Conference call: In conversation with Cloudflare’s Michelle Zatlyn

Good afternoon, everybody. This is David Scock, the CEO and Editor in Chief of the Logic. I'm joined by with Michelle Zaitlin this afternoon. We're going to hold off a few seconds, probably till about 12:01 for everybody to jump on and then we will begin. Thanks for joining us. Okay, so we're going to begin once again. This is David Scott, the CEO and Editor in Chief of the Logic. I'm joined by Michelle Zaitlin, the co founder and COO of Cloudflare. Michelle, thank you so much. Thank you so much for taking the time out of your busy day to be with us today.

Thanks so much for having me. Really looking forward to this.

So I will confess that we were going to do this in person. It was going to be part of our first ever Logic subscriber summit last June. And then the world changed. And the reason why I reached out was I had heard you give a talk at the World Economic Forum in January in Davos about the splintering of the global Internet and thought, who better than a Canadian to provide a little bit of context into some of the geopolitical shifts that we're seeing in the world today. So I guess if we could start there, and we will, I'm sure, talk about what Cloudflare's role is in all of this. But if you go back to January and you think about how you felt and what you were thinking about when you were sitting on that panel and where the world is today, what do you think of how has your own perception shifted in terms of the world geopolitical landscape over the last six months?

Yeah, definitely. Well, I kind of see a little bit from the tech's perspective. I'm certainly not a poly scientist or a policy expert, and I don't want to misrepresent that. I am, although I am a founder of a successful technology company that's a global company and we connect a lot on that. On that point of view and what I've seen over the last 10 years building my company is when I first started to be an entrepreneur, almost went like from tech to do no wrong. And today I feel like tech can do no right. I think the technology companies and sentiment has turned much more negative than it was even a few years ago. And so that's made a lot of people zoom out and think, why? What's going on? And I think that there are a couple interesting trends that impact all of us in Canada and around the world, as well as the United States. And the trends that I see are this, as I Zoom out is 10 years ago there were eight technology companies that had market caps over $100 billion. In the last decade, that's increased to 26. And so it's actually been quite a fast acceleration of the number of technology companies who've grown very large market share and large market cap sizes in a fairly short period of time. And so I think that went from the geeks in the corner that no one really cared about to all of a sudden people paying attention, people being politicians, governments. Because what happens is these large companies with these large market caps are reshaping local industries and markets and having profound effects in local economies. And so I think people are saying, whoa, what's going on? If you look at those 26 that have over $100 billion of market cap, there are $5 trillion plus market cap companies, four of which are technology companies. And you look at a company like Apple, how fast it went from a trillion dollar market cap to a almost $2 trillion market cap very, very quickly. So this compounding interest. And so I think a lot more people are taking notice because of the shaping of the local economies. And that's contributing because a lot of those 26 companies are based in the United States. And I think countries, including Canada and European countries are saying, what about us? Where are our giants? Large success stories? And so I think that's a big part. The second piece I would say is that there's been some bad behavior among the leadership in technology companies. Not all of it. There's been some bad leadership in terms of how some of those companies have treated private data and use that for profit. I think that there's been some bad stories of how those companies have run their companies and people take a notice. And that's been surfaced. And I think people say, hey, we got to do better there. And then the third one is just really the sense of right again, bigger companies and how people have taken use this data and what they've done with it. And people said this is really important. The third is that technology is impacting all of us as private citizens. And so policymakers are saying, wow, this really matters. Who are the gatekeepers on the Internet? Where are the tools taking place? How are people using my private citizens data? What does that mean? And so it's kind of a combination of all those things that are leading to the shifting nature of technology and what does it mean in a geopolitical context? And they're really good meaty questions. And so that's a little bit of the context that I think is why you're hearing a lot more about this in the media and we should hear more about it because it's not going away, it's only going to become more important.

