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“A New Strategy, R2”

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Recreation of a scene from Star Wars A New Hope depicting droids C-3PO and R2D2 on the desert planet of Tatooine with escape pod - Hasbro action Figure

As part of their ongoing ‘birthday week’ announcements, Cloudflare announced a new object store service, R2, that has garnered attention for several reasons.

  1. Adding unstructured storage to their portfolio will nicely augment Cloudflare’s existing platform. It has the opportunity to make the CDN more compelling and give Cloudflare Workers (a serverless platform hosted on its edge network) more functionality.
  2. They are implementing the service using the S3 API, meaning that AWS customers can easily migrate files to Cloudflare.
  3. They’re pricing the base storage rates competitively with cloud providers, with the additional kicker that
  4. Cloudflare won’t charge any egress fees on the data served from R2. (This is the biggest element of the announcement.)

Corey Quinn breaks down what no egress fees mean for customers, and it’s worth taking a look at his analysis because the potential savings are considerable.

While this is a clear win for customer economics, I’m quite curious what it means for Cloudflare’s broader financials.

Cloudflare’s CDN heritage colors the expectations of any additional services they launch. First, there is an expectation for CDN-level delivery speeds. Second, there are no explicitly defined regions at this time, as Cloudflare is designed to be a global delivery network. (And on top of these expectations of global reach at low latencies, Cloudflare has built this service with eleven-9’s of reliability.) Running this service is going to cost $$$.

While Cloudflare’s R2 announcement references their plans to algorithmically manage storage across its network to optimize regional availability and frequency of access, the general implication of storing and serving data objects at extremely low latency across a global network is that this will need infrastructure. And infrastructure is capital intensive.

Right now R2 is at the waitlist stage and is not publicly available, but this pricing-driven, head on attack is clearly designed to siphon cloud workloads at volume (in addition to other S3-compatible services, like MinIO, Scality, and Storj). Presumably the company’s existing infrastructure has the capacity to deal with the launch of R2, but if they get the customer uptake they presumably want, it seems like capital expenditure to support the service is inevitable.

In short, Cloudflare is deliberately attacking the margins of AWS, Azure, and GCP (and thus limiting their own potential marginal revenue from the service) while also potentially increasing their own need for future capital investments.

This service announcement is amazingly ambitious and I, like many others, am so curious to see how this all plays out once R2 goes GA.

Disclosure: AWS, Cloudflare, and Storj are RedMonk clients.

Image credit: Willrow Hood –


  1. My comments

    My VERY first thoughts on reading this:
    “what is AWS going to do with their “DELIGHTFUL” pay for egress model?”

    Will this R2 likely drive AWS to ‘FINALLY’ reduce the cost of egress? Because I am quite sure that many, MANY AWS customers will become ‘happier’ to remain with AWS with a lower priced egress model.

    I just wonder… Or is AWS willing to let customers just mosey on ovah to CloudFlare’s new fangled R2 storage – ain’t that right C-3PO….

    1. Gudguy1a: Maybe. It didn’t really work for Wasabi who has a really fast and cheap implementation in the same frame as Cloudflare.

      I would never move anything critical over to Cloudflare personally, they have some of (if not the) worst customer support that I have ever seen. Even when paying out the wazoo for it.

      I personally think AWS should consider pricing changes, but I’d rather continue getting the support that I get from them vs. having nil egress.

      1. Yep, I hear you K (sorry for delayed response, apparently I had not turned on notification….)

        Yes, well, we’re going to find out in the next year or so – that is, if Cloudflare makes a bigger impact with customers than with Wasabi did to get AWS to flinch…
        And if that the Cloudflare custserv cost creeps down a wee bit (I’m not aware of what it is right at this moment).

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