. It will power live video broadcasting. You can stream to millions of viewers instantly from mobile or desktop. It works with programs like OBS or Zoom. On top of that:\n\n Your broadcasts are automatically recorded, optimized and delivered using the Stream player.\n\n\nWith most webinars, there is a latency of about 15 to 20 seconds and that is the minimum now. Cloudflare wants to make this much better:\n\n We’re on a mission to reduce the latency Stream Live adds to near-zero.\n\nThat's especially important for conversations like a Q&A.\nCloudflare is also very clear about the pricing:\n\n It costs $5 per 1,000 minutes of video storage capacity per month. Live-streamed videos are automatically recorded. There is no additional cost for ingesting the live stream.\n\n\n It costs $1 per 1,000 minutes of video viewed.\n\nThoughts about Cloudflare's Innovation\nThere was also an interesting blog post about why and how Cloudflare can innovate so fast. It's an interesting read. A few interesting quotes from the blog post.\nInnovation starts with the people working at Cloudflare:\n\n The seeds of innovative ideas start with our team. One of the core things we look for when hiring in every role at Cloudflare — be it engineering and product or sales or account — is curiosity. (...)\n\n\n There’s an important attribute that partners with curiosity, however. To innovate, we listen. One of the things I screen for when we hire product managers is their ability to listen and synthesize the information they are hearing and then their ability to distill it into actionable problems for us to tackle.\n\nThe second important factor is that Cloudflare is a user of all of its products.\n\n We like to say Cloudflare was built on Cloudflare and for Cloudflare. This means we eat our own dog food with a glass of our own champagne on the side.\n\nAs a side note, I can't help but wonder if Cloudflare uses Fiverr for these drawings\nHow the company is structured is also very important:\n\n At Cloudflare, it is not unusual for an initial product idea to start with a team small enough to split a pack of Twinkies and for the initial proof of concept to go from whiteboard to rolled out in days. We intentionally staff and structure our teams and our backlogs so that we have flexibility to pivot and innovate. Our Emerging Technology and Incubation team is a small group of product managers and engineers solely dedicated to exploring new products for new markets.\n\n\n Our Research team is dedicated to thinking deeply and partnering with organizations across the globe to define new standards and new ways to tackle some of the hardest challenges.\n\n\n (...)\n\n\n We ship software for businesses like a consumer software company. Traditional B2B software development typically follows longer development cycles and focuses on delivering more fully featured and deeply integrated offerings out of the gate. This cautious approach yields fewer more fully featured offerings shipped less frequently.\n\nThe fact that so many Cloudflare products are free is also an integral part of the reason why Cloudflare is innovative:\n\n There’s one more aspect to all of this — because we’ve innovated in the way we’ve built our network — making it highly scalable and cost-effective — we’re able to pass these savings on to our customers. In a lot of instances, these savings amount to a pretty good price for our products and services: nothing at all.\n\n\n (...)\n\n\n Typically, in B2B enterprise software companies, the big customers and the multi-million dollar contracts get 99.99% of the focus. Here’s what I would say: our free customers are the secret sauce to our innovation. (...)\n\n\n We’re fortunate to have millions of free sites and applications on our network. Like a consumer app developer, we typically roll out new capabilities to pods of these users first. These users give us the volume and scale to get confident in what we’ve delivered. The more confident we get, the more broadly we roll out, such that by the time it hits broad rollout, our customers can feel confident in the quality and stability.\n\nConclusion\nCloudflare is a company that keeps innovating at an incredible speed and Birthday Week showed this again. With so many new products that are being rolled out or will be rolled out in the next weeks and months, we don't have to worry that Cloudflare's revenue will slow down growing at high speed any time soon.\nWhat especially stood out to me during this Birthday Week is that quite a bit of Cloudflare's innovations are on the infrastructural level, which I really like. Infrastructure is the basis for all the rest of the innovative expansions.\nIn the meantime, keep growing!","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":841441642,"gmtCreate":1635938012576,"gmtModify":1635938012576,"author":{"id":"3579252090743663","authorId":"3579252090743663","name":"Dexterine","avatar":"https://static.tigerbbs.com/10138ffa1aa8c4a45d64ae4fb9241d72","vip":1,"crmLevel":7,"crmLevelSwitch":0,"idStr":"3579252090743663","authorIdStr":"3579252090743663"},"htmlText":"I couldn’t agree more. The unique and silent positioning of cloud flare gives it an edge that many other companies does not have.Good article","listText":"I couldn’t agree more. The unique and silent positioning of cloud flare gives it an edge that many other companies does not have.Good article","text":"I couldn’t agree more. The unique and silent positioning of cloud flare gives it an edge that many other companies does not have.Good article","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/841441642","repostId":1162447676,"repostType":2,"repost":{"id":"1162447676","kind":"news","pubTimestamp":1635486956,"share":"https://www.laohu8.com/m/news/1162447676?lang=&edition=full","pubTime":"2021-10-29 13:55","market":"us","language":"en","title":"Cloudflare Before The Earnings: Valuation And Innovation","url":"https://stock-news.laohu8.com/highlight/detail?id=1162447676","media":"Seeking Alpha","summary":"Summary\n\nNext week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued ","content":"Summary\n<ul>\n <li>Next week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued extremely high.</li>\n <li>Despite the very expensive stock, I won't sell a single share. I explain why.</li>\n <li>More and more, Cloudflare is becoming the protector of the Internet, with a huge market share of 80% for reverse proxy. This is important for the roll-out of its products.</li>\n <li>Cloudflare has ambitions to become the fourth public cloud, next to AWS, Azure and GCP, the cloud offerings of Amazon, Microsoft and Google. There also are much more innovations.</li>\n <li>The constant innovation can spur the high growth of Cloudflare for a very long time.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/b5bc6245a3d372e9254b36065d3ea143\" tg-width=\"1536\" tg-height=\"1024\" width=\"100%\" height=\"auto\">Sundry Photography/iStock Editorial via Getty Images\nIntroduction\nNext week, on Nov. 4, Cloudflare (NET) reports earnings. There's no doubt that the stock is priced extremely high, but still I won't sell before the earnings. In the first part of the article, I will explain my reasoning.\nIn the second part of this article, I will show the new developments and why investors have reacted so enthusiastically.\nMy situation might differ from yours\nFirst, I want to explain my personal situation on Cloudflare. I picked it as a Potential Multibaggers for my subscribers at $39 and as I always invest along with my subscribers, I have a low-cost basis. I don't want to brag at all here, so if it comes across as that, I'm sorry and I should have phrased it more carefully.\nThe reason why I mention my low-cost basis before you even start reading is that it says a few things about my investing and your situation. The first is obvious: I may in a completely different situation as you might be in right now. The second thing it says about my investing is that I'm a long-term investor. For me that means at least three years, but preferably much longer. That may be very different from how you try to make money in the stock market.\nDifferent strokes for different folks and I wanted to make clear from the start here that if you react in the comments (everybody who follows me knows that I love the comment section) you should know my situation, which could be very different from yours and some arguments could not make sense for me, just as some arguments in this article might not make sense for more short-term oriented investors. Having said that, I will start with the hottest item first, the expensive valuation of Cloudflare.\nExpensive Cloudflare: What do I do?\nEven as a very bullish investor, there's no denying that Cloudflare is very expensive right now. It already was, and with the 25% jump this week, it's even more. I live in Belgium and there's no capital gains tax here (don't worry, there are numerous taxes to compensate that). So why wouldn't I sell after such a huge run? After all, Cloudflare is up 226% over the last year. With capital gains tax, what I will write is true even more.\n<img src=\"https://static.tigerbbs.com/393403b594ce293798b0e37f7b2399d3\" tg-width=\"635\" tg-height=\"417\" width=\"100%\" height=\"auto\">Data by YCharts\nSuppose I sell now, at $182, the price when I'm writing this near the market open on Thursday morning. In the next weeks and months, the stock continues to go up, to $250. After all, the stock market is not a rational place. If you believe that, you will probably not be very successful. How do you think I will feel at $250? I will feel stupid. But that's not all...\nSuppose after six long months Cloudflare goes down to $185. Will I still have the money to buy back my position? Would I be willing to enter again at a price a bit higher than where I sold and give up the reason why I sold in the first place? Or will I wait?\nNo, I want it to go lower before I buy again. Suppose I put a price of $155 on it. That's $27/share less or 15% from where I sold. Is that enough? Or should I wait until there is a 25% drop at $136.5? What if it never goes down to that price again? Am I supposed to not hold stock of this great company that does everything right because of an arbitrary price I drill into my head?\nSuppose I'm strict, $136.5 or no buying. But suppose in 2022, there is a drop from $300 to $210, will I not be tempted to buy, at a 10% higher price than where I sold but 30% down from its previous high? Suppose I don't buy and in five years it crosses $500 without me owning it, how do you think I will feel? Of course, like a complete idiot, because I know this company so well, I know that it does everything right and that it has a fantastic future in front of it but I still decided to not own it.\nAnd still, this scenario is what a lot of so-called specialists promote and practice. It sounds easy (buy low, sell high) but is extremely complicated in reality. I want to have the best companies of our time in my portfolio, even if they are expensive or extremely expensive, like Cloudflare is right now. If Cloudflare goes down, great, then I add a bit more. I'm not selling a single share.\nI already had written this part when I thought it would be good content for Twitter too. To my surprise and delight, I got an answer from the man himself, Cloudflare founder and CEO Matthew Prince.\n<img src=\"https://static.tigerbbs.com/01d0bf4a2f03b11e7e01cd8cfd6e5344\" tg-width=\"552\" tg-height=\"113\" width=\"100%\" height=\"auto\">\nSo, for the earnings, the stock price could drop, it could go up or stay flat. You never know. I think that if you are a short-term oriented investor, the chance is somewhat higher that it drops because of the high valuation. But if the company posts stellar results, the price could even go up. There are no certainties in investing.\nWith all of Cloudflare's innovations (more about that later in this article) and the many products it doesn't monetize yet, the company could see very high revenue growth (40%-50%) for many, many years to come, especially if it could realize its ambition to become the fourth public cloud (again, see further in this article).\nCloudflare is becoming the gateway for the internet\nSomething else to consider here is another, much more important&nbsp;tweet&nbsp;that Matthew Prince sent out, the market share that Cloudflare has when it comes to reverse proxy services.\n<img src=\"https://static.tigerbbs.com/b40ce06aa804ec7b58a45973c471350b\" tg-width=\"600\" tg-height=\"273\" width=\"100%\" height=\"auto\">\nA reverse proxy is a layer between a web server and the rest of the Internet. It provides security and better performance. Your computer doesn't have to connect to a single server, it can connect to any of the more than 250 Cloudflare's POPs (point-of-presence, a data center, which are almost always much closer to you.) That means faster and also much more secure internet, as a DDOS attacker (a bombardment of requests that make your site unusable) would need to attack all 250+ data centers of Cloudflare to be successful. I think you can see the huge advantage for customers.\nThis is a very simple visualization of how Cloudflare reverse proxy works.\n<img src=\"https://static.tigerbbs.com/199f44b4cd59831986852ac9707d09d0\" tg-width=\"640\" tg-height=\"322\" width=\"100%\" height=\"auto\">\nAs you can see on the chart that Matthew Prince shared, Cloudflare now does this for 18.4% of the whole Internet, followed by Fastly (1.7%) and AWS Cloudfront (1.2%). That's already a huge thing in and of itself. Cloudflare is 10 times bigger than its nearest competitor, which is a monster company. With edge computing and compute and storage capacities that Cloudflare is rolling out on the edge, this lead is very important. Cloudflare is in the driver's seat here and the market clearly recognizes that. That's probably one of the main reasons that it's priced so high.\nBut the huge majority of sites, 77.2%, still doesn't use a reverse proxy serve service. If you look then at the websites that use a reverse proxy, you see that Cloudflare's market share is more than 80%. Mind blowing!\n<img src=\"https://static.tigerbbs.com/bb5bbfb621eb9935bc83b037a8e24f27\" tg-width=\"469\" tg-height=\"597\" width=\"100%\" height=\"auto\">Source:Liberty Highlight's excellent newsletter\nOne of my subscribers, Irnest Kaplan, had some interesting questions about reverse proxy and, in another premium example of how communicative Matthew Prince is, the CEO answered to Irnest's question.\n<img src=\"https://static.tigerbbs.com/41da49470d4e441fe66b0f9a25c3600b\" tg-width=\"613\" tg-height=\"537\" width=\"100%\" height=\"auto\">\nI will answer Irnest's last question: Yes, Cloudflare monetized this, but just a small part. It generates a ton of data and insights that it gives Cloudflare an incredible competitive advantage over all of the other players in the industry. On top of that, you are a Cloudflare customer already, even if it is on a free plan, which means that if you look for another solution, Cloudflare will probably be the first vendor you'll think of, as it is much easier to have a one-stop-shop.\nCloudflare's Innovation\nI share my Birthday Week with that of Cloudflare. The company was founded in 2010, on Sept. 27, two days before I was born, years earlier, of course. Yearly, Cloudflare celebrates its Birthday Week with of new initiatives. Let's look at the most important ones here, but first the Founders' Letter, which the company also issues each year in this week.\nCloudflare's Birthday Week: the Founders' Letter\nAs part of the Birthday Week festivities, Cloudflare’s Co-Founders, Matthew Prince and Michelle Zatlyn (who is the COO and President of Cloudflare)&nbsp;released their annual “Founder’s Letter.”