So as part of that, there's this sense of the splintering of the Internet where you have US companies being asked by their government to close off a little bit. You have Chinese companies having always in some sense been a walled garden. Cloudflare, your platform, which is a network of over 200 cities in more than 100 countries. You, you're kind of the Star Trek Enterprise dashboard of a lot of the Internet security. Maybe tell people a little bit about what Cloudflare does, of which I should fully disclose the logic as a customer. But you're sitting on all this data and seeing how global Internet traffic is moving. How is this bifurcated Internet playing out based on what you're seeing?

I like that, David. I'm going to start using that or the Star Trek dashboard of the Internet. I think that'll, that'll really resonate. I went from using, you know, digital bouncer and personal trainer, which is also resonates with some group, but there's definitely a certain group that the Star Trek piece will work. So. So thanks for that analogy. I'm going to start using that. I'll attribute it to you and the logic, but thank you for that, for that description. You know, I. In some ways it's the same thing. In some ways it's different. More and more people are online. And so what we've seen from very early days today is just huge traffic. People, people, citizens, people, our peers, our friends, our family around the world who are connecting online to do more, whether it's communicate or commerce or business. And so we've just seen Internet traffic continue to grow around the world, very global. And that's been everywhere around the world. We've just seen more and more connectivity. And there's a whole trend in technology saying getting the next billion people online, that's less. So in Canada, in Canada, people have access to great Internet, but if you're in rural Africa, it's not as accessible. People are trying to say, hey, let's get more people in these rural areas access to the Internet. Because you can get online, you can access a lot of information, you can connect with people, you can almost really leapfrog physical boundaries in your community and get connected to a more broad community which is really used for good, is incredibly powerful. And so we've just seen huge traffic around the world and that's been the same. What's been interesting is during COVID during this pandemic of 2020, what some of the things that we've seen. And so basically when the world went into the lockdown in March, overnight, basically overnight Internet traffic increased 50, basically increased 50% from the start of the year on average. And so think about that. You think about the Internet all of a sudden being able to handle 50% more traffic worldwide. And it did so pretty flawlessly, which I really credit to the computer scientists who, the technologists who originally created the Internet, and then all the cloud companies helping make it run today, including cloudflare. It's quite remarkable when you think about that. So overnight, 50% more traffic during COVID what's interesting in Canada at its high point was kind of up 40% in mid May. That was kind of during the height of the lockdowns. And if you look Canadians, Internet traffic spiked about mid May as up 40% from the beginning of the year. And that's come back down to the low 30%. And that's about in line with what we see in the United States. It's both about 30, 31% in Canada, 33% in the US up over the beginning of the year, just during this COVID pandemic. Related traffic. So traffic is way up around the world, on average 50%. It varies by country. Canada is falling back down to the low 30% today, up from the beginning of the year. Some things that we've seen. The other thing we've seen, which has been a little bit sad for me to see, is you think about why is Internet traffic up? It makes sense. You can't physically go anywhere. People have a lot more time, so they're spending time online, connecting, reading, buying. Like those things are all the positive side. But we also have seen is cyber attacks are also way up, which is kind of really sad that even during a pandemic that you would see cyber attacks go up so much. And it's like even in the second quarter of this year, so what was it? April through June saw Cyber attacks up 60% from the first three months of the year. And so, you know, that's, I guess, a window into humanity. And I think part of that are kids who are bored, who are just learning some technical skills and throwing instead of throwing eggs at schools, there are houses. They're doing some things they shouldn't be doing online and other those are really serious. And so that's the sad part of what we've seen with the increase in Internet traffic is that cyber attacks were also Way up this year.

Michelle, if I can interrupt you there, do you know where those are originating from?

We look more where they're directed to than where they're originating from. It's actually very hard to figure out where they're originating from. And we don't assign blame. We're much more about stopping them. And so if you say, where are those attacks against a lot of US Businesses, high. Canada and Germany are also on that list of where who are under attack. But we look much more closely at who is being attacked, not where they are coming from.

And who is being attacked. Is it. You know, obviously, naturally, we've written a bunch of stories on how the Canadian government has moved to remote life. Has the Canadian government seen more targeting on their servers with people working from home?

