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Cloudflare supports more than 20% of total internet traffic. The company recently made headlines with breakthrough technology that blocks AI companies from scraping online content with impunity. Cofounder and CEO Matthew Prince shares how the new tools are poised to dramatically impact AI firms, publishers, and the future of the internet. This is an abridged transcript of an interview from Rapid Response, hosted by Robert Safian, former editor-in-chief of Fast Company. From the team behind the Masters of Scale podcast, Rapid Response features candid conversations with todays top business leaders navigating real-time challenges. Subscribe to Rapid Response wherever you get your podcasts to ensure you never miss an episode. You released a new tool that’s got a lot of folks buzzing: a blocker for AI crawlersthe bots that scrape content from websites without their consent. You’ve called this new tool the biggest thing you or the company has ever accomplished? Yeah. I feel incredibly fortunate to have built what today is a $60 billion company on the back of the internet. And we became aware about 18 months ago of a new threat to the internet, to content creators, which was being posed by these AI companies. When we realized that there was something we could do about it, we spent about a year talking to everyone in the content creation space, everyone in the AI space. . . . We’re going to change the rules of the road, and say that if you’re not paying for content as an AI company, then you don’t get that content. Today it’s almost 10 times harder to get actual traffic from Google for the same amount of content you created. The minute you show an AI overview, it’s less likely that people click on links. And again, that is better for the Google user, but it is worse for the content creator because it means that you can’t sell a subscription, you can’t sell ads, and you can’t even get the ego boost of knowing that people are reading your stuff. Today, OpenAI is 750 times harder to get traffic from than the Google of old. Anthropic is 30,000 times harder to get traffic from than the Google of old. And so, if content creation is struggling today [when its] 10 times harder, I worry that it won’t survive [if its] 750 times or 30,000 times harder [to read] original content. . . . And if people don’t have the incentive to create content, they’re not going to create content. So there needs to be some business model behind the future of the web, and it’s not going to be around traffic because an AI-driven web doesn’t drive traffic. And the irony is that the AI itself needs the content to be able to make those answers. Now who knows where they’re going to get their answers from. That’s the key: 80% of the major AI companies use Cloudflare in their infrastructure. What they have all said, with a few exceptions, is We agree, content creators need to get paid for content, but it has to be a level playing field. What nobody wants to do is pay for content where all of their competitors get it for free. So, creating that level playing field is incredibly important. Just Anthropic will scrape a site 60,000 times for every one visitor that’s there. Someone has to pay for that traffic. Just from a pure fairness perspective, they should be compensating creators that they’re pulling that content from. We started as a cybersecurity company. We go to war every day with Russian hackers, Iranian hackers, North Korean hackers, Chinese hackers who are trying to get in and thwart our systems. So when we first started talking to publishers about this, it was almost this sort of nihilistic, Oh my gosh, what are we possibly going to do? There’s no way we can stop it. These guys are so smart, they’re a bunch of nerds in Palo Alto. . . . We can’t ever possibly block them. And I remember thinking, We block the North Koreans every day. AI companies are a piece of cake. Before you release the first round of this tool, did you give the AI companies a heads-up? I think there are some bad actors out there, and I think it’ll surprise some people who the bad actors are. We’re monitoring them, and very soon we will publish and we will name and shame who is actually a bad actor in this space. And we will take from what has been basically posting a speed limit sign that says Don’t drive more than 55 miles an hour . . . and we’ll make it into something that is actually much more strict. We’re saying, Listen, we’re taking away your car, you’re not allowed to drive on the road anymore. I understand you’re exploring sort of a pay-per-crawl model with some of the content publishers, which to me sounds a little bit like a toll on the highwaythat you have to pay a toll if you want to come through. If you are generating a huge amount of cost by crawling somebody, but you’re not giving them any benefit, then step one is block them. Then once you’ve created scarcity, then there can be a market, right? There has to be some compensation for taking content, and it’s not going to be traffic anymore, it’s going to be something else. Now the question is, Okay, how do you pay? And I think a lot of times, big AI companies and big publishers are just going to negotiate deals themselves. So if you’re Condé Nast, you go out and do an OpenAI deal, or a Google deal, or something else, and you negotiate it yourself. We don’t have any role in that. I think for the smaller AI companies, or for the long tail of publishers, Cloudflare can hopefully sit in between and help negotiate what is the best deal. And we don’t know exactly what that will look like yet. It could be a micropayment every time a page is accessed. It could be something that’s closer to a Spotify model where there’s a pool of funds and that gets distributed out to all of the different content providers. . . . That will develop, but step one in any market has to be scarcity. If you don’t have scarcity, you don’t have a market. I’m actually optimistic [that] all of us are going to have subscriptions to a certain number of AI agents that are out there. And how AI companies will differentiate themselves is access to unique content that they have and they have alone. So, imagine Taylor Swift is about to release a new album, and she does an interview with some journalists, and they are willing to give that interview to one AI company exclusively for a week. How much is that worth? Probably quite a bit, right? A lot of people are going to sign up. And so, I’m actually optimistic that we might be at the precipice of a golden age of content creation. If we do this right, and we get the incentives right, it might be that instead of us all worshiping the deity that Google taught us to worship, which is traffic, which has always been a really bad proxy for value, if instead we find a way to compensate creators based on when they actually create something which is worthwhile and advances human knowledge, we can actually do some real good in the world, at the same time that wehelp the content creators get paid more.