\nI really like that Matthew and Michelle talk a lot about their Mission Statement (“To Help Build a Better Internet”) and what they're actively doing to bring it to fruition.\nCloudflare is attracting elite talent. They have had more than 250,000 people apply in the last year but have hired less than one-half of one percent of them. This quote also shows how fast the company is growing:\n<blockquote>\n It's incredible to realize that more than half of Cloudflare's team today started since March 13, 2020, when we closed all our physical offices due to the pandemic.\n</blockquote>\nThe company now organizes social events like picnics to make social connections. At the same time, Prince and Zatlyn are really happy with work from home:\n<blockquote>\n Culture has little to do with fun offices, plentiful snacks, or adjustable desks. Instead, for us, it starts with hiring people who are relentlessly curious and, at the same time, empathetic. Curious people want to learn. Empathetic people love to teach. And if you put a group of them together, whether in a swanky office or on Zoom, great things will happen.\n</blockquote>\nOne of the aspects I like about Matthew Prince and Michelle Zatlyn is their ability to zoom out, which I also try for investing too. That's why this part stood out for me as well (my bold):\n<blockquote>\n A mere 11 years before Cloudflare's founding, long-distance phone calls still cost a fortune, sharing a photograph with someone in another country took weeks, and the idea that you could access the sum total of human knowledge from a device in your pocket was beyond even the fantasies of science fiction.\n</blockquote>\n<blockquote>\n (...)\n</blockquote>\n<blockquote>\n The Internet may seem static, but it is not. Eleven years ago, watching a video online was an exercise in frustration. Today, it seems almost automatic that you can push play on your TV and access nearly any movie ever made instantly. That's possible because the Internet isn't static; it gets better through innovation.\n At Cloudflare, we're optimized to catalyze exactly that innovation.\n</blockquote>\nThis is another great piece:\n<blockquote>\n Sometimes people outside the company are surprised by the products we build. In fact, predicting our roadmap is pretty easy. We look at all the steps that are required to load a web page, send an email, stream a video, login to a workstation, or anything else you do online and ask: can we make that more secure, more reliable, or faster?\n</blockquote>\n<blockquote>\n (...)\n</blockquote>\n<blockquote>\n As the Internet grows and acquires more capabilities, we believe we will continue to grow with it. An investment in Cloudflare is, fundamentally, we feel an investment in the Internet itself.\n</blockquote>\nI really like that quote because it aligns with Cloudflare’s mission statement. If you’re bullish on the growth of the Internet and the role it plays in our lives, then you’re inherently bullish on Cloudflare according to the founders. To me, this is backed up by their rapid rate of innovation and quality products. We will now dive into some of these new products that were released during Birthday Week.\nCloudflare is building real-time communication.\nCloudflare&nbsp;announced&nbsp;Just to remind you, Cloudflare works with POPs (points-of-presence), 250 data centers around the world. Starting out, this was a CDN (content delivery network) but Cloudflare builds more and more software and services on top of that infrastructure and that is what makes this company so much better than Fastly (FSLY), for example. The pace of innovation is incredible.\nThe POPs are meant to speed up data streams. Communication is a data stream. If you talk during your Zoom (ZM) meeting, that generates a data stream. Twitter Spaces (group audio) is another example of communication that is built on real-time communication.\nIt will be interesting to see what Cloudflare does here. Will it develop APIs that developers can use to build their own real-time communication like Agora or Twilio? Or will Cloudflare even go further and also launch a consumer product, more like Zoom?\nWe don't know what Cloudflare's plans exactly are and I think it will take them a year or even more before everything is ready for the market, although you never know with Cloudflare.\nOne of my subscribers had shared&nbsp;a very interesting job opening&nbsp;from Cloudflare (thank you GV!), so I already knew this was in the making before the announcement during Birthday Week. I share the most interesting parts here:a real-time communications platform during Birthday Week. This is the business Agora (API) and Twilio (TWLO) are in, although Twilio does much more than this alone. It means that Cloudflare will go into communications. This could become very powerful.\n<img src=\"https://static.tigerbbs.com/054a3c8e95a94a34fc4e32909ef74567\" tg-width=\"632\" tg-height=\"197\" width=\"100%\" height=\"auto\">\nSecure e-mail through Cloudflare\nCloudflare&nbsp;introduced&nbsp;Cloudflare Email Routing&nbsp;during Birthday Week. It's a simple email integration tool. As Cloudflare explains:\nThe process is simple:\n<ol>\n <li>You enter the email address you want to create on your domain</li>\n <li>You enter the email address you want it forwarded to</li>\n</ol>\n<img src=\"https://static.tigerbbs.com/70007928efbac8c6c1b6100068e6134d\" tg-width=\"1084\" tg-height=\"156\" width=\"100%\" height=\"auto\">\nIn short, Cloudflare makes sure that your e-mail comes in the right e-mail box without losing any speed, security or privacy. It's free and just another way of branching into another business. It's a huge market, as 4 billion people have at least one e-mail address and 300 billion mails are sent around the globe every day. Some of those people and businesses will start using Cloudflare's service and get to know the company better.\nCloudflare Registrar\nCloudflare also&nbsp;announced&nbsp;that all Cloudflare customers have full Registrar access, including the ability to register new domains. The company already has introduced the most used TLDs (top-level domains) such as .com, .net and several others and extensions of countries (.uk, .de, .au etc) already are introduced or will be rolled out over the next few weeks. Cloudflare does this all at-cost, meaning you only pay what Cloudflare itself has to pay.\nThis introduction is Cloudflare at its best again, explaining sometimes difficult things in an easy-to-understand way.\n<blockquote>\n In the domain name world, there are two key players: Registrars and registries. Understandably, the two are often confused. One way to look at it is that registries are the wholesalers and registrars are the retailers. Registries host the centralized database of registered domains within a TLD. They are responsible for establishing the policies and business rules for the TLD. They also set the wholesale price. Registrars sell domains to end users and manage those registrations on an ongoing basis. They set the retail fee, collect payment, provide customer support, and ensure registrations are renewed and kept up to date. They often provide complementary services such as DNS, web hosting, and email.\n</blockquote>\nCloudflare has experience with being a registrar. It offered a high-end niche service for customers with specific needs. In 2018, it also started with more general registrar functions, but based on transferring domains.\n<blockquote>\n At the time, we estimated that if our customers transferred all of their domains to us, they would collectively save over&nbsp;\n $50 million per year&nbsp;in registration fees.\n</blockquote>\nNow Cloudflare also offers this service to register new domains. According to Cloudflare, there was a big demand for the service, especially from people who didn't have a domain name yet. And that is understandable:\n<blockquote>\n Since they didn’t have anything to transfer in, they would have to go through the somewhat cumbersome process of registering a new domain with another provider\n and only thentransfer their domain to Cloudflare.\n</blockquote>\nNow every customer of Cloudflare, including free customers, can register new domains.\nOne of my subscribers switched his domains to Cloudflare immediately and he was very enthusiastic:\n<blockquote>\n Going to transfer my domains to Cloudflare\n</blockquote>\n<blockquote>\n Cloudflare: - 1 year .COM renewal $8.57Godaddy: - 1 year .COM Domain Renewal $17.99\n</blockquote>\n<blockquote>\n Privacy Protection:CloudFlare: Free - I still need to test thisGoDaddy: Full Domain Privacy and Protection - Renewal - $9.99\n</blockquote>\n<blockquote>\n So domain + privacy...320% difference in price.\n</blockquote>\n<blockquote>\n And there is ZERO value in overpaying for domain services.\n</blockquote>\nIn the meantime, more subscribers have followed and they are all very happy with the easy transition and great service.\nThe key element here is that Cloudflare again becomes more of a one-stop shop and that it can attract new customers that can later upgrade to other products. It's another small addition to the Cloudflare universe, but all together, these things are important.\nCan Cloudflare become the fourth cloud player?\nIf you look at Cloudflare to the bone, they have created a worldwide private network that speeds up and secures the internet. Their ticker NET is no coincidence. With the announcement of R2 during Birthday Week, Cloudflare is going even deeper into the infrastructure of that network.\nR2 is a cloud object storage product. Cloudflare already had built its own cloud storage for its own use and now wants to open the storage-as-a-service for its customers too. Matthew Prince&nbsp;commented:\n<blockquote>\n We thought if we can build a storage solution that provides all the functionality that other storage solutions do, that takes advantage of our global network so it’s extremely performant and we can also then price it in a way that is very attractive to customers we should do it.\n</blockquote>\nMatthew Prince already had&nbsp;put a tweet out&nbsp;before the announcement:\n<img src=\"https://static.tigerbbs.com/0a3d8428d39351182677597001026fef\" tg-width=\"602\" tg-height=\"182\" width=\"100%\" height=\"auto\">\nR2 is a great name with a pun, as it's both 1 less than S3 and Amazon S3 or Amazon Simple Storage Service is a service offered by Amazon Web Services that provides object storage. This is what Prince&nbsp;tweeted&nbsp;when R2 had been announced:\n<img src=\"https://static.tigerbbs.com/36df309cd563e21fce893fa29801ba1f\" tg-width=\"588\" tg-height=\"311\" width=\"100%\" height=\"auto\">\nPrince always uses the word egregious (for the non-native speakers of English, it means shocking) aboutAWS'egress,he even wrote a blog post with that title.\nCloudflare will be cheaper than AWS, charging $0.015 per GB vs. AWS' $0.023 per GB. (Note: AWS Glacier S3 Deep Archive is even cheaper at $0.00099 per GB but can only be used for long-term data storage, not for things you regularly need).\nMuji from&nbsp;hhhypergrowth&nbsp;pointed out this tweet that explains very clearly why this is a big deal, from one of the best AWS pricing specialists out there (he's built a successful company around his specialty).\n<img src=\"https://static.tigerbbs.com/d46017456e01dc1be31b5544c98542f8\" tg-width=\"587\" tg-height=\"466\" width=\"100%\" height=\"auto\">(I'm leaving out a few things here)<img src=\"https://static.tigerbbs.com/7e778ac6df472fbe78f095e6e5e83202\" tg-width=\"597\" tg-height=\"258\" width=\"100%\" height=\"auto\">\nI think this really shows the incredible power of R2's offering.\nNow, AWS is the clear leader, but Microsoft's Azure and GCP (Google Cloud Platform) have similar prices. The product is not out yet, but Cloudflare has made a waiting list for customers who want to beta test the product in the coming months. I think there will be a lot of interest.\nMatthew Prince wants to keep building services and&nbsp;he shares&nbsp;what his ultimate goal is:\n<blockquote>\n We really think we’re on the path to be the fourth major public cloud.\n</blockquote>\nYou know what? I think that Cloudflare really has a chance of succeeding if it keeps innovating like this. Of course, this will take years but I think that's one of the reasons why Cloudflare's stock price has surged so much in the last month since this was announced. The market is a forward-looking place.\n<img src=\"https://static.tigerbbs.com/b2a46af3c4e7098301aecb0a8c4226fb\" tg-width=\"635\" tg-height=\"417\" width=\"100%\" height=\"auto\">Data by YCharts\nWeb3\nCloudflare&nbsp;starts working on Web3 already. It's actually the decentralization of the internet based on the principles of the blockchain:\n<blockquote>\n The last two decades have proven that building a scalable system that decentralizes content is a challenge. While the technology to build such systems exists, no content platform achieves decentralization at scale.\n</blockquote>\n<blockquote>\n There is one notable exception: Bitcoin. Bitcoin was conceptualized in a 2008 whitepaper by Satoshi Nakamoto as a type of distributed ledger known as a blockchain designed so that a peer-to-peer (...) network could transact in a public, consistent, and tamper-proof manner.\n</blockquote>\nThis quote shows you the evolution toward Web3 and Cloudflare's role in it:\n<blockquote>\n The early Web was static. Then Web 2.0 came to provide interactiveness and service we use daily at the cost of centralisation. Web3 is a trend that tries to challenge this. With distributed networks built on open protocols, users of the web are empowered to participate.\n</blockquote>\n<blockquote>\n At Cloudflare, we are embracing this distributed future. Applying the knowledge and experience we have gained from running one of the largest edge networks, we are making it easier for users and businesses to benefit from Web3. This includes operating a distributed web product suite, contributing to open standards, and moving privacy forward.\n</blockquote>\nIf you don't totally understand Web3 yet,you are not alone:\n<img src=\"https://static.tigerbbs.com/8b08b7d260f89edae78a292900aa93d1\" tg-width=\"600\" tg-height=\"208\" width=\"100%\" height=\"auto\">\nWhat I like about this is that Cloudflare already is thinking about the future. It doesn't wait until ithasto follow, it works proactive, a typical trait of an innovator.\nCloudflare for Offices\nCloudflare For Offices: Cloudflare will extend its network in more than 1,000 of the busiest office buildings in the world. Examples are 4 Times Square and 520 Madison in New York City, the Salesforce Tower in San Francisco and the Willis Tower in Chicago. This will be rolled out globally. This is a schematic overview of how it works:\n<img src=\"https://static.tigerbbs.com/7cd1a9f3e977b5fb5784840c24efc09a\" tg-width=\"640\" tg-height=\"348\" width=\"100%\" height=\"auto\">\nCloudflare explains that the edge will become much more like local computing and Zero Trust will be introduced in all of these offices. Remarkable is that Cloudflare built its own hardware to introduce this.\nTV As A Service\nCloudflare has been streaming video since June 2020, 24/7 on&nbsp;Cloudflare TV. During Birthday Week, it announced that it will now make the technology available to any other business that wants to run its own 24/7 streaming network.\n<blockquote>\n We didn’t initially set out to build Cloudflare TV from scratch. But as we explored our available options, we quickly realized that few solutions were designed for 24/7 linear streaming, and fewer still were optimized to be managed by a globally-distributed team. Thankfully, at Cloudflare, we like to build.