Developer adoption is our priority, profits second, Cloudflare tells bankers

We seem to give away stuff for free at just the right time, says CFO


If Cloudflare CFO Thomas Seifert's take on his company's direction is accurate, expect future strategy to focus on how it can use its slew of newly announced tools to make the biggest dent in existing markets. Profit motivations come a distant second, as least for now.

Speaking at the Morgan Stanley Technology, Media and Telecom conference, Seifert told analyst Keith Weiss that 2022 will be all about growing Cloudflare's Zero Trust solution as well as Workers, its serverless code platform.

Even with those products, Seifert said, the security-focused content-delivery network's strategy isn't about earnings – it's about gaining users. "We think primarily about adoption in the developer community penetration and less about dollars and revenue at this point in time," Siefert told the audience of investors and financial analysts.

That's not an outlier for Cloudflare either, at least as Seifert tells it. He said the COVID-19 pandemic and Russia's invasion of Ukraine were just two examples of incidents that have led to Cloudflare offering its services (in this case, Cloudflare Teams) freely to businesses affected by those events.

"When we launched Cloudflare for Teams, in January, nobody knew that COVID would come, but the most disruptive move was to give it away for free and help companies out," Seifert said. "We didn't know when we gave that guidance that Ukraine would be invaded. But giving away these products for free, I think, is the right move to make." 

In addition to those new software products and their expansion, Seifert also commented on how much growth is possible in the company's core business of providing application services. In short, he's not worried about reaching market saturation.

On-prem hardware, Seifert said, isn't getting upgraded anymore: it's getting replaced with cloud services. This will trigger a huge spending shift over time, which will in turn lead more customers to Cloudflare's digital door.

Again, Seifert said, the strategy is all about disruption. "It's not only about new business and new installations, it's really disrupting the installed infrastructure and there is, in our opinion, a significant runway still ahead of us," he said. 

Seifert also fielded questions about Cloudflare's Magic WAN product, a cloud-native replacement for legacy WAN hardware. In particular, Weiss was curious about how Cloudflare is getting along with ISPs given that some of Magic WAN's features step on regional ISPs' feet. 

"The value that we provide to local ISPs or regional ISPs is still the same. We help them to save substantial costs," Seifert said. Citing zero-trust technology as an example, Seifert said that companies have trouble globally enforcing zero trust due to differences between ISPs, and Magic WAN addresses those issues without having a direct impact on ISPs. "We make the internet faster, conversion rates higher. So, that's a unique opportunity for them to increase revenue," Seifert said.

Additionally, Seifert discussed Cloudflare One, Cloudflare's SASE platform, as well as Cloudflare R2 cloud storage, both of which he said have been growing rapidly. At the end of it all, Seifert still kept coming back to Cloudflare's mission of creating change before it counts the earnings.

"When we talk about competition, it's not like, let's discount this product – we have one percentage point of margin left," Seifert opined.

"It's like what is the most disruptive move we can make in a given competitive situation? I think a big part of what is driving [our] growth or has driven growth in the past is our ability to just out innovate and keep that total addressable market that we disrupt increasing." ®

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