$NET: I've heard from several contacts over the last two weeks that Cloudflare is meaningfully raising prices on their 'Enterprise' plans. The core driver is resource utilization, and clients are being told that this is because $NET is now a public company.
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On the one hand, it could be argued that $NET feels so confident about its moat that it can justify raising prices and these same clients will simply soak up the costs, allowing Cloudflare to push toward profitability.
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On the other hand, these same contacts have told me that the price raises (as much as 140% in some cases higher), have compressed their margins meaningfully. In some cases pushing them in to negative territory.
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After discussing this at length with a CTO of a not too small hosting company with thousands of clients, he mentioned that they will be moving away from $NET as the cost increase was not something they could justify.
They aren't alone, either.
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They aren't alone, either.
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The core issue is the question of just how much of a moat $NET really has.
The main offerings vary from CDN to DDoS protection. Neither of which are particularly unique or hard to replicate from a technical perspective.
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The main offerings vary from CDN to DDoS protection. Neither of which are particularly unique or hard to replicate from a technical perspective.
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There's also a WAF (web application firewall) feature which $NET offers and is widely touted, but it is essentially nginx (a web server/proxy/cache) with mod_security and other bells and whistles added on.
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There's competition, such as $AKAM, $FSLY, $AMZN, $MSFT, etc. But there's also the capacity for any company with decent brainshare to spin up their own cloud hosted CDN w/WAF and park it on a DDoS-resilient cloud hosting service, thus effectively replacing $NET.
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Whether or not the price increases on the 'Enterprise' plans help, hurt, or don't effect $NET is something that has yet to be determined.
If you know of companies using that same plan, it may be a good investment research experiment to reach out and ask how they're impacted.
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If you know of companies using that same plan, it may be a good investment research experiment to reach out and ask how they're impacted.
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But ultimately one of the big value props for $NET was that they were a bit more resource utilization agnostic than an $AKAM, which charges on a usage basis. Does that value prop invert a bit now? Possibly. Certainly for those I've spoken to they are considering alternatives. 9/9
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