\n</blockquote>\nStream Live\n<blockquote>\n With Stream Live, you can painlessly grow your streaming app to scale to millions of concurrent broadcasters and millions of concurrent users.\n</blockquote>\nThis is another great addition. It will power live video broadcasting. You can stream to millions of viewers instantly from mobile or desktop. It works with programs like OBS or Zoom. On top of that:\n<blockquote>\n Your broadcasts are automatically recorded, optimized and delivered using the Stream player.\n</blockquote>\n<img src=\"https://static.tigerbbs.com/19270e26bb1ff73c07a288a1bf3e6ee5\" tg-width=\"640\" tg-height=\"230\" width=\"100%\" height=\"auto\">\nWith most webinars, there is a latency of about 15 to 20 seconds and that is the minimum now. Cloudflare wants to make this much better:\n<blockquote>\n We’re on a mission to reduce the latency Stream Live adds to near-zero.\n</blockquote>\nThat's especially important for conversations like a Q&amp;A.\nCloudflare is also very clear about the pricing:\n<blockquote>\n It costs $5 per 1,000 minutes of video storage capacity per month. Live-streamed videos are automatically recorded. There is no additional cost for ingesting the live stream.\n</blockquote>\n<blockquote>\n It costs $1 per 1,000 minutes of video viewed.\n</blockquote>\nThoughts about Cloudflare's Innovation\nThere was also an interesting blog post about why and how Cloudflare can innovate so fast. It's&nbsp;an interesting read. A few interesting quotes from the blog post.\nInnovation starts with the people working at Cloudflare:\n<blockquote>\n The seeds of innovative ideas start with our team. One of the core things we look for when hiring in every role at Cloudflare — be it engineering and product or sales or account — is curiosity. (...)\n</blockquote>\n<blockquote>\n There’s an important attribute that partners with curiosity, however. To innovate, we listen. One of the things I screen for when we hire product managers is their ability to listen and synthesize the information they are hearing and then their ability to distill it into actionable problems for us to tackle.\n</blockquote>\nThe second important factor is that Cloudflare is a user of all of its products.\n<blockquote>\n We like to say Cloudflare was built on Cloudflare and for Cloudflare. This means we eat our own dog food with a glass of our own champagne on the side.\n</blockquote>\n<img src=\"https://static.tigerbbs.com/f3c860b9be8ba80430c0161d168527c2\" tg-width=\"280\" tg-height=\"192\" width=\"100%\" height=\"auto\">As a side note, I can't help but wonder if Cloudflare uses Fiverr for these drawings\nHow the company is structured is also very important:\n<blockquote>\n At Cloudflare, it is not unusual for an initial product idea to start with a team small enough to split a pack of Twinkies and for the initial proof of concept to go from whiteboard to rolled out in days. We intentionally staff and structure our teams and our backlogs so that we have flexibility to pivot and innovate. Our Emerging Technology and Incubation team is a small group of product managers and engineers solely dedicated to exploring new products for new markets.\n</blockquote>\n<blockquote>\n Our Research team is dedicated to thinking deeply and partnering with organizations across the globe to define new standards and new ways to tackle some of the hardest challenges.\n</blockquote>\n<blockquote>\n (...)\n</blockquote>\n<blockquote>\n We ship software for businesses like a consumer software company. Traditional B2B software development typically follows longer development cycles and focuses on delivering more fully featured and deeply integrated offerings out of the gate. This cautious approach yields fewer more fully featured offerings shipped less frequently.\n</blockquote>\nThe fact that so many Cloudflare products are free is also an integral part of the reason why Cloudflare is innovative:\n<blockquote>\n There’s one more aspect to all of this — because we’ve innovated in the way we’ve built our network — making it highly scalable and cost-effective — we’re able to pass these savings on to our customers. In a lot of instances, these savings amount to a pretty good price for our products and services: nothing at all.\n</blockquote>\n<blockquote>\n (...)\n</blockquote>\n<blockquote>\n Typically, in B2B enterprise software companies, the big customers and the multi-million dollar contracts get 99.99% of the focus. Here’s what I would say: our free customers are the secret sauce to our innovation. (...)\n</blockquote>\n<blockquote>\n We’re fortunate to have millions of free sites and applications on our network. Like a consumer app developer, we typically roll out new capabilities to pods of these users first. These users give us the volume and scale to get confident in what we’ve delivered. The more confident we get, the more broadly we roll out, such that by the time it hits broad rollout, our customers can feel confident in the quality and stability.\n</blockquote>\nConclusion\nCloudflare is a company that keeps innovating at an incredible speed and Birthday Week showed this again. With so many new products that are being rolled out or will be rolled out in the next weeks and months, we don't have to worry that Cloudflare's revenue will slow down growing at high speed any time soon.\nWhat especially stood out to me during this Birthday Week is that quite a bit of Cloudflare's innovations are on the infrastructural level, which I really like. Infrastructure is the basis for all the rest of the innovative expansions.\nIn the meantime, keep growing!","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Cloudflare Before The Earnings: Valuation And Innovation</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCloudflare Before The Earnings: Valuation And Innovation\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-10-29 13:55 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4463158-cloudflare-net-stock-q3-earnings-preview-valuation-innovation>Seeking Alpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nNext week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued extremely high.\nDespite the very expensive stock, I won't sell a single share. I explain why.\nMore ...\n\n<a href=\"https://seekingalpha.com/article/4463158-cloudflare-net-stock-q3-earnings-preview-valuation-innovation\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NET":"Cloudflare, Inc."},"source_url":"https://seekingalpha.com/article/4463158-cloudflare-net-stock-q3-earnings-preview-valuation-innovation","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1162447676","content_text":"Summary\n\nNext week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued extremely high.\nDespite the very expensive stock, I won't sell a single share. I explain why.\nMore and more, Cloudflare is becoming the protector of the Internet, with a huge market share of 80% for reverse proxy. This is important for the roll-out of its products.\nCloudflare has ambitions to become the fourth public cloud, next to AWS, Azure and GCP, the cloud offerings of Amazon, Microsoft and Google. There also are much more innovations.\nThe constant innovation can spur the high growth of Cloudflare for a very long time.\n\nSundry Photography/iStock Editorial via Getty Images\nIntroduction\nNext week, on Nov. 4, Cloudflare (NET) reports earnings. There's no doubt that the stock is priced extremely high, but still I won't sell before the earnings. In the first part of the article, I will explain my reasoning.\nIn the second part of this article, I will show the new developments and why investors have reacted so enthusiastically.\nMy situation might differ from yours\nFirst, I want to explain my personal situation on Cloudflare. I picked it as a Potential Multibaggers for my subscribers at $39 and as I always invest along with my subscribers, I have a low-cost basis. I don't want to brag at all here, so if it comes across as that, I'm sorry and I should have phrased it more carefully.\nThe reason why I mention my low-cost basis before you even start reading is that it says a few things about my investing and your situation. The first is obvious: I may in a completely different situation as you might be in right now. The second thing it says about my investing is that I'm a long-term investor. For me that means at least three years, but preferably much longer. That may be very different from how you try to make money in the stock market.\nDifferent strokes for different folks and I wanted to make clear from the start here that if you react in the comments (everybody who follows me knows that I love the comment section) you should know my situation, which could be very different from yours and some arguments could not make sense for me, just as some arguments in this article might not make sense for more short-term oriented investors. Having said that, I will start with the hottest item first, the expensive valuation of Cloudflare.\nExpensive Cloudflare: What do I do?\nEven as a very bullish investor, there's no denying that Cloudflare is very expensive right now. It already was, and with the 25% jump this week, it's even more. I live in Belgium and there's no capital gains tax here (don't worry, there are numerous taxes to compensate that). So why wouldn't I sell after such a huge run? After all, Cloudflare is up 226% over the last year. With capital gains tax, what I will write is true even more.\nData by YCharts\nSuppose I sell now, at $182, the price when I'm writing this near the market open on Thursday morning. In the next weeks and months, the stock continues to go up, to $250. After all, the stock market is not a rational place. If you believe that, you will probably not be very successful. How do you think I will feel at $250? I will feel stupid. But that's not all...\nSuppose after six long months Cloudflare goes down to $185. Will I still have the money to buy back my position? Would I be willing to enter again at a price a bit higher than where I sold and give up the reason why I sold in the first place? Or will I wait?\nNo, I want it to go lower before I buy again. Suppose I put a price of $155 on it. That's $27/share less or 15% from where I sold. Is that enough? Or should I wait until there is a 25% drop at $136.5? What if it never goes down to that price again? Am I supposed to not hold stock of this great company that does everything right because of an arbitrary price I drill into my head?\nSuppose I'm strict, $136.5 or no buying. But suppose in 2022, there is a drop from $300 to $210, will I not be tempted to buy, at a 10% higher price than where I sold but 30% down from its previous high? Suppose I don't buy and in five years it crosses $500 without me owning it, how do you think I will feel? Of course, like a complete idiot, because I know this company so well, I know that it does everything right and that it has a fantastic future in front of it but I still decided to not own it.\nAnd still, this scenario is what a lot of so-called specialists promote and practice. It sounds easy (buy low, sell high) but is extremely complicated in reality. I want to have the best companies of our time in my portfolio, even if they are expensive or extremely expensive, like Cloudflare is right now. If Cloudflare goes down, great, then I add a bit more. I'm not selling a single share.\nI already had written this part when I thought it would be good content for Twitter too. To my surprise and delight, I got an answer from the man himself, Cloudflare founder and CEO Matthew Prince.\n\nSo, for the earnings, the stock price could drop, it could go up or stay flat. You never know. I think that if you are a short-term oriented investor, the chance is somewhat higher that it drops because of the high valuation. But if the company posts stellar results, the price could even go up. There are no certainties in investing.\nWith all of Cloudflare's innovations (more about that later in this article) and the many products it doesn't monetize yet, the company could see very high revenue growth (40%-50%) for many, many years to come, especially if it could realize its ambition to become the fourth public cloud (again, see further in this article).\nCloudflare is becoming the gateway for the internet\nSomething else to consider here is another, much more important tweet that Matthew Prince sent out, the market share that Cloudflare has when it comes to reverse proxy services.\n\nA reverse proxy is a layer between a web server and the rest of the Internet. It provides security and better performance. Your computer doesn't have to connect to a single server, it can connect to any of the more than 250 Cloudflare's POPs (point-of-presence, a data center, which are almost always much closer to you.) That means faster and also much more secure internet, as a DDOS attacker (a bombardment of requests that make your site unusable) would need to attack all 250+ data centers of Cloudflare to be successful. I think you can see the huge advantage for customers.\nThis is a very simple visualization of how Cloudflare reverse proxy works.\n\nAs you can see on the chart that Matthew Prince shared, Cloudflare now does this for 18.4% of the whole Internet, followed by Fastly (1.7%) and AWS Cloudfront (1.2%). That's already a huge thing in and of itself. Cloudflare is 10 times bigger than its nearest competitor, which is a monster company. With edge computing and compute and storage capacities that Cloudflare is rolling out on the edge, this lead is very important. Cloudflare is in the driver's seat here and the market clearly recognizes that. That's probably one of the main reasons that it's priced so high.\nBut the huge majority of sites, 77.2%, still doesn't use a reverse proxy serve service. If you look then at the websites that use a reverse proxy, you see that Cloudflare's market share is more than 80%. Mind blowing!\nSource:Liberty Highlight's excellent newsletter\nOne of my subscribers, Irnest Kaplan, had some interesting questions about reverse proxy and, in another premium example of how communicative Matthew Prince is, the CEO answered to Irnest's question.\n\nI will answer Irnest's last question: Yes, Cloudflare monetized this, but just a small part. It generates a ton of data and insights that it gives Cloudflare an incredible competitive advantage over all of the other players in the industry. On top of that, you are a Cloudflare customer already, even if it is on a free plan, which means that if you look for another solution, Cloudflare will probably be the first vendor you'll think of, as it is much easier to have a one-stop-shop.\nCloudflare's Innovation\nI share my Birthday Week with that of Cloudflare. The company was founded in 2010, on Sept. 27, two days before I was born, years earlier, of course. Yearly, Cloudflare celebrates its Birthday Week with of new initiatives. Let's look at the most important ones here, but first the Founders' Letter, which the company also issues each year in this week.\nCloudflare's Birthday Week: the Founders' Letter\nAs part of the Birthday Week festivities, Cloudflare’s Co-Founders, Matthew Prince and Michelle Zatlyn (who is the COO and President of Cloudflare) released their annual “Founder’s Letter.”\nI really like that Matthew and Michelle talk a lot about their Mission Statement (“To Help Build a Better Internet”) and what they're actively doing to bring it to fruition.\nCloudflare is attracting elite talent. They have had more than 250,000 people apply in the last year but have hired less than one-half of one percent of them. This quote also shows how fast the company is growing:\n\n It's incredible to realize that more than half of Cloudflare's team today started since March 13, 2020, when we closed all our physical offices due to the pandemic.