Yes. Well, that's actually interesting. So let me be clear. The attacks are up. The frequency, the size and the types of attacks have become more. There are more types. So it's both the frequency in which attacks we've seen this year are up. Cyber attacks, the size of these cyber attacks, especially in the second quarter, have gotten larger. And the third is there are new vector attacks. And so what you just said would fit into the new vector attack. So all of a sudden, businesses have all their employees mostly working from home. And businesses invest a lot in cybersecurity. Most of them, not all of them, but most of them invest some and take it some somewhat seriously. And so their networks are quite hardened. And so all of a sudden their employees were all at home. And so what you just described, David, makes sense. Attackers have said, hey, all these employees are now working from home. And guess what? Our home networks are not as hardened or as secure as our business networks because most of us as people haven't put the investments in. And overnight, businesses shifted from their employees coming into the office to getting connected at home. And so one of the new vector types that we've seen this year is targeting employees who are working from home. And that is certainly not just a Canadian government vector. We've seen that across all businesses around the world. Because it just, if you are a, if you are interested in the field of cyber attacks and you want to launch a new attack, it becomes a new vector type to try and take advantage of. And so that's been interesting. And there have been other new vector types too. It's been, you know, again, checking for backdoors, trying to take advantage of, you know, older platforms, pretending that, you know, they're using older browsers, which causes all these different vulnerabilities and so again, the frequency, the size and the attack types have all widened or increased given the depending on the right measure of unit for those three. Those three types.

It's funny hearing you talk about this. It brings back to me probably around the time when Cloudflare was formed, when I was working in large enterprise news organizations and there were constantly very tense debates of which I was involved in about the digital transformation of the organizations and moving away from enterprise hardware with stacks of computers in house and going to the cloud and the real concerns that a lot of IT professionals had at that time around the security of that platforms like yours have reduced that concern. But I wonder in the past six months if the pandemic has reawakened any of those debates. Or is this in some ways has the cloud one completely. And has this pandemic shown that the cloud is capable of protecting companies as much as having your own network would?

Yeah, well, that's actually a good point, David. So what I'm saying is true. The attacks are off the frequency, the size, the types. And you just reminded me that I shouldn't paint such a doom and gloom picture because it's true, the tax are up and the size are up. I guess there are some good news to this and we're not out of the water yet, but there is good news. The good news is if you are a business today, there are much better solutions than even five years ago. In fact, technology will solve the cybersecurity risk. I really believe that. And it's not completely solved. It's getting much better today. And I think it will continue to get better because technology, can you hear these, these types of technologies like artificial intelligence and machine learning in a cloud environment, Cloudflare provides cloud based security solutions. We use all those technologies to provide amazing cybersecurity protection on behalf of our customers. So we have 27 million Internet properties that use Cloudflare and every day. Last quarter we stopped 72 billion cyber attacks daily on behalf of those customers. So that's with a B72 billion cyber attacks daily. And you think, wow, that's a huge number. It is a huge number, but we're still a relatively small or big company depending on what your lens is. I mean, we're about a 1500 person company, 10 $11 billion market cap company in the United States and you think, wow, with a company, your technology can help all those customers. These 27 million Internet properties around the world. And so the truth is the technology has gotten much better because of technologies like artificial intelligent, machine Learning where the whole premise is. If one, if a small business, a blogger in Malaysia gets attacked. And when these attackers try, they usually start with something small. They don't start with the World bank of Canada, they start somewhere else. Okay. They start on the blogger in another developing nation and they practice, they refine their skills and they work their way up. And it usually takes about 18 months for an attacker to start somewhere small and then go to a larger spot. Not always. It can happen faster. But that's what we've seen over time is what happens. And if that because we have 27 million properties. Cloudflare is a service that is available to everyone. Whether you're a small business, a nonprofit, a developer, a hobbyist or a large organization. We have customers that look all of those is that Malaysian blogger is using Cloudflare. Our technology learns. And now all 27 million other Internet properties using Cloudflare are protected. So it's like a neighborhood watch. And so while these trends are up and you say what do I do about it? I guess the reason why I'm not running from I'm a little bit more optimistic, I'm a glass half full is because I do think the technologists and the technologies that we've developed in the last 20 years are actually really good and they're going to help solve this. And so I make a prediction that 10 years from now cybersecurity will be thing of the past. You'll still have it in really narrow ways. But the way that it's impacted our lives the last five years today as a business is really going to go away. Because if you use a service, a cloud based service like Cloudflow or one of the others available, the technology will basically patch will become act like a digital bouncer or like the start startreck of the Internet, they'll be the digital bouncer. They'll just say nope, you're, you're not, you're, you're an attacker, you're an illegitimate visitor. We're not, you're not welcome here, please move on. And it just makes it all increases the friction for people to do bad things online. And so that's where the world is going. That's the optimistic side. We're not there. So between now and there, as people and as businesses, you got to pay attention because if not, you're going to be the COVID of the newspaper for sure and bad thing, you're going to leak your customers data. But I do think that the tools today are much better than before and the cloud is a Huge reason for that. The cloud allows you to do all these things. You know, you said, we're in 200 cities around the world. It's true. Cloudflare runs a network, or we're in 200 cities around the world. So if the bad actor is originating from, I don't know, somewhere in Canada, we stop it locally. It never actually gets any further than that. Or if it's coming from Russia or the Ukraine or London, England, or wherever the person is trying to do something that's bad acting, we can stop it much more closer to the source. And it makes it much easier to solve if you stop it closer to the source. And so that's because of the cloud. And so I'm optimistic for the future.

