Letting people go is always a complicated matter at any scale. Whether you are a ten person company and firing one employee or you are 500 people and firing a larger number.
Wanted to address a few statements from the hackernews community here.
We are not prepping the company for sale.
As unfortunate as the layoffs are they were really due to two CEO changes in the past 18 months and leadership changes that created competing directions in the business, which Yancey our new CEO, is now addressing.
We are not running out of money, nor do we have an immediate need to raise capital, and the lay-offs aren't related to any sort of "cost-cutting".
We last raised an equity round in the summer of 2015 and haven't had a need to raise capital since. This is because we are very capital efficient and have been since our founding.
There are no profitability issues with $5/mo customers as the unit economics are the same as larger accounts. As we have grown we have added more products and features so that scaling teams and companies can also be successful on DigitalOcean, but we are not changing our commitment to the individual developer and those who are just getting started.
Lastly, it pains me to see people let go, having been on both sides of the table, it honestly just really sucks.
Digital Ocean is a great company in a brutal, low-margin industry. Based on having run a similar (now mostly defunct) company in the past, I would guess that 80% of their customers are on the $5/mo plan.
That $5/mo has to cover the hardware costs: you're buying expensive physical servers to put the VPSes on, and lots of SSDs too. SSDs have a limited lifetime measured in writes, and some of your customers will leave broken programs running that chew through this precious resource for no reason. If you throttle them, they'll complain.
Then there's the support. Handling a support ticket costs you at least $3 in salary and benefits (remember, your typical customer pays $5/mo), and people will demand that you help them fix their broken MySQL server or whatever. They'll yell and threaten when you tell them that this is outside the scope of what you can do.
And don't forget security. Your customers will install broken-ass Wordpress sites and forget to upgrade them for 5 years. Then a worm sweeps through and now a whole bunch of them have been pwned and are mining cryptocurrency. Those pwned customers are complaining and demanding that you fix it, and the regular customers are also upset because of slowness due to the "noisy neighbor" problem inherent to all VPSes.
Speaking of which, preventing one VPS from hogging all the CPU or disk bandwidth is harder than it looks. The two dominant software platforms are Xen and KVM, and neither gives you great tools for dealing with disk bandwidth. Limiting CPU is much easier, but there's still the problem that you're overselling. Which is fine until half the VPSes on your machine are trying to mine Ethereum.
On the bright side: half your customers will buy the VPS, leave it running, and forget about it for years at a time. That's what makes the $5/mo business model work out.
Anyway, I do hope they can become profitable! They run a much better operation than the incumbents they replaced (slicehost, etc).
Person whose job title has "senior network engineer" in it here. I work for a mid sized regional ASN doing middle-mile and last-mile transport and transit. Quite intentionally we offer no services to customers related to VM hosting or managed hosting. The closest we come is selling rack space/cooling/power to people who want to colocate their own equipment and be fully responsible for it themselves.
We are considerably smaller than DigitalOcean in staffing head count. But we have a network that is spread out geographically across five states and 30+ cities and towns, built a combination of third party lit L2 transport, dark fiber IRUs, and fiber we built ourselves. We're a facilities based WAN provider.
There are so many different possible types of ISPs. For a small organization it only makes sense to decide whether you want to go after a huge number of $5 a month customers, or if you want to focus your time and effort on customers that spend anywhere from $250/month upwards for last mile broadband services, colocation/hosting services, etc. As a generalization, the higher the dollar value of the customer, the less of a headache they are, and the higher the clue level of the customer is.
I concur with 100% of what the above poster says about the hosting business.
Bulk hosting/VPS/VM hosting is an incredibly brutal race to the bottom in pricing. Extensive well crafted automation tools and massive economies of scale are the only thing that will save you. I truly feel sorry for the people who are working (mostly entry-level) jobs doing first tier technical support/customer service for 5 dollar a month VPS customers.
If somebody wanted to hire me to work for a consumer-facing hosting company I would run away screaming. It's my idea of a personal hell in the ISP business. Those who have found a way to make it work, not go bankrupt and not have mental breakdowns are a rare breed.
I've had a "droplet" going at $7/mo for about half a year and probably used it less than ten hours so far, and not doing anything too heavy when I use it. Every time I think about turning it off I say "yeah but it's only $7 and I like to ssh into it sometimes."
I've had a "shared hosting" setup on Dreamhost for at least 15 years, also using pennies per month in capacity, at most.
I get that it can be a brutal, low-margin business, but I also wonder how many "small" customers are extremely high-margin like me, and whether that can aggregate into a better overall margin than you might guess?
Or will you always have a few outliers running at capacity and calling the help desk and blowing out your margins?
They also have a referral program that turned DigitalOcean to free hosting for me. A few years ago I got annoyed with something, wrote an article about how to fix it using a DO instance, linked to DO with my referral code and racked up thousands of $ in a payout. I used most when experimenting and feeling too lazy to shut down instances(because I didn't want to go through backup since maybe I will use it later etc).