\n\nThe company now organizes social events like picnics to make social connections. At the same time, Prince and Zatlyn are really happy with work from home:\n\n Culture has little to do with fun offices, plentiful snacks, or adjustable desks. Instead, for us, it starts with hiring people who are relentlessly curious and, at the same time, empathetic. Curious people want to learn. Empathetic people love to teach. And if you put a group of them together, whether in a swanky office or on Zoom, great things will happen.\n\nOne of the aspects I like about Matthew Prince and Michelle Zatlyn is their ability to zoom out, which I also try for investing too. That's why this part stood out for me as well (my bold):\n\n A mere 11 years before Cloudflare's founding, long-distance phone calls still cost a fortune, sharing a photograph with someone in another country took weeks, and the idea that you could access the sum total of human knowledge from a device in your pocket was beyond even the fantasies of science fiction.\n\n\n (...)\n\n\n The Internet may seem static, but it is not. Eleven years ago, watching a video online was an exercise in frustration. Today, it seems almost automatic that you can push play on your TV and access nearly any movie ever made instantly. That's possible because the Internet isn't static; it gets better through innovation.\n At Cloudflare, we're optimized to catalyze exactly that innovation.\n\nThis is another great piece:\n\n Sometimes people outside the company are surprised by the products we build. In fact, predicting our roadmap is pretty easy. We look at all the steps that are required to load a web page, send an email, stream a video, login to a workstation, or anything else you do online and ask: can we make that more secure, more reliable, or faster?\n\n\n (...)\n\n\n As the Internet grows and acquires more capabilities, we believe we will continue to grow with it. An investment in Cloudflare is, fundamentally, we feel an investment in the Internet itself.\n\nI really like that quote because it aligns with Cloudflare’s mission statement. If you’re bullish on the growth of the Internet and the role it plays in our lives, then you’re inherently bullish on Cloudflare according to the founders. To me, this is backed up by their rapid rate of innovation and quality products. We will now dive into some of these new products that were released during Birthday Week.\nCloudflare is building real-time communication.\nCloudflare announced Just to remind you, Cloudflare works with POPs (points-of-presence), 250 data centers around the world. Starting out, this was a CDN (content delivery network) but Cloudflare builds more and more software and services on top of that infrastructure and that is what makes this company so much better than Fastly (FSLY), for example. The pace of innovation is incredible.\nThe POPs are meant to speed up data streams. Communication is a data stream. If you talk during your Zoom (ZM) meeting, that generates a data stream. Twitter Spaces (group audio) is another example of communication that is built on real-time communication.\nIt will be interesting to see what Cloudflare does here. Will it develop APIs that developers can use to build their own real-time communication like Agora or Twilio? Or will Cloudflare even go further and also launch a consumer product, more like Zoom?\nWe don't know what Cloudflare's plans exactly are and I think it will take them a year or even more before everything is ready for the market, although you never know with Cloudflare.\nOne of my subscribers had shared a very interesting job opening from Cloudflare (thank you GV!), so I already knew this was in the making before the announcement during Birthday Week. I share the most interesting parts here:a real-time communications platform during Birthday Week. This is the business Agora (API) and Twilio (TWLO) are in, although Twilio does much more than this alone. It means that Cloudflare will go into communications. This could become very powerful.\n\nSecure e-mail through Cloudflare\nCloudflare introduced Cloudflare Email Routing during Birthday Week. It's a simple email integration tool. As Cloudflare explains:\nThe process is simple:\n\nYou enter the email address you want to create on your domain\nYou enter the email address you want it forwarded to\n\n\nIn short, Cloudflare makes sure that your e-mail comes in the right e-mail box without losing any speed, security or privacy. It's free and just another way of branching into another business. It's a huge market, as 4 billion people have at least one e-mail address and 300 billion mails are sent around the globe every day. Some of those people and businesses will start using Cloudflare's service and get to know the company better.\nCloudflare Registrar\nCloudflare also announced that all Cloudflare customers have full Registrar access, including the ability to register new domains. The company already has introduced the most used TLDs (top-level domains) such as .com, .net and several others and extensions of countries (.uk, .de, .au etc) already are introduced or will be rolled out over the next few weeks. Cloudflare does this all at-cost, meaning you only pay what Cloudflare itself has to pay.\nThis introduction is Cloudflare at its best again, explaining sometimes difficult things in an easy-to-understand way.\n\n In the domain name world, there are two key players: Registrars and registries. Understandably, the two are often confused. One way to look at it is that registries are the wholesalers and registrars are the retailers. Registries host the centralized database of registered domains within a TLD. They are responsible for establishing the policies and business rules for the TLD. They also set the wholesale price. Registrars sell domains to end users and manage those registrations on an ongoing basis. They set the retail fee, collect payment, provide customer support, and ensure registrations are renewed and kept up to date. They often provide complementary services such as DNS, web hosting, and email.\n\nCloudflare has experience with being a registrar. It offered a high-end niche service for customers with specific needs. In 2018, it also started with more general registrar functions, but based on transferring domains.\n\n At the time, we estimated that if our customers transferred all of their domains to us, they would collectively save over \n $50 million per year in registration fees.\n\nNow Cloudflare also offers this service to register new domains. According to Cloudflare, there was a big demand for the service, especially from people who didn't have a domain name yet. And that is understandable:\n\n Since they didn’t have anything to transfer in, they would have to go through the somewhat cumbersome process of registering a new domain with another provider\n and only thentransfer their domain to Cloudflare.\n\nNow every customer of Cloudflare, including free customers, can register new domains.\nOne of my subscribers switched his domains to Cloudflare immediately and he was very enthusiastic:\n\n Going to transfer my domains to Cloudflare\n\n\n Cloudflare: - 1 year .COM renewal $8.57Godaddy: - 1 year .COM Domain Renewal $17.99\n\n\n Privacy Protection:CloudFlare: Free - I still need to test thisGoDaddy: Full Domain Privacy and Protection - Renewal - $9.99\n\n\n So domain + privacy...320% difference in price.\n\n\n And there is ZERO value in overpaying for domain services.\n\nIn the meantime, more subscribers have followed and they are all very happy with the easy transition and great service.\nThe key element here is that Cloudflare again becomes more of a one-stop shop and that it can attract new customers that can later upgrade to other products. It's another small addition to the Cloudflare universe, but all together, these things are important.\nCan Cloudflare become the fourth cloud player?\nIf you look at Cloudflare to the bone, they have created a worldwide private network that speeds up and secures the internet. Their ticker NET is no coincidence. With the announcement of R2 during Birthday Week, Cloudflare is going even deeper into the infrastructure of that network.\nR2 is a cloud object storage product. Cloudflare already had built its own cloud storage for its own use and now wants to open the storage-as-a-service for its customers too. Matthew Prince commented:\n\n We thought if we can build a storage solution that provides all the functionality that other storage solutions do, that takes advantage of our global network so it’s extremely performant and we can also then price it in a way that is very attractive to customers we should do it.\n\nMatthew Prince already had put a tweet out before the announcement:\n\nR2 is a great name with a pun, as it's both 1 less than S3 and Amazon S3 or Amazon Simple Storage Service is a service offered by Amazon Web Services that provides object storage. This is what Prince tweeted when R2 had been announced:\n\nPrince always uses the word egregious (for the non-native speakers of English, it means shocking) aboutAWS'egress,he even wrote a blog post with that title.\nCloudflare will be cheaper than AWS, charging $0.015 per GB vs. AWS' $0.023 per GB. (Note: AWS Glacier S3 Deep Archive is even cheaper at $0.00099 per GB but can only be used for long-term data storage, not for things you regularly need).\nMuji from hhhypergrowth pointed out this tweet that explains very clearly why this is a big deal, from one of the best AWS pricing specialists out there (he's built a successful company around his specialty).\n(I'm leaving out a few things here)\nI think this really shows the incredible power of R2's offering.\nNow, AWS is the clear leader, but Microsoft's Azure and GCP (Google Cloud Platform) have similar prices. The product is not out yet, but Cloudflare has made a waiting list for customers who want to beta test the product in the coming months. I think there will be a lot of interest.\nMatthew Prince wants to keep building services and he shares what his ultimate goal is:\n\n We really think we’re on the path to be the fourth major public cloud.\n\nYou know what? I think that Cloudflare really has a chance of succeeding if it keeps innovating like this. Of course, this will take years but I think that's one of the reasons why Cloudflare's stock price has surged so much in the last month since this was announced. The market is a forward-looking place.\nData by YCharts\nWeb3\nCloudflare starts working on Web3 already. It's actually the decentralization of the internet based on the principles of the blockchain:\n\n The last two decades have proven that building a scalable system that decentralizes content is a challenge. While the technology to build such systems exists, no content platform achieves decentralization at scale.\n\n\n There is one notable exception: Bitcoin. Bitcoin was conceptualized in a 2008 whitepaper by Satoshi Nakamoto as a type of distributed ledger known as a blockchain designed so that a peer-to-peer (...) network could transact in a public, consistent, and tamper-proof manner.\n\nThis quote shows you the evolution toward Web3 and Cloudflare's role in it:\n\n The early Web was static. Then Web 2.0 came to provide interactiveness and service we use daily at the cost of centralisation. Web3 is a trend that tries to challenge this. With distributed networks built on open protocols, users of the web are empowered to participate.\n\n\n At Cloudflare, we are embracing this distributed future. Applying the knowledge and experience we have gained from running one of the largest edge networks, we are making it easier for users and businesses to benefit from Web3. This includes operating a distributed web product suite, contributing to open standards, and moving privacy forward.\n\nIf you don't totally understand Web3 yet,you are not alone:\n\nWhat I like about this is that Cloudflare already is thinking about the future. It doesn't wait until ithasto follow, it works proactive, a typical trait of an innovator.\nCloudflare for Offices\nCloudflare For Offices: Cloudflare will extend its network in more than 1,000 of the busiest office buildings in the world. Examples are 4 Times Square and 520 Madison in New York City, the Salesforce Tower in San Francisco and the Willis Tower in Chicago. This will be rolled out globally. This is a schematic overview of how it works:\n\nCloudflare explains that the edge will become much more like local computing and Zero Trust will be introduced in all of these offices. Remarkable is that Cloudflare built its own hardware to introduce this.\nTV As A Service\nCloudflare has been streaming video since June 2020, 24/7 on Cloudflare TV. During Birthday Week, it announced that it will now make the technology available to any other business that wants to run its own 24/7 streaming network.\n\n We didn’t initially set out to build Cloudflare TV from scratch. But as we explored our available options, we quickly realized that few solutions were designed for 24/7 linear streaming, and fewer still were optimized to be managed by a globally-distributed team. Thankfully, at Cloudflare, we like to build.\n\nStream Live\n\n With Stream Live, you can painlessly grow your streaming app to scale to millions of concurrent broadcasters and millions of concurrent users.\n\nThis is another great addition. It will power live video broadcasting. You can stream to millions of viewers instantly from mobile or desktop. It works with programs like OBS or Zoom. On top of that:\n\n Your broadcasts are automatically recorded, optimized and delivered using the Stream player.\n\n\nWith most webinars, there is a latency of about 15 to 20 seconds and that is the minimum now. Cloudflare wants to make this much better:\n\n We’re on a mission to reduce the latency Stream Live adds to near-zero.\n\nThat's especially important for conversations like a Q&A.\nCloudflare is also very clear about the pricing:\n\n It costs $5 per 1,000 minutes of video storage capacity per month. Live-streamed videos are automatically recorded. There is no additional cost for ingesting the live stream.\n\n\n It costs $1 per 1,000 minutes of video viewed.\n\nThoughts about Cloudflare's Innovation\nThere was also an interesting blog post about why and how Cloudflare can innovate so fast. It's an interesting read. A few interesting quotes from the blog post.\nInnovation starts with the people working at Cloudflare:\n\n The seeds of innovative ideas start with our team. One of the core things we look for when hiring in every role at Cloudflare — be it engineering and product or sales or account — is curiosity. (...)\n\n\n There’s an important attribute that partners with curiosity, however. To innovate, we listen. One of the things I screen for when we hire product managers is their ability to listen and synthesize the information they are hearing and then their ability to distill it into actionable problems for us to tackle.\n\nThe second important factor is that Cloudflare is a user of all of its products.\n\n We like to say Cloudflare was built on Cloudflare and for Cloudflare. This means we eat our own dog food with a glass of our own champagne on the side.\n\nAs a side note, I can't help but wonder if Cloudflare uses Fiverr for these drawings\nHow the company is structured is also very important:\n\n At Cloudflare, it is not unusual for an initial product idea to start with a team small enough to split a pack of Twinkies and for the initial proof of concept to go from whiteboard to rolled out in days. We intentionally staff and structure our teams and our backlogs so that we have flexibility to pivot and innovate. Our Emerging Technology and Incubation team is a small group of product managers and engineers solely dedicated to exploring new products for new markets.