Cloudflare CEO Matthew Prince sits down with Yahoo Finance at the 2023 World Economic Forum in Davos, Switzerland, to discuss the state of cybersecurity, the overarching theme of Davos, and the impact of the Russia-Ukraine war.
DAVE BRIGGS: All right, our coverage from the World Economic Forum in Davos continues now. Let’s head over to Brian Sozzi and Julie Hyman in Switzerland.
BRIAN SOZZI: Thanks, Seana and Dave. We caught up with Cloudflare CEO Matthew Prince here at the World Economic Forum and asked him his top takeaway so far.
MATTHEW PRINCE: There’s a lot of concern over the economy. It’s coming up from almost every conversation that I have. I think people are seeing that. I think there’s still a lot of concern, obviously, around the war. We are within a short train ride of the front lines in Ukraine. And so over and over again, I think that the theme of this Davos is really concerned.
JULIE HYMAN: Where are you seeing that concern in your business, right? Because you did have late last year some cautious tone from you all as well. Now it’s been, what, two months since then, more or less? What can you tell us about what you’re seeing?
MATTHEW PRINCE: Well, I think we’ve been cautious for well more than two months. We actually started talking about what we were seeing as a slowdown in the economy almost a year ago, and saying that what we were seeing was customers were asking for ways that they could save money on their IT bills, that they could get more with less. But at the same time, that they really had these huge cybersecurity concerns.
And so at that level, it’s sort of a tension in our business where people need to have the cybersecurity protection, but they’re looking to us to also help them save money with some of the other vendors that they use.
JULIE HYMAN: And yet, you raised prices, I believe, for the first time ever. So how did you sort of thread that needle, then, if your customers want to save money, but you also are facing higher costs, and you’re raising your prices?
MATTHEW PRINCE: Yeah, we raised prices because we really wanted people to pay for our services on an annual basis, our low end customers. And what’s been amazing is that that was incredibly well received. In fact, if you go and just look at even the social media around it, people are saying, Cloudflare delivers so much value, delivers so much that I’m happy to pay them more. And I think that was actually really well received. And so I’m excited that our customers are so loyal to us.
BRIAN SOZZI: And like you mentioned, Matt, you do get a lot of, I think, a lot of credit on Wall Street for seeing that economic slowdown before a lot of others in your space. And now we’re seeing a massive just tech slowdown, and stock prices are under pressure. How much longer before the cycle plays out, or when do things start to improve a little bit?
MATTHEW PRINCE: I don’t know. I don’t see things turning around in the short-term. We have quite a bit of visibility because so much of the internet sits behind us. Somewhere between 20% and 25% of the web sits behind Cloudflare, so we get those early indications. We can see e-commerce spend slowing down. We can see B2B spend slowing down. And that’s what we saw at the end of ’21 into 2022, why we slowed down hiring ourselves, and why we actually are in a pretty good position, I think, compared with some of our peers that maybe didn’t have that same visibility.
And so, unfortunately, I don’t see that turning around certainly in the near term. But I think that this period of time is really a period of time for companies like Cloudflare, other tech companies, to really refocus on how they can be the best companies they can be, as efficient as possible. And I’m confident we’re going to come out of this a lot stronger than we went in.
JULIE HYMAN: It’s just a question of when, I guess. I want to ask you about cybersecurity as well. You guys regularly put out reports on various kinds of cyber attacks. Where are we on that? Are things getting worse? Are things getting better? How are things evolving? What’s your big takeaway on that front?
MATTHEW PRINCE: When we were here in May, I think what we talked about was a real concern that there was going to be a big uptick in cybersecurity attacks, especially coming out of Russia. The fear was that Russia would retaliate against the allies of Ukraine by using cyber as a weapon. And I think maybe the big cybersecurity story of 2022 was that didn’t happen. It was actually much quieter than we expected.
JULIE HYMAN: And– sorry– did it not happen because the defenses were good enough, or did it not happen because they’re so distracted with the ground war that they’re not doing it as much as you would have expected?
MATTHEW PRINCE: I think more the latter than the former. And some other really interesting things, a lot of the cyber gangs were actually made up of both Russians and Ukrainians. And they literally tore themselves apart where an example of one called Conti, the Ukrainians actually released all their sort of secrets so that they couldn’t do their hacking anymore. And so I think that’s been a distraction. And unfortunately, towards the end of 2022, we started to see more attacks, those targeting Japan, those targeting Poland, Germany, the UK, looking at that infrastructure.
And so I, unfortunately, think that while we were worried about this in May, and it’s not the time to let our guards down. This is really still a shields up posture. And going into 2023, we’re seeing more of those attacks. We’re also seeing attacks by the North Koreans actually posing as Russians, sort of just taking advantage of the chaos that’s going on and doing kind of mischief that’s out there. So I think 2023 is going to be a lot of cyber attacks. And we’re well prepared to make sure our clients are safe.
BRIAN SOZZI: We talked to the Klitschko brothers about what they’re dealing with on the ground in Ukraine, just very powerful stories. But they did mention and remind everyone that Russia remains a very big risk, not just to Ukraine, but around the world. I mean, do you get the sense that Russia is gearing up for some form of large cyber attack?
MATTHEW PRINCE: It’s hard to know what’s going on inside of Russia. But what we’re doing is making sure that, first of all, in Ukraine, we’re offering our services to the Ukrainian government at no cost. We’ve been doing that since even before the invasion to make sure that they are hardened, that they can protect themselves. We’re also helping make sure that images, messages, videos of what’s going on, on the front lines and the atrocities that are going on can get out of Ukraine.
And then thirdly, we’re making sure that inside of Russia, that the people who want to avoid Russian censorship can actually do that using Cloudflare’s tools to see what’s going on. And we’re really proud of the fact that organizations like Bellingcat use Cloudflare in order to be able to show a lot of the atrocities that are going on inside of Russia. And we’re going to continue to do that and continue to support the Ukrainian people.
BRIAN SOZZI: And I want to give you a little of credit before we let you go, Matt. Every year, you close this event, Cloudflare, with a really great gathering of everyone here, great party atmosphere. But you’re not doing that this year. And I see a lot of other folks here in tech still throwing these lavish parties. Take us behind that decision to just reel it in a little bit and be mindful of what’s going on out in the world.
MATTHEW PRINCE: It just didn’t seem like the right year to be celebrating. And I think when we see a lot of peer companies laying people off, when we see people in the tech industry really struggling, the idea of throwing in a– flying in a big performer, spending a ton of money on a lavish party, didn’t make a bunch of sense. And so we’re still getting people together. We’re doing something that’s much more modest. And we’re hopeful that by next year, the economy will be recovered, and we’ll be able to do a big party again.
But this year, I think it’s time for us all to reflect, to all take stock of what we’re doing, and to really be more efficient and be more mindful of, again, a lot of people that are going through some really, really hard times.
BRIAN SOZZI: Julie, it was really interesting what Matt said about the growing risk of Russia as a cyber threat. It didn’t get a lot of attacks last year that we know of, but maybe gearing up for something big at some point this year.
JULIE HYMAN: Yeah, definitely interesting, but he also said how opaque it is. It’s really hard to predict. So we’ll see what ends up happening.