For 6-7 years now I'm using DO for free but my only resource-intensive instance is a personal VPN server that I use from time to time(a few hours a day maybe?).
At first, DO use to give referral payouts in cash, then they limited the payouts to credits, then changed the structure and introduced expiration date to these credits.
I would guess that this referral program that probably helped them a lot with the growth at first is now a burden.
> That $5/mo has to cover the hardware costs: you're buying expensive physical servers to put the VPSes on, and lots of SSDs too. SSDs have a limited lifetime measured in writes, and some of your customers will leave broken programs running that chew through this precious resource for no reason. If you throttle them, they'll complain.
This makes it sound like you could get a big win in the VPS-provider space by drawing an ROI line at ~$20, and making all instances below that size diskless, with their rootfs being either a tmpfs overlay of a shared SAN-mount of a base image (like a LiveCD environment), or a tmpfs into which was dumped a PXE initramfs image (as e.g. CoreOS does in its idiomatic deploy style.)
I feel like many customer use-cases would still be satisfied by such instances (especially if you also offer local object-storage for the diskless instances to interact with.) It'd sort of be a hybrid position between ephemeral PaaS containers, and actual persistent VMs.
Anyone know of a provider that provides low-cost long-running diskless VPSes like this?
> Digital Ocean is a great company in a brutal, low-margin industry. Based on having run a similar (now mostly defunct) company in the past, I would guess that 80% of their customers are on the $5/mo plan.
Well, to be honest, Vultr has 2.5$ (IPv6 only) and 3.5$ plans. So, if they're getting by, so could DO.
I actually migrated from DO to Vultr because at the time DO offered 512 MB RAM for $5, while Vultr offered it for $2.5. And Vultr gave me $50 bonus platform credit on sign up, valid for about 18 months (accounting for possible overage fees).
I'm still on Vultr, 3 years on. No problems at all, other than billing issues (accidentally was assigned Australian VAT despite living in Serbia), I had no support tickets. After some time I started using more instances, and more powerful instances, and more services (block storage, "portable" IPs, object storage, internal networks, etc).
I've had a lot of problems with DO's Object storage which was also one reason to move away from them. Problems were quite catastrophic in nature, i.e. the files were unavailable for a few hours every few weeks.
If they ramped that $5/month to $20/month after X months, I would keep paying it. Digital Ocean is a fantastic deal, everything I've tried straightforwardly works, and the fact that I can't accidentally spend money as I experiment is a real boon.
In terms of similar competitor and ignoring those Cheap VPS, they started the whole $10 and later $5/month price plan. Linode has always maintained its $20 / Node starting price arguing for the exact reason you mentioned, Support Cost. And later DO / Linode became the price plan standards where everyone follows.
I remember at the time I suggested $5 plan should be limited to 1 per account or only for non- public internet facing usage. But the $5 plan made lots of headline and new customers during the growth at all cost stage.
So if $5 plan were really the problem that it was really their own making. Having said all of that I dont think $5 is really their concern. Hardware is cheap, and those plan with vCPU are shared and always over sold. The number of bad actor within the lowest plan are statistically quite small.
I actually think the future should be more like Render[1],
DO makes a great product. I've been using them for many years and I hope that they succeed.
I've used other hosts in the past and had nothing but trouble. Joyent ended one of their hosting plans and I had to migrate EVERYTHING which took forever. Then Rimuhosting had an actual hardware failure that resulted in non-reproducible errors happening very frequently - that company nearly brought down my whole business. Then there was Serverpronto which had too much downtime.
by comparison, DO has been much much better, always up, always trouble free.
> Based on having run a similar (now mostly defunct) company in the past, I would guess that 80% of their customers are on the $5/mo plan.
I wonder if the Always Free tiers of GCP / OCI have helped DO in this regard. You can get a lot of free VMs these days, so maybe other cheapasses like myself have left the DO / Linode / etc platforms.
I sympathise with your customer-support point, but not the others. Customers are paying for cloud resources. If their demands are too much for your infrastructure, the issue lies in your infrastructure, or in your claims to customers.
A customer's need for additional resources should translate to a price-point question, rather than to uncertainty about what they've already paid for.
> SSDs have a limited lifetime measured in writes, and some of your customers will leave broken programs running that chew through this precious resource for no reason. If you throttle them, they'll complain.
High IO doesn't always mean an instance was compromised.
There should be clearly defined limits, and/or a clearly defined throttling policy, and the customer should have the option to buy their way out. Amazon gets this right. There should be no guessing game about reasonable use, or goodwill.
> Those pwned customers are complaining and demanding that you fix it, and the regular customers are also upset because of slowness due to the "noisy neighbor" problem inherent to all VPSes.
High CPU load doesn't always mean an instance was compromised. If you've sold CPU resources, the customer is entitled to use them. Obvious example: build servers.
If other customers experience unacceptable degradation, that means you overpromised, or else your isolation solution isn't fit for service.