\n\n\n Our Research team is dedicated to thinking deeply and partnering with organizations across the globe to define new standards and new ways to tackle some of the hardest challenges.\n\n\n (...)\n\n\n We ship software for businesses like a consumer software company. Traditional B2B software development typically follows longer development cycles and focuses on delivering more fully featured and deeply integrated offerings out of the gate. This cautious approach yields fewer more fully featured offerings shipped less frequently.\n\nThe fact that so many Cloudflare products are free is also an integral part of the reason why Cloudflare is innovative:\n\n There’s one more aspect to all of this — because we’ve innovated in the way we’ve built our network — making it highly scalable and cost-effective — we’re able to pass these savings on to our customers. In a lot of instances, these savings amount to a pretty good price for our products and services: nothing at all.\n\n\n (...)\n\n\n Typically, in B2B enterprise software companies, the big customers and the multi-million dollar contracts get 99.99% of the focus. Here’s what I would say: our free customers are the secret sauce to our innovation. (...)\n\n\n We’re fortunate to have millions of free sites and applications on our network. Like a consumer app developer, we typically roll out new capabilities to pods of these users first. These users give us the volume and scale to get confident in what we’ve delivered. The more confident we get, the more broadly we roll out, such that by the time it hits broad rollout, our customers can feel confident in the quality and stability.\n\nConclusion\nCloudflare is a company that keeps innovating at an incredible speed and Birthday Week showed this again. With so many new products that are being rolled out or will be rolled out in the next weeks and months, we don't have to worry that Cloudflare's revenue will slow down growing at high speed any time soon.\nWhat especially stood out to me during this Birthday Week is that quite a bit of Cloudflare's innovations are on the infrastructural level, which I really like. Infrastructure is the basis for all the rest of the innovative expansions.\nIn the meantime, keep growing!","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":857521983,"gmtCreate":1635550705893,"gmtModify":1635550706253,"author":{"id":"3579992296424941","authorId":"3579992296424941","name":"DMC8","avatar":"https://static.tigerbbs.com/65aa8f5f6299558ce2ab36482793f750","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3579992296424941","authorIdStr":"3579992296424941"},"htmlText":"Good Article 👍","listText":"Good Article 👍","text":"Good Article 👍","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/857521983","repostId":1162447676,"repostType":2,"repost":{"id":"1162447676","kind":"news","pubTimestamp":1635486956,"share":"https://www.laohu8.com/m/news/1162447676?lang=&edition=full","pubTime":"2021-10-29 13:55","market":"us","language":"en","title":"Cloudflare Before The Earnings: Valuation And Innovation","url":"https://stock-news.laohu8.com/highlight/detail?id=1162447676","media":"Seeking Alpha","summary":"Summary\n\nNext week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued ","content":"Summary\n<ul>\n <li>Next week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued extremely high.</li>\n <li>Despite the very expensive stock, I won't sell a single share. I explain why.</li>\n <li>More and more, Cloudflare is becoming the protector of the Internet, with a huge market share of 80% for reverse proxy. This is important for the roll-out of its products.</li>\n <li>Cloudflare has ambitions to become the fourth public cloud, next to AWS, Azure and GCP, the cloud offerings of Amazon, Microsoft and Google. There also are much more innovations.</li>\n <li>The constant innovation can spur the high growth of Cloudflare for a very long time.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/b5bc6245a3d372e9254b36065d3ea143\" tg-width=\"1536\" tg-height=\"1024\" width=\"100%\" height=\"auto\">Sundry Photography/iStock Editorial via Getty Images\nIntroduction\nNext week, on Nov. 4, Cloudflare (NET) reports earnings. There's no doubt that the stock is priced extremely high, but still I won't sell before the earnings. In the first part of the article, I will explain my reasoning.\nIn the second part of this article, I will show the new developments and why investors have reacted so enthusiastically.\nMy situation might differ from yours\nFirst, I want to explain my personal situation on Cloudflare. I picked it as a Potential Multibaggers for my subscribers at $39 and as I always invest along with my subscribers, I have a low-cost basis. I don't want to brag at all here, so if it comes across as that, I'm sorry and I should have phrased it more carefully.\nThe reason why I mention my low-cost basis before you even start reading is that it says a few things about my investing and your situation. The first is obvious: I may in a completely different situation as you might be in right now. The second thing it says about my investing is that I'm a long-term investor. For me that means at least three years, but preferably much longer. That may be very different from how you try to make money in the stock market.\nDifferent strokes for different folks and I wanted to make clear from the start here that if you react in the comments (everybody who follows me knows that I love the comment section) you should know my situation, which could be very different from yours and some arguments could not make sense for me, just as some arguments in this article might not make sense for more short-term oriented investors. Having said that, I will start with the hottest item first, the expensive valuation of Cloudflare.\nExpensive Cloudflare: What do I do?\nEven as a very bullish investor, there's no denying that Cloudflare is very expensive right now. It already was, and with the 25% jump this week, it's even more. I live in Belgium and there's no capital gains tax here (don't worry, there are numerous taxes to compensate that). So why wouldn't I sell after such a huge run? After all, Cloudflare is up 226% over the last year. With capital gains tax, what I will write is true even more.\n<img src=\"https://static.tigerbbs.com/393403b594ce293798b0e37f7b2399d3\" tg-width=\"635\" tg-height=\"417\" width=\"100%\" height=\"auto\">Data by YCharts\nSuppose I sell now, at $182, the price when I'm writing this near the market open on Thursday morning. In the next weeks and months, the stock continues to go up, to $250. After all, the stock market is not a rational place. If you believe that, you will probably not be very successful. How do you think I will feel at $250? I will feel stupid. But that's not all...\nSuppose after six long months Cloudflare goes down to $185. Will I still have the money to buy back my position? Would I be willing to enter again at a price a bit higher than where I sold and give up the reason why I sold in the first place? Or will I wait?\nNo, I want it to go lower before I buy again. Suppose I put a price of $155 on it. That's $27/share less or 15% from where I sold. Is that enough? Or should I wait until there is a 25% drop at $136.5? What if it never goes down to that price again? Am I supposed to not hold stock of this great company that does everything right because of an arbitrary price I drill into my head?\nSuppose I'm strict, $136.5 or no buying. But suppose in 2022, there is a drop from $300 to $210, will I not be tempted to buy, at a 10% higher price than where I sold but 30% down from its previous high? Suppose I don't buy and in five years it crosses $500 without me owning it, how do you think I will feel? Of course, like a complete idiot, because I know this company so well, I know that it does everything right and that it has a fantastic future in front of it but I still decided to not own it.\nAnd still, this scenario is what a lot of so-called specialists promote and practice. It sounds easy (buy low, sell high) but is extremely complicated in reality. I want to have the best companies of our time in my portfolio, even if they are expensive or extremely expensive, like Cloudflare is right now. If Cloudflare goes down, great, then I add a bit more. I'm not selling a single share.\nI already had written this part when I thought it would be good content for Twitter too. To my surprise and delight, I got an answer from the man himself, Cloudflare founder and CEO Matthew Prince.\n<img src=\"https://static.tigerbbs.com/01d0bf4a2f03b11e7e01cd8cfd6e5344\" tg-width=\"552\" tg-height=\"113\" width=\"100%\" height=\"auto\">\nSo, for the earnings, the stock price could drop, it could go up or stay flat. You never know. I think that if you are a short-term oriented investor, the chance is somewhat higher that it drops because of the high valuation. But if the company posts stellar results, the price could even go up. There are no certainties in investing.\nWith all of Cloudflare's innovations (more about that later in this article) and the many products it doesn't monetize yet, the company could see very high revenue growth (40%-50%) for many, many years to come, especially if it could realize its ambition to become the fourth public cloud (again, see further in this article).\nCloudflare is becoming the gateway for the internet\nSomething else to consider here is another, much more important&nbsp;tweet&nbsp;that Matthew Prince sent out, the market share that Cloudflare has when it comes to reverse proxy services.\n<img src=\"https://static.tigerbbs.com/b40ce06aa804ec7b58a45973c471350b\" tg-width=\"600\" tg-height=\"273\" width=\"100%\" height=\"auto\">\nA reverse proxy is a layer between a web server and the rest of the Internet. It provides security and better performance. Your computer doesn't have to connect to a single server, it can connect to any of the more than 250 Cloudflare's POPs (point-of-presence, a data center, which are almost always much closer to you.) That means faster and also much more secure internet, as a DDOS attacker (a bombardment of requests that make your site unusable) would need to attack all 250+ data centers of Cloudflare to be successful. I think you can see the huge advantage for customers.\nThis is a very simple visualization of how Cloudflare reverse proxy works.\n<img src=\"https://static.tigerbbs.com/199f44b4cd59831986852ac9707d09d0\" tg-width=\"640\" tg-height=\"322\" width=\"100%\" height=\"auto\">\nAs you can see on the chart that Matthew Prince shared, Cloudflare now does this for 18.4% of the whole Internet, followed by Fastly (1.7%) and AWS Cloudfront (1.2%). That's already a huge thing in and of itself. Cloudflare is 10 times bigger than its nearest competitor, which is a monster company. With edge computing and compute and storage capacities that Cloudflare is rolling out on the edge, this lead is very important. Cloudflare is in the driver's seat here and the market clearly recognizes that. That's probably one of the main reasons that it's priced so high.\nBut the huge majority of sites, 77.2%, still doesn't use a reverse proxy serve service. If you look then at the websites that use a reverse proxy, you see that Cloudflare's market share is more than 80%. Mind blowing!\n<img src=\"https://static.tigerbbs.com/bb5bbfb621eb9935bc83b037a8e24f27\" tg-width=\"469\" tg-height=\"597\" width=\"100%\" height=\"auto\">Source:Liberty Highlight's excellent newsletter\nOne of my subscribers, Irnest Kaplan, had some interesting questions about reverse proxy and, in another premium example of how communicative Matthew Prince is, the CEO answered to Irnest's question.\n<img src=\"https://static.tigerbbs.com/41da49470d4e441fe66b0f9a25c3600b\" tg-width=\"613\" tg-height=\"537\" width=\"100%\" height=\"auto\">\nI will answer Irnest's last question: Yes, Cloudflare monetized this, but just a small part. It generates a ton of data and insights that it gives Cloudflare an incredible competitive advantage over all of the other players in the industry. On top of that, you are a Cloudflare customer already, even if it is on a free plan, which means that if you look for another solution, Cloudflare will probably be the first vendor you'll think of, as it is much easier to have a one-stop-shop.\nCloudflare's Innovation\nI share my Birthday Week with that of Cloudflare. The company was founded in 2010, on Sept. 27, two days before I was born, years earlier, of course. Yearly, Cloudflare celebrates its Birthday Week with of new initiatives. Let's look at the most important ones here, but first the Founders' Letter, which the company also issues each year in this week.\nCloudflare's Birthday Week: the Founders' Letter\nAs part of the Birthday Week festivities, Cloudflare’s Co-Founders, Matthew Prince and Michelle Zatlyn (who is the COO and President of Cloudflare)&nbsp;released their annual “Founder’s Letter.”\nI really like that Matthew and Michelle talk a lot about their Mission Statement (“To Help Build a Better Internet”) and what they're actively doing to bring it to fruition.\nCloudflare is attracting elite talent. They have had more than 250,000 people apply in the last year but have hired less than one-half of one percent of them. This quote also shows how fast the company is growing:\n<blockquote>\n It's incredible to realize that more than half of Cloudflare's team today started since March 13, 2020, when we closed all our physical offices due to the pandemic.\n</blockquote>\nThe company now organizes social events like picnics to make social connections. At the same time, Prince and Zatlyn are really happy with work from home:\n<blockquote>\n Culture has little to do with fun offices, plentiful snacks, or adjustable desks. Instead, for us, it starts with hiring people who are relentlessly curious and, at the same time, empathetic. Curious people want to learn. Empathetic people love to teach. And if you put a group of them together, whether in a swanky office or on Zoom, great things will happen.\n</blockquote>\nOne of the aspects I like about Matthew Prince and Michelle Zatlyn is their ability to zoom out, which I also try for investing too. That's why this part stood out for me as well (my bold):\n<blockquote>\n A mere 11 years before Cloudflare's founding, long-distance phone calls still cost a fortune, sharing a photograph with someone in another country took weeks, and the idea that you could access the sum total of human knowledge from a device in your pocket was beyond even the fantasies of science fiction.\n</blockquote>\n<blockquote>\n (...)\n</blockquote>\n<blockquote>\n The Internet may seem static, but it is not. Eleven years ago, watching a video online was an exercise in frustration. Today, it seems almost automatic that you can push play on your TV and access nearly any movie ever made instantly. That's possible because the Internet isn't static; it gets better through innovation.\n At Cloudflare, we're optimized to catalyze exactly that innovation.\n</blockquote>\nThis is another great piece:\n<blockquote>\n Sometimes people outside the company are surprised by the products we build. In fact, predicting our roadmap is pretty easy. We look at all the steps that are required to load a web page, send an email, stream a video, login to a workstation, or anything else you do online and ask: can we make that more secure, more reliable, or faster?\n</blockquote>\n<blockquote>\n (...)