Category:
E-Commerce
Successful innovationespecially breakthrough innovation that drives sustainable, long-term growthrequires getting a lot of things right along the whole innovation journey, from concept development to commercial launch. Some of the key steps along this path are well understood and generate lots of attention, among them understanding and building product/market fit, soliciting customer feedback early, and gauging customer willingness to pay. But even the best companies and the most innovation-minded, C-suites can get innovation wrong. In our book Predictable Winners, we leveraged the experience of hundreds of projects, analyzed company case studies, and examined a lookback study of 100 innovations. As a result, we determined that several mistakes are quite commonand can put the overall success of an innovation at risk. There are three deadly sins that stifle innovation. Most innovators make them. They are: Sin #1: Picking the wrong early adopters A key decision in any businessand a critical one for innovatorsis determining who your target customers are and arent. The right answer is a byproduct of effective customer segmentation. For innovators, its especially critical to identify early adopters. But doing that correctly is not as simple as it seems. Many innovators assume that early adopters are simply those customers who are willing to use their products first. Not so. Anyone can sell a handful of products to friends, family, and tech junkies. The right question to ask during the initial market-testing phase is, which customers seem most excited and passionate about the product? Who is clamoring for the opportunity to try it? Early adopters are not just customers willing to buy your product before anyone elsethey are the customers who love your product. Their passion and loyalty help you build a sustainable base of customers who serve as a reference and can unlock network effects for later adopters. In other words, early adopters need to care disproportionately about your value proposition. Often, they are a subset or micro-segment within a broader group you have identified through your segmentation processoften the bull’s-eye of that customer segment. Lululemons initial strategy was to target young women with active lifestyles for their line of fashionable but action-friendly apparel. Within that segment, female yoga teachers became the early adopter group. Intuitive Surgical found that the early adopters for their da Vinci robotic-assisted surgery systems were not, as expected, cardiac surgeons but rather urologists who loved da Vinci because it gave them their first-ever option for removing prostates via a minimally invasive surgical procedure. As an innovator, you need to intentionally define the early adopters. Then, determine what the subsequent target customer segments will be. The right group of early adopters can build a lasting foundation and help unlock the customer runway. Intentionality makes this a strategic and conscious choice. Dont let your early adopters just happen to you. Sin #2: Playing chess with yourself A great innovation will generate swift, fierce competition. Many innovators are surprised at the speed and intensity of competitive response. In fact, one of the most common mistakes innovators make is to underestimate their competitors and underinvest in understanding how their competitors will respond. Theyre too focused on their own product and their own customers. They do insufficient research on their expected competitorsand on the individuals who lead those companies. They subconsciously bias their moves based on what they want the other side to do. They assess competitive responses far too optimistically and fail to anticipate the full range of competitors actions. As a result, they often underestimate how quickly competitors come to market and how much impact that speed to market can havethis holds true in markets as different as pharmaceuticals and automotive (e.g., Teslas launch of the Model 3). What these innovators are doing is playing chess with themselves instead of the competition. When you do that, youre always tempted to have your opponent play the game you want them to play. This is just human nature, right? A better move is to conduct a wargame. An effective wargame forces you and your team to role-play as if you were the competitor. If you can do that successfully, you will be well positioned to understand how and why your competitors go to market. That means you will be able to predict their behaviorwhich in turn, will enable you to pursue the right strategy to win in the marketplace. Wargaming demands that you gather data on your competitors. These days, theres typically no shortage of data available. But many innovators do this homework incompletely. Keep this in mind: you cant know your competitors too well. Data gathering will help you understand their true competitive advantages. The exercise will help you understand the range of competitive actions but also keep them in bounds. In effective wargaming, many ideas for possible actions can come up, but in most cases only a few paths will appear to be rational and likely. The focus should be on competitive advantage. Lets keep it simple: A competitive advantage is the reason a competitor wins. Often, there arent that many entries on that list, and theyre not necessarily the most inspiring attributes. They may be strong relationships with hard-to-reach customers, control of a channel, expertise with manipulating a raw material, brand longevity, size of an installed base, and so onall examples of real, tangible competitive advantages, which are both hard to replicate and contribute significantly to a winning strategy. Again, your competitive homework needs to help you to understand whats on the short list for each of your key competitors. This cuts both ways, though. Sometimes, your competitive advantage may simply be the flexibility to do things your competitors cant. Among U.K. supermarkets in the early 1990s, Tesco was always a little