Cloudflare still relies on the "massive amount of free users creating buzz vs. a tiny fraction of paid users". Although not an obvious scam, they may very well go the Groupon way.
This is a classic "bottoms-up" model that is quite viable (eg Dropbox, Slack, Zoom, Elastic, MongoDB). Not sure why anyone would call it a scam. In fact, I would be wary of software companies without a base of free users, as that means the company needs to keep spending a lot of its revenue on sales and marketing.
Not necessarily. You don't need marketing and sales people if you have a free-tier product that markets itself. Michael Stonebraker, the guy who took Postgres from academia and into the real world, talks about how he applies this with VoltDB
>This is a classic "bottoms-up" model that is quite viable (eg Dropbox, Slack, Zoom, Elastic, MongoDB).
None of which are profitable.
>In fact, I would be wary of software companies without a base of free users, as that means the company needs to keep spending a lot of its revenue on sales and marketing.
I am much more wary of companies that keep or burning cash for years and years with the only excuse that "Amazon did that as well".
> I am much more wary of companies that keep or burning cash for years and years with the only excuse that "Amazon did that as well".
I think about this a little differently. Spending money on free users is actually a much more efficient "marketing expense" than classic outbound strategies (e.g., online advertising).
Are these good examples, though? Dropbox is down ~35% since IPOing, and Slack is down almost 50%. This certainly suggests the market thinks they were both overvalued when they IPO'd.
This is arguably a "things might go wrong in the future" argument, which has no real substance as it can be made about literally anything. To really say something, you'd need to provide some more substance about why you think the current investors in Dropbox and Slack are less informed about economic conditions than investors in the rest of the market.
> The Fed will run out of monetary tricks, eventually.
No, it won't.
It might run into a monetary-policy resistant situation (e.g., stagflation), but the Fed has infinite range of monetary policy tricks available (literally, there's no floor to rates now that the Fed has taken notice of the use of negative rates elsewhere.)
Groupon is a perfect example of a company that became irrelevant before reaching profitability. Most tech valuations are based on the assumption that the company's product will stay hot forever, giving enough time to cut expenses and turn black. While in reality, the crowd of early adopters that gave you the hockey stick growth, quickly moves on to something else once they get bored and then it turns out your market is orders of magnitude smaller than your investors expected.
I don't see a CDN as something that customers get bored of in the same way as coupons for random services.
When a consumer realizes they are getting 50% off of a service or product they didn't want or need in the first place, they stop signing up for deals. Also, once the businesses realize these customers don't provide repeat business and they are devaluing their product for consumers who do want it, they stop offering the discounts. Finally, it's trivial to sign up for each of their competitors and play them off of each other.
When does a Cloudflare customer stop needing secure, performant content delivery, and how easy is it to switch to a competitor?