\n</blockquote>\n<blockquote>\n As the Internet grows and acquires more capabilities, we believe we will continue to grow with it. An investment in Cloudflare is, fundamentally, we feel an investment in the Internet itself.\n</blockquote>\nI really like that quote because it aligns with Cloudflare’s mission statement. If you’re bullish on the growth of the Internet and the role it plays in our lives, then you’re inherently bullish on Cloudflare according to the founders. To me, this is backed up by their rapid rate of innovation and quality products. We will now dive into some of these new products that were released during Birthday Week.\nCloudflare is building real-time communication.\nCloudflare&nbsp;announced&nbsp;Just to remind you, Cloudflare works with POPs (points-of-presence), 250 data centers around the world. Starting out, this was a CDN (content delivery network) but Cloudflare builds more and more software and services on top of that infrastructure and that is what makes this company so much better than Fastly (FSLY), for example. The pace of innovation is incredible.\nThe POPs are meant to speed up data streams. Communication is a data stream. If you talk during your Zoom (ZM) meeting, that generates a data stream. Twitter Spaces (group audio) is another example of communication that is built on real-time communication.\nIt will be interesting to see what Cloudflare does here. Will it develop APIs that developers can use to build their own real-time communication like Agora or Twilio? Or will Cloudflare even go further and also launch a consumer product, more like Zoom?\nWe don't know what Cloudflare's plans exactly are and I think it will take them a year or even more before everything is ready for the market, although you never know with Cloudflare.\nOne of my subscribers had shared&nbsp;a very interesting job opening&nbsp;from Cloudflare (thank you GV!), so I already knew this was in the making before the announcement during Birthday Week. I share the most interesting parts here:a real-time communications platform during Birthday Week. This is the business Agora (API) and Twilio (TWLO) are in, although Twilio does much more than this alone. It means that Cloudflare will go into communications. This could become very powerful.\n<img src=\"https://static.tigerbbs.com/054a3c8e95a94a34fc4e32909ef74567\" tg-width=\"632\" tg-height=\"197\" width=\"100%\" height=\"auto\">\nSecure e-mail through Cloudflare\nCloudflare&nbsp;introduced&nbsp;Cloudflare Email Routing&nbsp;during Birthday Week. It's a simple email integration tool. As Cloudflare explains:\nThe process is simple:\n<ol>\n <li>You enter the email address you want to create on your domain</li>\n <li>You enter the email address you want it forwarded to</li>\n</ol>\n<img src=\"https://static.tigerbbs.com/70007928efbac8c6c1b6100068e6134d\" tg-width=\"1084\" tg-height=\"156\" width=\"100%\" height=\"auto\">\nIn short, Cloudflare makes sure that your e-mail comes in the right e-mail box without losing any speed, security or privacy. It's free and just another way of branching into another business. It's a huge market, as 4 billion people have at least one e-mail address and 300 billion mails are sent around the globe every day. Some of those people and businesses will start using Cloudflare's service and get to know the company better.\nCloudflare Registrar\nCloudflare also&nbsp;announced&nbsp;that all Cloudflare customers have full Registrar access, including the ability to register new domains. The company already has introduced the most used TLDs (top-level domains) such as .com, .net and several others and extensions of countries (.uk, .de, .au etc) already are introduced or will be rolled out over the next few weeks. Cloudflare does this all at-cost, meaning you only pay what Cloudflare itself has to pay.\nThis introduction is Cloudflare at its best again, explaining sometimes difficult things in an easy-to-understand way.\n<blockquote>\n In the domain name world, there are two key players: Registrars and registries. Understandably, the two are often confused. One way to look at it is that registries are the wholesalers and registrars are the retailers. Registries host the centralized database of registered domains within a TLD. They are responsible for establishing the policies and business rules for the TLD. They also set the wholesale price. Registrars sell domains to end users and manage those registrations on an ongoing basis. They set the retail fee, collect payment, provide customer support, and ensure registrations are renewed and kept up to date. They often provide complementary services such as DNS, web hosting, and email.\n</blockquote>\nCloudflare has experience with being a registrar. It offered a high-end niche service for customers with specific needs. In 2018, it also started with more general registrar functions, but based on transferring domains.\n<blockquote>\n At the time, we estimated that if our customers transferred all of their domains to us, they would collectively save over&nbsp;\n $50 million per year&nbsp;in registration fees.\n</blockquote>\nNow Cloudflare also offers this service to register new domains. According to Cloudflare, there was a big demand for the service, especially from people who didn't have a domain name yet. And that is understandable:\n<blockquote>\n Since they didn’t have anything to transfer in, they would have to go through the somewhat cumbersome process of registering a new domain with another provider\n and only thentransfer their domain to Cloudflare.\n</blockquote>\nNow every customer of Cloudflare, including free customers, can register new domains.\nOne of my subscribers switched his domains to Cloudflare immediately and he was very enthusiastic:\n<blockquote>\n Going to transfer my domains to Cloudflare\n</blockquote>\n<blockquote>\n Cloudflare: - 1 year .COM renewal $8.57Godaddy: - 1 year .COM Domain Renewal $17.99\n</blockquote>\n<blockquote>\n Privacy Protection:CloudFlare: Free - I still need to test thisGoDaddy: Full Domain Privacy and Protection - Renewal - $9.99\n</blockquote>\n<blockquote>\n So domain + privacy...320% difference in price.\n</blockquote>\n<blockquote>\n And there is ZERO value in overpaying for domain services.\n</blockquote>\nIn the meantime, more subscribers have followed and they are all very happy with the easy transition and great service.\nThe key element here is that Cloudflare again becomes more of a one-stop shop and that it can attract new customers that can later upgrade to other products. It's another small addition to the Cloudflare universe, but all together, these things are important.\nCan Cloudflare become the fourth cloud player?\nIf you look at Cloudflare to the bone, they have created a worldwide private network that speeds up and secures the internet. Their ticker NET is no coincidence. With the announcement of R2 during Birthday Week, Cloudflare is going even deeper into the infrastructure of that network.\nR2 is a cloud object storage product. Cloudflare already had built its own cloud storage for its own use and now wants to open the storage-as-a-service for its customers too. Matthew Prince&nbsp;commented:\n<blockquote>\n We thought if we can build a storage solution that provides all the functionality that other storage solutions do, that takes advantage of our global network so it’s extremely performant and we can also then price it in a way that is very attractive to customers we should do it.\n</blockquote>\nMatthew Prince already had&nbsp;put a tweet out&nbsp;before the announcement:\n<img src=\"https://static.tigerbbs.com/0a3d8428d39351182677597001026fef\" tg-width=\"602\" tg-height=\"182\" width=\"100%\" height=\"auto\">\nR2 is a great name with a pun, as it's both 1 less than S3 and Amazon S3 or Amazon Simple Storage Service is a service offered by Amazon Web Services that provides object storage. This is what Prince&nbsp;tweeted&nbsp;when R2 had been announced:\n<img src=\"https://static.tigerbbs.com/36df309cd563e21fce893fa29801ba1f\" tg-width=\"588\" tg-height=\"311\" width=\"100%\" height=\"auto\">\nPrince always uses the word egregious (for the non-native speakers of English, it means shocking) aboutAWS'egress,he even wrote a blog post with that title.\nCloudflare will be cheaper than AWS, charging $0.015 per GB vs. AWS' $0.023 per GB. (Note: AWS Glacier S3 Deep Archive is even cheaper at $0.00099 per GB but can only be used for long-term data storage, not for things you regularly need).\nMuji from&nbsp;hhhypergrowth&nbsp;pointed out this tweet that explains very clearly why this is a big deal, from one of the best AWS pricing specialists out there (he's built a successful company around his specialty).\n<img src=\"https://static.tigerbbs.com/d46017456e01dc1be31b5544c98542f8\" tg-width=\"587\" tg-height=\"466\" width=\"100%\" height=\"auto\">(I'm leaving out a few things here)<img src=\"https://static.tigerbbs.com/7e778ac6df472fbe78f095e6e5e83202\" tg-width=\"597\" tg-height=\"258\" width=\"100%\" height=\"auto\">\nI think this really shows the incredible power of R2's offering.\nNow, AWS is the clear leader, but Microsoft's Azure and GCP (Google Cloud Platform) have similar prices. The product is not out yet, but Cloudflare has made a waiting list for customers who want to beta test the product in the coming months. I think there will be a lot of interest.\nMatthew Prince wants to keep building services and&nbsp;he shares&nbsp;what his ultimate goal is:\n<blockquote>\n We really think we’re on the path to be the fourth major public cloud.\n</blockquote>\nYou know what? I think that Cloudflare really has a chance of succeeding if it keeps innovating like this. Of course, this will take years but I think that's one of the reasons why Cloudflare's stock price has surged so much in the last month since this was announced. The market is a forward-looking place.\n<img src=\"https://static.tigerbbs.com/b2a46af3c4e7098301aecb0a8c4226fb\" tg-width=\"635\" tg-height=\"417\" width=\"100%\" height=\"auto\">Data by YCharts\nWeb3\nCloudflare&nbsp;starts working on Web3 already. It's actually the decentralization of the internet based on the principles of the blockchain:\n<blockquote>\n The last two decades have proven that building a scalable system that decentralizes content is a challenge. While the technology to build such systems exists, no content platform achieves decentralization at scale.\n</blockquote>\n<blockquote>\n There is one notable exception: Bitcoin. Bitcoin was conceptualized in a 2008 whitepaper by Satoshi Nakamoto as a type of distributed ledger known as a blockchain designed so that a peer-to-peer (...) network could transact in a public, consistent, and tamper-proof manner.\n</blockquote>\nThis quote shows you the evolution toward Web3 and Cloudflare's role in it:\n<blockquote>\n The early Web was static. Then Web 2.0 came to provide interactiveness and service we use daily at the cost of centralisation. Web3 is a trend that tries to challenge this. With distributed networks built on open protocols, users of the web are empowered to participate.\n</blockquote>\n<blockquote>\n At Cloudflare, we are embracing this distributed future. Applying the knowledge and experience we have gained from running one of the largest edge networks, we are making it easier for users and businesses to benefit from Web3. This includes operating a distributed web product suite, contributing to open standards, and moving privacy forward.\n</blockquote>\nIf you don't totally understand Web3 yet,you are not alone:\n<img src=\"https://static.tigerbbs.com/8b08b7d260f89edae78a292900aa93d1\" tg-width=\"600\" tg-height=\"208\" width=\"100%\" height=\"auto\">\nWhat I like about this is that Cloudflare already is thinking about the future. It doesn't wait until ithasto follow, it works proactive, a typical trait of an innovator.\nCloudflare for Offices\nCloudflare For Offices: Cloudflare will extend its network in more than 1,000 of the busiest office buildings in the world. Examples are 4 Times Square and 520 Madison in New York City, the Salesforce Tower in San Francisco and the Willis Tower in Chicago. This will be rolled out globally. This is a schematic overview of how it works:\n<img src=\"https://static.tigerbbs.com/7cd1a9f3e977b5fb5784840c24efc09a\" tg-width=\"640\" tg-height=\"348\" width=\"100%\" height=\"auto\">\nCloudflare explains that the edge will become much more like local computing and Zero Trust will be introduced in all of these offices. Remarkable is that Cloudflare built its own hardware to introduce this.\nTV As A Service\nCloudflare has been streaming video since June 2020, 24/7 on&nbsp;Cloudflare TV. During Birthday Week, it announced that it will now make the technology available to any other business that wants to run its own 24/7 streaming network.\n<blockquote>\n We didn’t initially set out to build Cloudflare TV from scratch. But as we explored our available options, we quickly realized that few solutions were designed for 24/7 linear streaming, and fewer still were optimized to be managed by a globally-distributed team. Thankfully, at Cloudflare, we like to build.\n</blockquote>\nStream Live\n<blockquote>\n With Stream Live, you can painlessly grow your streaming app to scale to millions of concurrent broadcasters and millions of concurrent users.\n</blockquote>\nThis is another great addition. It will power live video broadcasting. You can stream to millions of viewers instantly from mobile or desktop. It works with programs like OBS or Zoom. On top of that:\n<blockquote>\n Your broadcasts are automatically recorded, optimized and delivered using the Stream player.\n</blockquote>\n<img src=\"https://static.tigerbbs.com/19270e26bb1ff73c07a288a1bf3e6ee5\" tg-width=\"640\" tg-height=\"230\" width=\"100%\" height=\"auto\">\nWith most webinars, there is a latency of about 15 to 20 seconds and that is the minimum now. Cloudflare wants to make this much better:\n<blockquote>\n We’re on a mission to reduce the latency Stream Live adds to near-zero.\n</blockquote>\nThat's especially important for conversations like a Q&amp;A.\nCloudflare is also very clear about the pricing:\n<blockquote>\n It costs $5 per 1,000 minutes of video storage capacity per month. Live-streamed videos are automatically recorded. There is no additional cost for ingesting the live stream.\n</blockquote>\n<blockquote>\n It costs $1 per 1,000 minutes of video viewed.\n</blockquote>\nThoughts about Cloudflare's Innovation\nThere was also an interesting blog post about why and how Cloudflare can innovate so fast. It's&nbsp;an interesting read. A few interesting quotes from the blog post.\nInnovation starts with the people working at Cloudflare:\n<blockquote>\n The seeds of innovative ideas start with our team. One of the core things we look for when hiring in every role at Cloudflare — be it engineering and product or sales or account — is curiosity. (...)\n</blockquote>\n<blockquote>\n There’s an important attribute that partners with curiosity, however. To innovate, we listen. One of the things I screen for when we hire product managers is their ability to listen and synthesize the information they are hearing and then their ability to distill it into actionable problems for us to tackle.\n</blockquote>\nThe second important factor is that Cloudflare is a user of all of its products.\n<blockquote>\n We like to say Cloudflare was built on Cloudflare and for Cloudflare. This means we eat our own dog food with a glass of our own champagne on the side.