If you have any questions for Michelle, please enter them in the chat box that's right there, and we'll try to get to them before the end. We have about 11 minutes left. I want to talk to Michelle about the journey of going public, which I think there's a lot of fascinating, interesting insights that we can all learn from that. But before I do, you know, Michelle, I was reminded about when you were going public. There was controversy at the time around hosting on platforms. And you mentioned earlier that politics isn't a part of what you guys do. And yet it seems like politics is in every part of our lives today, particularly where you're living in the United States, whether it's politics around geopolitics with China and the United States and how the government in the United States maybe wants to influence how tech companies function, or whether it's around cultural things and who you host and how you manage what you host and who you host and your company's policies around that. How do you navigate that? It seems to me, I guess, at a high level, running a technology company in 2020 is in so many ways a. You know, you're almost running a state. How do you. How do you balance the challenges that seem to come onto your shores when you're. When you're trying to run a company?

Well, this is. And this is for the entrepreneurs, the business leaders listening and who are tuning in. I mean, my other prediction, again, predicting is hard, but I strongly believe this. So it comes back to the trend we're seeing, like technology matters, and it's here to. It's here to stay. It's not going away. So the people who embrace it, and by people, I mean like the most general sense, citizens, business leaders, founders, you just need to embrace it and figure out what works for you, because it's not going away. There's just too many benefits that outweigh the negative. So it is here to stay. So that's that. So what that means is if you are a business leader today, and I truly believe this is a business leader conversation, whether you are running marketing or you're in charge of the security team or you're the CEO, you need to understand more about policy than you did before, because technology is not going away. And so what that means is the best business leaders are the ones who are going to lean into policy, because there's a lot of policies that are going to get made over the next few years and 10 years, and the best policymakers are going to lean into the technology and those, I think where we see that happen, that's when the best things are going to happen. I think it's when the business leaders say, kind of say, oh, that policy stuff doesn't matter, bad things will happen. There'll be a lot of clash and friction. And if the policymakers say, I don't care about technology, I don't even want to try to learn what the implications are, I think a lot of bad policy will get made. But the people that I think have a chance to shift to shape the narrative the next 10 years are the ones that lean in and come to the table and have discussions because it is so important. The, the technology is accelerating. It's everywhere. And so some of the policies that we have from 10 years ago, 15 years ago, 20 years ago, 30 years ago, they're falling short, right? And so we need to go patch those holes and create new ones. And it turns out creating new laws is hard because you don't want to have unintended consequences on that. You want to make sure you enable the entrepreneur to go with their idea and run with it and start all these new ideas you can have the next can shopify get created in Canada. I think everybody wants that. They want the job creation, they want the economic prosperity, they want all that. But they also don't want the bullying online and the hate online, which are real things that happen. Right? And so it's how do you have all the good, how do you take care of some of the bad things that have popped up that are clearly not great? We got to address them without damaging all the good. And that's what policymakers and technologists and academics, the business leaders, are committed to conversation tables today to talk about that. And what I've learned in the policymaking world is most, there are no silver bullets. Most of the Silver bullets you take care of, it's not clear. So people come and they dialogue. And actually this is the role that media can play. It's a dialogue. You come to the table, you have these different shareholders who come