behind the market leader, Sainsbury’s: lower share, lower margins, and a more down-market positioning. Ten years later, Tesco was twice the size of Sainsbury’s. How did that happen? While its true that Tesco innovated, for example with its loyalty program, the big reason they were able to gain share was simply that they built more stores. Sainsbury’swith the founding family still owning a significant stake targeted a hefty 21% return on equity. Tesco, by contrast, was happy with 18%. This helped fund expansion and gave them more freedom to respond to low-price discounters. Investors were happy, too, because they could see the company was growing and gaining share. The disciplined competitive analysis that results from wargaming can reveal similar trajectories. In our experience, we have seen aha moments arise when previously hypothesized actions or scenarios are proven to be off-base and are replaced by more likely and more nuanced expectations for competitive responses. Butand this is an important caveatnot all competitive responses and not all business strategies are rational. This is where knowing individual leaders pays off. Factoring in the styles, track record, and biases of competitors leaders is essential if you are going to anticipate their moves. No matter how you proceed, keep in mind that the essential point of wargamingand indeed, of most steps along the path of innovationis to never assume that yu are smarter than your competitors. Dont underestimate them.Its almost always better to overestimate themand then be pleasantly surprised when they play into your chess game. Sin #3: Discovering barriers to adoption only when you launch All of the innovation planning in the world comes to nothing if the new product or service fails at launch. There is one goal at launchcustomer adoption. Here is where planning can and must pay off. Perhaps the most impactful mistake innovators make is failing to develop a deep enough understanding of their customers before launch. In particular: Before launch is when you must proactively identify and mitigate barriers to adoption that can spell the death of your innovation. The last thing you want is to find out that there is something that keeps your customers away from your productand that you only found out about it when youve started commercialization. True, you can still take action at that point. But your options are severely limited. At best, you can adapt and find a way to overcome them. At worst, you can scuttle your launchand hope you dont scuttle the company along with it. Best practitioners understand the whole scope of the customers purchasing journey and all the possible barriers that arise at each step. It is also essential to understand the relative importance of these barriers. How severe are they? And how many of your potential customers do they impact? Once you have a thorough handle on your customer purchasing dynamics, you then canand mustmake it your key prelaunch objective to identify and mitigate those adoption barriers. Those barriers are simply reasons not to adopt. They vary by customer segment, by stakeholder, and by where they occur along the purchasing journey. You wont necessarily be able to impact all of thembut if you anticipate them, you can at least know which ones you may be able to impact. Take a systematic approachuse the customer purchase journey as an organizing principle. This journey can be generalized into several phases: Awareness, Consideration, and Conversion. Many other versions of the customer journey (or marketing funnel) exist. You can tailor them to your specific needs. Uber succeeded in identifying three barriersnot having the legal right to operate locally, not having enough drivers, and not attracting enough customers. With that knowledge in hand, Uber was able to formulate a plan of attack. Without the resources to lobby each local market, Uber chose to ignore the established regulatory framework, first establishing itself as a gig economy alternative for drivers and a less expensive, more convenient option for customers. Only then did it address policymakersusing its drivers and riders as a political force. The company had specific plans to overcome the adoption barriers for each target community. Incentives and bonuses helped build driver ranks. Careful analysis quantified how many consumers might leak out at each stage of the customer journey and indicated how to mitigate those barriers (and which to prioritize). Extensive (and localized) advertising and marketing along with safety features like GPS tracking served to allay consumer concerns and turn them into Uber riders. Many of Ubers tactics were questionablenot all were praiseworthy. For example, their decision to ignore local regulations in some communities was rightly subject to sharp criticism. But Ubers story does serve to illustrate how a systematic approach to barriers drives strategic choicesand how those choices in turn drive adoption. Uber also illustrates that not all adoption barriers are created equal. It turns out that in many situations, its possible to quantitatively assess the impact of each adoption barrier, and this assessment can help you prioritize the order in which to tackle them. An effective way to do this is to conduct a leakage analysis along the customer journeysimply stated, how many customers leak out from the purchasing journey at each step? Understanding why such leakage occurs, where it is most significant, and what steps you as the innovator can take to minimize leakage can be very powerful. Sin no more While there is no doubt that the innovation sins can be deadly, they can also be overcome. A systematic approach is the key. By anticipating competitors actions and establishing a deep understanding of the customer journeyand by establishing gates and safeguards at each critical stepits possible to greatly reduce the risks of innovation and ensure that the process of developing breakthrough products and services will be predictablewith much greater odds of success.