\n</blockquote>\n<img src=\"https://static.tigerbbs.com/f3c860b9be8ba80430c0161d168527c2\" tg-width=\"280\" tg-height=\"192\" width=\"100%\" height=\"auto\">As a side note, I can't help but wonder if Cloudflare uses Fiverr for these drawings\nHow the company is structured is also very important:\n<blockquote>\n At Cloudflare, it is not unusual for an initial product idea to start with a team small enough to split a pack of Twinkies and for the initial proof of concept to go from whiteboard to rolled out in days. We intentionally staff and structure our teams and our backlogs so that we have flexibility to pivot and innovate. Our Emerging Technology and Incubation team is a small group of product managers and engineers solely dedicated to exploring new products for new markets.\n</blockquote>\n<blockquote>\n Our Research team is dedicated to thinking deeply and partnering with organizations across the globe to define new standards and new ways to tackle some of the hardest challenges.\n</blockquote>\n<blockquote>\n (...)\n</blockquote>\n<blockquote>\n We ship software for businesses like a consumer software company. Traditional B2B software development typically follows longer development cycles and focuses on delivering more fully featured and deeply integrated offerings out of the gate. This cautious approach yields fewer more fully featured offerings shipped less frequently.\n</blockquote>\nThe fact that so many Cloudflare products are free is also an integral part of the reason why Cloudflare is innovative:\n<blockquote>\n There’s one more aspect to all of this — because we’ve innovated in the way we’ve built our network — making it highly scalable and cost-effective — we’re able to pass these savings on to our customers. In a lot of instances, these savings amount to a pretty good price for our products and services: nothing at all.\n</blockquote>\n<blockquote>\n (...)\n</blockquote>\n<blockquote>\n Typically, in B2B enterprise software companies, the big customers and the multi-million dollar contracts get 99.99% of the focus. Here’s what I would say: our free customers are the secret sauce to our innovation. (...)\n</blockquote>\n<blockquote>\n We’re fortunate to have millions of free sites and applications on our network. Like a consumer app developer, we typically roll out new capabilities to pods of these users first. These users give us the volume and scale to get confident in what we’ve delivered. The more confident we get, the more broadly we roll out, such that by the time it hits broad rollout, our customers can feel confident in the quality and stability.\n</blockquote>\nConclusion\nCloudflare is a company that keeps innovating at an incredible speed and Birthday Week showed this again. With so many new products that are being rolled out or will be rolled out in the next weeks and months, we don't have to worry that Cloudflare's revenue will slow down growing at high speed any time soon.\nWhat especially stood out to me during this Birthday Week is that quite a bit of Cloudflare's innovations are on the infrastructural level, which I really like. Infrastructure is the basis for all the rest of the innovative expansions.\nIn the meantime, keep growing!","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Cloudflare Before The Earnings: Valuation And Innovation</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCloudflare Before The Earnings: Valuation And Innovation\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-10-29 13:55 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4463158-cloudflare-net-stock-q3-earnings-preview-valuation-innovation>Seeking Alpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nNext week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued extremely high.\nDespite the very expensive stock, I won't sell a single share. I explain why.\nMore ...\n\n<a href=\"https://seekingalpha.com/article/4463158-cloudflare-net-stock-q3-earnings-preview-valuation-innovation\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NET":"Cloudflare, Inc."},"source_url":"https://seekingalpha.com/article/4463158-cloudflare-net-stock-q3-earnings-preview-valuation-innovation","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1162447676","content_text":"Summary\n\nNext week, Cloudflare reports Q3 2021 earnings. There's no doubt that Cloudflare is valued extremely high.\nDespite the very expensive stock, I won't sell a single share. I explain why.\nMore and more, Cloudflare is becoming the protector of the Internet, with a huge market share of 80% for reverse proxy. This is important for the roll-out of its products.\nCloudflare has ambitions to become the fourth public cloud, next to AWS, Azure and GCP, the cloud offerings of Amazon, Microsoft and Google. There also are much more innovations.\nThe constant innovation can spur the high growth of Cloudflare for a very long time.\n\nSundry Photography/iStock Editorial via Getty Images\nIntroduction\nNext week, on Nov. 4, Cloudflare (NET) reports earnings. There's no doubt that the stock is priced extremely high, but still I won't sell before the earnings. In the first part of the article, I will explain my reasoning.\nIn the second part of this article, I will show the new developments and why investors have reacted so enthusiastically.\nMy situation might differ from yours\nFirst, I want to explain my personal situation on Cloudflare. I picked it as a Potential Multibaggers for my subscribers at $39 and as I always invest along with my subscribers, I have a low-cost basis. I don't want to brag at all here, so if it comes across as that, I'm sorry and I should have phrased it more carefully.\nThe reason why I mention my low-cost basis before you even start reading is that it says a few things about my investing and your situation. The first is obvious: I may in a completely different situation as you might be in right now. The second thing it says about my investing is that I'm a long-term investor. For me that means at least three years, but preferably much longer. That may be very different from how you try to make money in the stock market.\nDifferent strokes for different folks and I wanted to make clear from the start here that if you react in the comments (everybody who follows me knows that I love the comment section) you should know my situation, which could be very different from yours and some arguments could not make sense for me, just as some arguments in this article might not make sense for more short-term oriented investors. Having said that, I will start with the hottest item first, the expensive valuation of Cloudflare.\nExpensive Cloudflare: What do I do?\nEven as a very bullish investor, there's no denying that Cloudflare is very expensive right now. It already was, and with the 25% jump this week, it's even more. I live in Belgium and there's no capital gains tax here (don't worry, there are numerous taxes to compensate that). So why wouldn't I sell after such a huge run? After all, Cloudflare is up 226% over the last year. With capital gains tax, what I will write is true even more.\nData by YCharts\nSuppose I sell now, at $182, the price when I'm writing this near the market open on Thursday morning. In the next weeks and months, the stock continues to go up, to $250. After all, the stock market is not a rational place. If you believe that, you will probably not be very successful. How do you think I will feel at $250? I will feel stupid. But that's not all...\nSuppose after six long months Cloudflare goes down to $185. Will I still have the money to buy back my position? Would I be willing to enter again at a price a bit higher than where I sold and give up the reason why I sold in the first place? Or will I wait?\nNo, I want it to go lower before I buy again. Suppose I put a price of $155 on it. That's $27/share less or 15% from where I sold. Is that enough? Or should I wait until there is a 25% drop at $136.5? What if it never goes down to that price again? Am I supposed to not hold stock of this great company that does everything right because of an arbitrary price I drill into my head?\nSuppose I'm strict, $136.5 or no buying. But suppose in 2022, there is a drop from $300 to $210, will I not be tempted to buy, at a 10% higher price than where I sold but 30% down from its previous high? Suppose I don't buy and in five years it crosses $500 without me owning it, how do you think I will feel? Of course, like a complete idiot, because I know this company so well, I know that it does everything right and that it has a fantastic future in front of it but I still decided to not own it.\nAnd still, this scenario is what a lot of so-called specialists promote and practice. It sounds easy (buy low, sell high) but is extremely complicated in reality. I want to have the best companies of our time in my portfolio, even if they are expensive or extremely expensive, like Cloudflare is right now. If Cloudflare goes down, great, then I add a bit more. I'm not selling a single share.\nI already had written this part when I thought it would be good content for Twitter too. To my surprise and delight, I got an answer from the man himself, Cloudflare founder and CEO Matthew Prince.\n\nSo, for the earnings, the stock price could drop, it could go up or stay flat. You never know. I think that if you are a short-term oriented investor, the chance is somewhat higher that it drops because of the high valuation. But if the company posts stellar results, the price could even go up. There are no certainties in investing.\nWith all of Cloudflare's innovations (more about that later in this article) and the many products it doesn't monetize yet, the company could see very high revenue growth (40%-50%) for many, many years to come, especially if it could realize its ambition to become the fourth public cloud (again, see further in this article).\nCloudflare is becoming the gateway for the internet\nSomething else to consider here is another, much more important tweet that Matthew Prince sent out, the market share that Cloudflare has when it comes to reverse proxy services.\n\nA reverse proxy is a layer between a web server and the rest of the Internet. It provides security and better performance. Your computer doesn't have to connect to a single server, it can connect to any of the more than 250 Cloudflare's POPs (point-of-presence, a data center, which are almost always much closer to you.) That means faster and also much more secure internet, as a DDOS attacker (a bombardment of requests that make your site unusable) would need to attack all 250+ data centers of Cloudflare to be successful. I think you can see the huge advantage for customers.\nThis is a very simple visualization of how Cloudflare reverse proxy works.\n\nAs you can see on the chart that Matthew Prince shared, Cloudflare now does this for 18.4% of the whole Internet, followed by Fastly (1.7%) and AWS Cloudfront (1.2%). That's already a huge thing in and of itself. Cloudflare is 10 times bigger than its nearest competitor, which is a monster company. With edge computing and compute and storage capacities that Cloudflare is rolling out on the edge, this lead is very important. Cloudflare is in the driver's seat here and the market clearly recognizes that. That's probably one of the main reasons that it's priced so high.\nBut the huge majority of sites, 77.2%, still doesn't use a reverse proxy serve service. If you look then at the websites that use a reverse proxy, you see that Cloudflare's market share is more than 80%. Mind blowing!\nSource:Liberty Highlight's excellent newsletter\nOne of my subscribers, Irnest Kaplan, had some interesting questions about reverse proxy and, in another premium example of how communicative Matthew Prince is, the CEO answered to Irnest's question.\n\nI will answer Irnest's last question: Yes, Cloudflare monetized this, but just a small part. It generates a ton of data and insights that it gives Cloudflare an incredible competitive advantage over all of the other players in the industry. On top of that, you are a Cloudflare customer already, even if it is on a free plan, which means that if you look for another solution, Cloudflare will probably be the first vendor you'll think of, as it is much easier to have a one-stop-shop.\nCloudflare's Innovation\nI share my Birthday Week with that of Cloudflare. The company was founded in 2010, on Sept. 27, two days before I was born, years earlier, of course. Yearly, Cloudflare celebrates its Birthday Week with of new initiatives. Let's look at the most important ones here, but first the Founders' Letter, which the company also issues each year in this week.\nCloudflare's Birthday Week: the Founders' Letter\nAs part of the Birthday Week festivities, Cloudflare’s Co-Founders, Matthew Prince and Michelle Zatlyn (who is the COO and President of Cloudflare) released their annual “Founder’s Letter.”\nI really like that Matthew and Michelle talk a lot about their Mission Statement (“To Help Build a Better Internet”) and what they're actively doing to bring it to fruition.\nCloudflare is attracting elite talent. They have had more than 250,000 people apply in the last year but have hired less than one-half of one percent of them. This quote also shows how fast the company is growing:\n\n It's incredible to realize that more than half of Cloudflare's team today started since March 13, 2020, when we closed all our physical offices due to the pandemic.\n\nThe company now organizes social events like picnics to make social connections. At the same time, Prince and Zatlyn are really happy with work from home:\n\n Culture has little to do with fun offices, plentiful snacks, or adjustable desks. Instead, for us, it starts with hiring people who are relentlessly curious and, at the same time, empathetic. Curious people want to learn. Empathetic people love to teach. And if you put a group of them together, whether in a swanky office or on Zoom, great things will happen.\n\nOne of the aspects I like about Matthew Prince and Michelle Zatlyn is their ability to zoom out, which I also try for investing too. That's why this part stood out for me as well (my bold):\n\n A mere 11 years before Cloudflare's founding, long-distance phone calls still cost a fortune, sharing a photograph with someone in another country took weeks, and the idea that you could access the sum total of human knowledge from a device in your pocket was beyond even the fantasies of science fiction.\n\n\n (...)\n\n\n The Internet may seem static, but it is not. Eleven years ago, watching a video online was an exercise in frustration. Today, it seems almost automatic that you can push play on your TV and access nearly any movie ever made instantly. That's possible because the Internet isn't static; it gets better through innovation.\n At Cloudflare, we're optimized to catalyze exactly that innovation.\n\nThis is another great piece:\n\n Sometimes people outside the company are surprised by the products we build. In fact, predicting our roadmap is pretty easy. We look at all the steps that are required to load a web page, send an email, stream a video, login to a workstation, or anything else you do online and ask: can we make that more secure, more reliable, or faster?\n\n\n (...)\n\n\n As the Internet grows and acquires more capabilities, we believe we will continue to grow with it. An investment in Cloudflare is, fundamentally, we feel an investment in the Internet itself.\n\nI really like that quote because it aligns with Cloudflare’s mission statement. If you’re bullish on the growth of the Internet and the role it plays in our lives, then you’re inherently bullish on Cloudflare according to the founders. To me, this is backed up by their rapid rate of innovation and quality products. We will now dive into some of these new products that were released during Birthday Week.\nCloudflare is building real-time communication.