to the stakeholders who come to the table and they dialogue on, okay, the bullying online is a serious thing. What do we do about it? It's not against the law, but we don't like it. Do we want to put a line? How do you do that without, you know, impeaching on in the United States someone's, you know, personal rights, like it's all these sorts of things that people are coming to the table to have a conversation about. And said, okay, well if someone is bullying, whose responsibility is it to go to go talk to that bully? Right. In the physical world, it might be a teacher or the principal or someone's parents in an online world whose responsibility it is. And so those are the conversations. And I think it's great that we're having conversations. One thing I've seen a huge change in just the last three years is the willingness to have a conversation between the policymakers, the business leaders, the technologists, the academics, the media to say, okay, let's figure this out and we are making progress. But the thing that I wish we could see more is it faster? It's, it's slower than I would like. But it turns out these are hard questions and a lot of people are coming to the table to say, and we are making progress, but it's super slow right now. And I think that that's the opportunity. It's if you're passionate about this, if you're fired up, get involved and you probably really will be able to shape the next 10 years and help make it better without damaging all the great things that we have too.

One of the things that your organization has been behind is election integrity and protecting the elections coming up in November, Obviously. We have a question from Derek Leverington, a subscriber, asking about your contribution to the Athenian project and what kind of take up you've seen in the US and Canada around that as we head towards November.

Yeah, well, that's really important actually. The Athenian. Thanks for the question. So, you know, I'm talking about kind of the general landscape online that attacks are up. The attacks are up against political campaigns as well. And this is actually not new to 2020. We saw this the last election where cyber attacks were way up against everybody participating in the election. And it's not just the candidates, it's the local administrators, it administrators who run the websites to check to see where you go vote or what the results are like those it was, the attacks were against that infrastructure, that critical infrastructure that kind of makes a democracy function, which is terrifying because it turns out those, you know, the IT administrator who's responsible for running the, making sure that you can look where you need to vote, what the voting hours are, what the results are, they feel very alone. They do not have a lot of resources. They are not a global 200,000 company. They do not have tons of teams and lots of money. So they feel alone and they feel what they do is very important. And so we saw this the last election and so we created the Athenian project that gives Cloudflare's enterprise grade services that the Fortune, these Global 2000 companies use. And we have about 15% of the Fortune 1000 using Cloudflare Away for free to any of these IT administrators who are really running the infrastructure. And what we see is like attacks are up today on a busy day, we'll stop about 40 million attacks against, against some sort of political infrastructure. And so the, the, the attackers are trying to meddle with metal in our democracy. And I am proud and our team is proud that we are one player trying to help in this regard. We think it's really important the functioning democracy is what allowed Cloudflare to be created. And so we want to play our role. There are other technology companies that are playing a role too, but it's serious and we take this seriously and others have too. But yeah, it's true, there's a lot. And so we stand ready to help. In the last election, we had 18 of the 19 political candidates used Cloudflare. The only one who didn't was Hillary Clinton, but everyone else did. In this election, we saw over 80% of the candidates all using Cloudflare. We're down to fewer candidates now, but it's whether you're running Senate, Congress, Parliament, small or large, everyone's vulnerable. And so we're just trying to help make that not the reason why someone wins or loses an election which feels.

I won't make any comments about Hillary Clinton's emails.

Yeah, please don't.

