[pornel]

5 is misleading. This isn't a typical model where paying customers subsidize the rest.

Cloudflare makes money from the free traffic by caching it. Caching dramatically reduces the amount of data that needs to be transferred over the backbone, which saves ISPs a ton of money, and improves latency for their customers.

From S-1 filing, under "Our Business Model" section:

https://www.sec.gov/Archives/edgar/data/1477333/000119312519...

> Given the large customer base we have and the immense amount of Internet traffic that we manage, we are able to negotiate mutually beneficial agreements with Internet Service Providers (ISPs) that allow us to place our equipment directly in their data centers, which dramatically drives down our bandwidth and co-location expenses.

[ranger_danger]

How is that "making money"?

[pornel]

From deals with ISPs that benefit from the caching of the traffic. The whole world fetching stuff from us-east-1 is an inefficiency that Cloudflare fixes, so the more customer traffic Cloudflare can cache or generate directly from its edge network, the better deals it can make with ISPs.

The peering and co-location partnerships also have a secondary effect of expanding Cloudflare's network, which allows Cloudflare to sell services on top of that, at large scale, with low latencies.