\nCloudflare announced Just to remind you, Cloudflare works with POPs (points-of-presence), 250 data centers around the world. Starting out, this was a CDN (content delivery network) but Cloudflare builds more and more software and services on top of that infrastructure and that is what makes this company so much better than Fastly (FSLY), for example. The pace of innovation is incredible.\nThe POPs are meant to speed up data streams. Communication is a data stream. If you talk during your Zoom (ZM) meeting, that generates a data stream. Twitter Spaces (group audio) is another example of communication that is built on real-time communication.\nIt will be interesting to see what Cloudflare does here. Will it develop APIs that developers can use to build their own real-time communication like Agora or Twilio? Or will Cloudflare even go further and also launch a consumer product, more like Zoom?\nWe don't know what Cloudflare's plans exactly are and I think it will take them a year or even more before everything is ready for the market, although you never know with Cloudflare.\nOne of my subscribers had shared a very interesting job opening from Cloudflare (thank you GV!), so I already knew this was in the making before the announcement during Birthday Week. I share the most interesting parts here:a real-time communications platform during Birthday Week. This is the business Agora (API) and Twilio (TWLO) are in, although Twilio does much more than this alone. It means that Cloudflare will go into communications. This could become very powerful.\n\nSecure e-mail through Cloudflare\nCloudflare introduced Cloudflare Email Routing during Birthday Week. It's a simple email integration tool. As Cloudflare explains:\nThe process is simple:\n\nYou enter the email address you want to create on your domain\nYou enter the email address you want it forwarded to\n\n\nIn short, Cloudflare makes sure that your e-mail comes in the right e-mail box without losing any speed, security or privacy. It's free and just another way of branching into another business. It's a huge market, as 4 billion people have at least one e-mail address and 300 billion mails are sent around the globe every day. Some of those people and businesses will start using Cloudflare's service and get to know the company better.\nCloudflare Registrar\nCloudflare also announced that all Cloudflare customers have full Registrar access, including the ability to register new domains. The company already has introduced the most used TLDs (top-level domains) such as .com, .net and several others and extensions of countries (.uk, .de, .au etc) already are introduced or will be rolled out over the next few weeks. Cloudflare does this all at-cost, meaning you only pay what Cloudflare itself has to pay.\nThis introduction is Cloudflare at its best again, explaining sometimes difficult things in an easy-to-understand way.\n\n In the domain name world, there are two key players: Registrars and registries. Understandably, the two are often confused. One way to look at it is that registries are the wholesalers and registrars are the retailers. Registries host the centralized database of registered domains within a TLD. They are responsible for establishing the policies and business rules for the TLD. They also set the wholesale price. Registrars sell domains to end users and manage those registrations on an ongoing basis. They set the retail fee, collect payment, provide customer support, and ensure registrations are renewed and kept up to date. They often provide complementary services such as DNS, web hosting, and email.\n\nCloudflare has experience with being a registrar. It offered a high-end niche service for customers with specific needs. In 2018, it also started with more general registrar functions, but based on transferring domains.\n\n At the time, we estimated that if our customers transferred all of their domains to us, they would collectively save over \n $50 million per year in registration fees.\n\nNow Cloudflare also offers this service to register new domains. According to Cloudflare, there was a big demand for the service, especially from people who didn't have a domain name yet. And that is understandable:\n\n Since they didn’t have anything to transfer in, they would have to go through the somewhat cumbersome process of registering a new domain with another provider\n and only thentransfer their domain to Cloudflare.\n\nNow every customer of Cloudflare, including free customers, can register new domains.\nOne of my subscribers switched his domains to Cloudflare immediately and he was very enthusiastic:\n\n Going to transfer my domains to Cloudflare\n\n\n Cloudflare: - 1 year .COM renewal $8.57Godaddy: - 1 year .COM Domain Renewal $17.99\n\n\n Privacy Protection:CloudFlare: Free - I still need to test thisGoDaddy: Full Domain Privacy and Protection - Renewal - $9.99\n\n\n So domain + privacy...320% difference in price.\n\n\n And there is ZERO value in overpaying for domain services.\n\nIn the meantime, more subscribers have followed and they are all very happy with the easy transition and great service.\nThe key element here is that Cloudflare again becomes more of a one-stop shop and that it can attract new customers that can later upgrade to other products. It's another small addition to the Cloudflare universe, but all together, these things are important.\nCan Cloudflare become the fourth cloud player?\nIf you look at Cloudflare to the bone, they have created a worldwide private network that speeds up and secures the internet. Their ticker NET is no coincidence. With the announcement of R2 during Birthday Week, Cloudflare is going even deeper into the infrastructure of that network.\nR2 is a cloud object storage product. Cloudflare already had built its own cloud storage for its own use and now wants to open the storage-as-a-service for its customers too. Matthew Prince commented:\n\n We thought if we can build a storage solution that provides all the functionality that other storage solutions do, that takes advantage of our global network so it’s extremely performant and we can also then price it in a way that is very attractive to customers we should do it.\n\nMatthew Prince already had put a tweet out before the announcement:\n\nR2 is a great name with a pun, as it's both 1 less than S3 and Amazon S3 or Amazon Simple Storage Service is a service offered by Amazon Web Services that provides object storage. This is what Prince tweeted when R2 had been announced:\n\nPrince always uses the word egregious (for the non-native speakers of English, it means shocking) aboutAWS'egress,he even wrote a blog post with that title.\nCloudflare will be cheaper than AWS, charging $0.015 per GB vs. AWS' $0.023 per GB. (Note: AWS Glacier S3 Deep Archive is even cheaper at $0.00099 per GB but can only be used for long-term data storage, not for things you regularly need).\nMuji from hhhypergrowth pointed out this tweet that explains very clearly why this is a big deal, from one of the best AWS pricing specialists out there (he's built a successful company around his specialty).\n(I'm leaving out a few things here)\nI think this really shows the incredible power of R2's offering.\nNow, AWS is the clear leader, but Microsoft's Azure and GCP (Google Cloud Platform) have similar prices. The product is not out yet, but Cloudflare has made a waiting list for customers who want to beta test the product in the coming months. I think there will be a lot of interest.\nMatthew Prince wants to keep building services and he shares what his ultimate goal is:\n\n We really think we’re on the path to be the fourth major public cloud.\n\nYou know what? I think that Cloudflare really has a chance of succeeding if it keeps innovating like this. Of course, this will take years but I think that's one of the reasons why Cloudflare's stock price has surged so much in the last month since this was announced. The market is a forward-looking place.\nData by YCharts\nWeb3\nCloudflare starts working on Web3 already. It's actually the decentralization of the internet based on the principles of the blockchain:\n\n The last two decades have proven that building a scalable system that decentralizes content is a challenge. While the technology to build such systems exists, no content platform achieves decentralization at scale.\n\n\n There is one notable exception: Bitcoin. Bitcoin was conceptualized in a 2008 whitepaper by Satoshi Nakamoto as a type of distributed ledger known as a blockchain designed so that a peer-to-peer (...) network could transact in a public, consistent, and tamper-proof manner.\n\nThis quote shows you the evolution toward Web3 and Cloudflare's role in it:\n\n The early Web was static. Then Web 2.0 came to provide interactiveness and service we use daily at the cost of centralisation. Web3 is a trend that tries to challenge this. With distributed networks built on open protocols, users of the web are empowered to participate.\n\n\n At Cloudflare, we are embracing this distributed future. Applying the knowledge and experience we have gained from running one of the largest edge networks, we are making it easier for users and businesses to benefit from Web3. This includes operating a distributed web product suite, contributing to open standards, and moving privacy forward.\n\nIf you don't totally understand Web3 yet,you are not alone:\n\nWhat I like about this is that Cloudflare already is thinking about the future. It doesn't wait until ithasto follow, it works proactive, a typical trait of an innovator.\nCloudflare for Offices\nCloudflare For Offices: Cloudflare will extend its network in more than 1,000 of the busiest office buildings in the world. Examples are 4 Times Square and 520 Madison in New York City, the Salesforce Tower in San Francisco and the Willis Tower in Chicago. This will be rolled out globally. This is a schematic overview of how it works:\n\nCloudflare explains that the edge will become much more like local computing and Zero Trust will be introduced in all of these offices. Remarkable is that Cloudflare built its own hardware to introduce this.\nTV As A Service\nCloudflare has been streaming video since June 2020, 24/7 on Cloudflare TV. During Birthday Week, it announced that it will now make the technology available to any other business that wants to run its own 24/7 streaming network.\n\n We didn’t initially set out to build Cloudflare TV from scratch. But as we explored our available options, we quickly realized that few solutions were designed for 24/7 linear streaming, and fewer still were optimized to be managed by a globally-distributed team. Thankfully, at Cloudflare, we like to build.\n\nStream Live\n\n With Stream Live, you can painlessly grow your streaming app to scale to millions of concurrent broadcasters and millions of concurrent users.\n\nThis is another great addition. It will power live video broadcasting. You can stream to millions of viewers instantly from mobile or desktop. It works with programs like OBS or Zoom. On top of that:\n\n Your broadcasts are automatically recorded, optimized and delivered using the Stream player.\n\n\nWith most webinars, there is a latency of about 15 to 20 seconds and that is the minimum now. Cloudflare wants to make this much better:\n\n We’re on a mission to reduce the latency Stream Live adds to near-zero.\n\nThat's especially important for conversations like a Q&A.\nCloudflare is also very clear about the pricing:\n\n It costs $5 per 1,000 minutes of video storage capacity per month. Live-streamed videos are automatically recorded. There is no additional cost for ingesting the live stream.\n\n\n It costs $1 per 1,000 minutes of video viewed.\n\nThoughts about Cloudflare's Innovation\nThere was also an interesting blog post about why and how Cloudflare can innovate so fast. It's an interesting read. A few interesting quotes from the blog post.\nInnovation starts with the people working at Cloudflare:\n\n The seeds of innovative ideas start with our team. One of the core things we look for when hiring in every role at Cloudflare — be it engineering and product or sales or account — is curiosity. (...)\n\n\n There’s an important attribute that partners with curiosity, however. To innovate, we listen. One of the things I screen for when we hire product managers is their ability to listen and synthesize the information they are hearing and then their ability to distill it into actionable problems for us to tackle.\n\nThe second important factor is that Cloudflare is a user of all of its products.\n\n We like to say Cloudflare was built on Cloudflare and for Cloudflare. This means we eat our own dog food with a glass of our own champagne on the side.\n\nAs a side note, I can't help but wonder if Cloudflare uses Fiverr for these drawings\nHow the company is structured is also very important:\n\n At Cloudflare, it is not unusual for an initial product idea to start with a team small enough to split a pack of Twinkies and for the initial proof of concept to go from whiteboard to rolled out in days. We intentionally staff and structure our teams and our backlogs so that we have flexibility to pivot and innovate. Our Emerging Technology and Incubation team is a small group of product managers and engineers solely dedicated to exploring new products for new markets.\n\n\n Our Research team is dedicated to thinking deeply and partnering with organizations across the globe to define new standards and new ways to tackle some of the hardest challenges.\n\n\n (...)\n\n\n We ship software for businesses like a consumer software company. Traditional B2B software development typically follows longer development cycles and focuses on delivering more fully featured and deeply integrated offerings out of the gate. This cautious approach yields fewer more fully featured offerings shipped less frequently.\n\nThe fact that so many Cloudflare products are free is also an integral part of the reason why Cloudflare is innovative:\n\n There’s one more aspect to all of this — because we’ve innovated in the way we’ve built our network — making it highly scalable and cost-effective — we’re able to pass these savings on to our customers. In a lot of instances, these savings amount to a pretty good price for our products and services: nothing at all.\n\n\n (...)\n\n\n Typically, in B2B enterprise software companies, the big customers and the multi-million dollar contracts get 99.99% of the focus. Here’s what I would say: our free customers are the secret sauce to our innovation. (...)\n\n\n We’re fortunate to have millions of free sites and applications on our network. Like a consumer app developer, we typically roll out new capabilities to pods of these users first. These users give us the volume and scale to get confident in what we’ve delivered. The more confident we get, the more broadly we roll out, such that by the time it hits broad rollout, our customers can feel confident in the quality and stability.\n\nConclusion\nCloudflare is a company that keeps innovating at an incredible speed and Birthday Week showed this again. With so many new products that are being rolled out or will be rolled out in the next weeks and months, we don't have to worry that Cloudflare's revenue will slow down growing at high speed any time soon.\nWhat especially stood out to me during this Birthday Week is that quite a bit of Cloudflare's innovations are on the infrastructural level, which I really like. Infrastructure is the basis for all the rest of the innovative expansions.\nIn the meantime, keep growing!","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":20,"commentSize":3,"repostSize":0,"favoriteSize":2,"likeStatus":false,"favoriteStatus":false}}