Category:
E-Commerce
Zohran Mamdanis victory in the New York City Democratic mayoral primary is sending shockwaves through the real estate market. But even though the 33-year-old won at the polls, some influential New Yorkers aren’t sold on his democratic socialist policiesincluding a promise to freeze rents. The mayoral candidate campaigned on a promise to immediately freeze the rent for all 2 million-plus New Yorkers living in rent-stabilized apartments, and to triple the citys stock of affordable housing by constructing 200,000 new units over the next 10 years. That plan is certainly ruffling some feathers. Mamdani’s mayoral primary victory in June was followed by a one-day sell-off in shares of companies with significant exposure to the New York real estate market, as well as threats of a mass exodus by some of the citys wealthiest denizens. Such policies might sound attractive (and clearly appealed to voters), but there are those in the real estate industry who are skeptical. In particular, some experts caution that while Mamdani is well-intentioned, he may be naive about the realities of New Yorks housing situation. And even if a rent freeze could be enacted rather quickly, it takes many years to get an adequate supply of new housing on the market. The concern among the real estate community is that while a rent freeze might provide short-term relief for tenants, it also risks raising market rents and causing long-term damage to building maintenance, rental supply, and investment interest, John Walkup, cofounder of New York-based UrbanDigs, tells Fast Company, noting that a rent freeze could accelerate the bifurcation between rental rates for regulated versus market-rate housing. According to Walkup, if landlords with mixed portfolios of housing units aggressively increase the rents for market-rate apartments to offset the losses for regulated units, the people who ultimately stand to pay the price of well-intentioned policies are other renters. And there are other potential consequences: Landlords could defer maintenance or upgrades, while there might be a rise in warehoused units that landlords intentionally keep off the market. (Mamdanis campaign did not respond to several requests to offer comment on the arguments described in this story.) Maintenance woes Landlords of smaller properties are going to face the most challenges, argues Peter Bafitis, managing principal at RKTB Architects in New York. Many buildings with subsidized and rent-stabilized housing are older, and older buildings typically require more maintenance. Meanwhile, Bafitis says, the cost of materials and labor have skyrocketed in recent years. These owners are struggling to keep up with regular building maintenance and needed repairs, he says. Whats been happening is that these smaller landlords have not been renovating apartments and theyre letting them be vacant because the finances dont make sense. These landlords rely on moderate rent increases to maintain their buildings, Bafitis says, noting that if thats taken off the tableand theres no commensurate relief for landlords, say in the form of reduced taxes or utilities coststhey will face a legitimate burden that will ultimately affect renters. Supply issues Like Walkup, Bafitis says any holistic solution to New Yorks housing problem must address supply: If you only deal with one side of the equation, its not going to work. The construction of regulated housing depends on private investment, but a rent freeze could deter outside investments in buildings that are often valued based on potential rent increases, Walkup says, noting that if theres no carrot for investorsbe it in the form of rent increases, subsidies, or tax incentivesthey could find it less appealing to invest in regulated buildings and more attractive to invest in market-rate buildings instead. Because of the public-private partnership thats required to build this type of housing, if elected, Mamdani would have to find a way to partner with the private sector. There has to be something in it for them, thats the only way for it to work, Bafitis says. And even with partners on board, there are logistical hurdles to overcome. Building a large supply of new houses quickly? Fuggedaboudit, Bafitis says. “Not in New York City.” Thats a reality he deals with on a daily basis as an architect. Whereas it once took one to three years to bring a small-scale project to completion, the timeline has now stretched to more like five to seven years. Its just because of the red tape, he says. Its mind-boggling. Finding middle ground While both Walkup and Bafitis commend Mamdani for focusing his campaign on issues of housing affordability, they say a holistic solution is necessary to truly address this problem. And, to be fair, there are a lot of ifs to be sorted out between now, the general election in November, and Mamdani potentially taking office. Like many politicians before him, Mamdani, if elected mayor, may walk back some of the promises he made as a candidate. While a rent freeze is a great slogan, Mamdani would have to be a consensus-builder as mayor and find ways to work with the various well-entrenched forces in the industry, Bafitis says, adding, Housing is an incredibly complicated business in New York. Finally, all the bluster this month about Mamdanis potential impact on the housing market might be a bit much, particularly with more than three months until the general electionand plenty of time for him to refine his agenda. Usually, the initial reaction is a knee jerk that leans in the direction of the worst-case scenario, Walkup says.
Category:
E-Commerce
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