But we don't have that much time. I didn't ask you at all about ipoing, so let me just high level, looking back, it's been a year almost. When you look at that experience, what surprised you? What did you learn? You know, you've been in business for a long time, but I'm sure it was a new experience for you in a Lot of ways. What was the most revealing thing about going through that process that we can all take away from?

Oh, this is my. So I'm a half class full person. If you've not realized on this conversation. For those of you who I don't know, I mean, going. Taking Cloudflare public was just such an amazing experience. And the most surprising thing was how proud I was and our team was. And it was this moment where we were at the floor of the New York Stock Exchange ringing the opening trading bell the day that our company went public was listing on the New York Stock Exchange. And I looked around, we had 150 people from Cloudflare in the audience and they were employees, early employees, board members, our family, our champions. We had office events all around the world and you just realize that wouldn't have happened without all the time. We had about 1200 people, all 1200 of us showing up every single day, sweating the details, caring. And you just realize what is possible when you assemble a team and you with a shared purpose, rowing in the same direction. There's just this immense sense of pride for all of us. And I didn't realize how much it would mean to everybody and myself. Like, it was a really awesome experience and one that we're all really proud of. It was a great milestone, we celebrated. And then on Monday was a Friday, we went public. On Friday the 13th, September 13th, it was Friday the 13th, we had a great celebration. And then on Monday, what I love, a big, big celebration on Monday. We are all back at our desk, back to work. Because it's, it's just, it was a milestone, we celebrated and then there's onto the next thing and, and so that's, that's what I would say. But it was a really positive experience and I hope lots of founders, if you're listening, I hope you all get the chance to take your company public, either in Canada or the United States. Was an amazing experience.

How's it changed the company? You know, I assume that even just corporate communications is a totally different beast now than it was a year ago. Are there fundamental shifts in how you govern?

So there are definitely fundamental shifts. I mean, you know, running a public company is a serious thing. So there's a lot more checks and balances and you have your board looks different and you know, our finance team looks different and the checking of everything, I mean, you just get much more professionalized, I guess, in terms of the finance, the corporate governance. Having said all that, that's all true. And you know, I was talking to A founder yesterday who's thinking about going public. And I feel like the narrative is it changes the company so much. And, you know, I said this the Saturday. I was like, I hadn't thought about it for a few months. I've been preoccupied with COVID and helping our customers. But I realized yesterday I kind of had this moment of actually, Cloudflare still feels like Cloudflare today. Like, it really hasn't changed us very much. We are a more professional company. We're better at things. Like, and I actually think it, you know, all those governances makes it means that you have less risk in the business. So, like, those are all good. I'm all. I like all those things. But the people, the excitement, why we come to work, how we work, it's changed very minor. Like, in a very small, subtle ways even. You know, Matthew and I, we're still tweeting. I don't run my tweets back by our lawyer before I tweet them. You know, like, we still have our personal voice online and our personal personalities. We still share as much as we can internally. Maybe the timing around that is after an earnings call, so maybe it's two weeks delayed, two weeks later than we would have before, but it really still feels like Cloudflare. And so I guess that's kind of a little bit of a boring answer. But it was a nice reminder yesterday of like, I actually, that's been the biggest surprise. It hasn't changed as much as I thought it was going to, and I think that's a really pleasant surprise.

Well, it's a wonderful way to end it. Michelle, thank you for your time today and it's great to see you. We're all very proud of you watching from where we are as you continue to succeed with Cloudflare and grow. And it sounds like there'll be many more years of growth ahead. Thanks again for your time.

Thanks so much for having me. And it's great to see everything that you're doing at TheLogic and proud to be a little part of it.

Thank you, Michelle. So, on that note, this is the beginning of our fall season of conference calls. We will continue to announce new ones as we go. Please check your emails. We'll let you know. Check the Slack channels as we continue to go here over the fall. And please tell your friends, keep subscribing. We love being able to have this kind of engagement with you. And shoot me a note if you have any questions or thoughts or suggestions. I love to Hear them at DavidTheLogic Co for Michelle, myself, Jenna, Amanda, thank you all for joining us today, and we'll see you again soon.