Again, Amazon gets this right. They're criticised for their complex billing schemes, sometimes rightly, but it clearly makes sense to measure and be explicit about all resource-consumption. They even have an elaborate scheme to incentivise customers to tame down their CPU usage, in the form of 'burstable performance instances'.
> Anyway, I do hope they can become profitable!
Agreed. It's good to have smaller players, not just the big three of Amazon/Google/Microsoft. Competing on price-point without having the same scale, must be really tough.
> That $5/mo has to cover the hardware costs: you're buying expensive physical servers to put the VPSes on, and lots of SSDs too. SSDs have a limited lifetime measured in writes, and some of your customers will leave broken programs running that chew through this precious resource for no reason. If you throttle them, they'll complain.
they are heavily throttled on disk I/O, so much so that I had to switch to AWS and pay per I/O for one project.
also the network seems throttled to 100Mbps up/down, and a few TB/mo, something which Scaleway for $3/mo is unlimited TB/mo and at certain times 2.5Gb/s
Maybe instead of using expensive SSDs. A topology of many spanning disks in large ZFS clusters by using PCIe HDD controllers. Then link the machines via 10GBe could provide you the speed and performance you require require. I've set up a moderate size pool of 1Pb across 16 physical servers on 4 full size racks. This cost less than 50k. Electricity and cooling come from solar. Its the damn internet connection for people to access it that is the cost killer.
> Based on having run a similar (now mostly defunct) company in the past, I would guess that 80% of their customers are on the $5/mo plan.
The founders of NordVPN have recently invested in Hostinger[1], which has successfully adopted their extremely profitable pricing model: charging for 2-4 years in advance, by default. This way, even those who would have paid $5 / month and cancelled and a few months later, end up spending $100+ for 24-48 months at once, often without having a clear need for it, thus leaving a lot of resources underutilized – and available for overselling. The company has more than doubled in size in the last 3 years, more than a decade after its inception.
I like how simple their API is. I have infrequent cloud needs, so it's nice being able to set up a simple docker-machine script once in a while to spin up a ton of compute nodes for some scientific task.
Digital Ocean is a great company in a brutal, low-margin industry. Based on having run a similar (now mostly defunct) company in the past, I would guess that 80% of their customers are on the $5/mo plan.
And they are competing with AWS Lightsail that have similar prices and offers Windows instances for people who want it.
But even though I am very steeped in the AWS ecosystem and the price of Lightsail is competitive, if I just needed a VPS I would still go with Linode. I can’t imagine AWS’s support being good for anyone who doesn’t have a business support plan.
I'm rooting for them as one of the best potential guardians against the cloud provider market becoming even more of an oligopoly.
Cloud resources should be a commodity. Providers should offer compute resources, persistent storage, load balancers, and MAYBE a small handful of other services.
The way Digital Ocean succeeds against AWS is by aligning itself with this idea, and competing on specialization. Forget competing with lambda; let me run my own serverless application. Don't worry about IAM; let me configure LDAP. Don't waste developer hours on service-ifying the latest NoSQL storage trend; write high-quality tutorials explaining how users can do it themselves.
And most importantly, continue to invest into open source and community resources. There are developers willing to fight the good fight against proprietary walled gardens like AWS/GCP/Azure, but it has to get easier. Configuring HA postgres is harder than paying for RDS. Paying for GKE is more feature complete than using rancher or kubeadm to make my own kubernetes cluster. This friction is an existential threat when Azure can make my problems go away for cash.
I don't know if Digital Ocean can succeed against the big cloud providers, but if they do it won't be because they made a better platform; it'll be by playing a totally different game.
I'm a DO employee on the tech side of the house. According to the CTO, the primary reason for this was actually reorg, not financial though that obviously played a part. Mostly managers got cut, with the goal of flattening the org. I'm keeping my ear to the ground but it doesn't seem like there's going to be more cuts any time soon at least. Apparently we're still hiring a ton this year, so that jives.
no offense but I wouldn't take your CTO's word at face value. you need to watch out for your own interest, including looking at other opportunities, even if it's just to keep yourself top of mind to others if something happens
Curious.. does your employment agreement not put you at very, very significant personal risk for putting information out like this? Throwaway account or not?
I'm inclined to trust HN and it's community to a pretty strong degree. But forgive me for simply not seeing this as anything but controlled information release.
This sucks. I really want DO to succeed because I love their offerings - whereas I occasionally feel like I really do need to RTFM in depth for many AWS offerings (even EC2), DO seemed to just work.
That being said, and I can’t put my finger on why necessarily, it sometimes feels a bit like Heroku - the thing you use before you “graduate” to just using one of the major cloud providers.
They're not shutting down or winding down. I am guessing that they hired a lot of people to start building an AWS competitor which is a steep battle (even with funding) and goes against the grain of DO philosophy - keep things simple and target DO for small-medium businesses (sub-100 employees).
Investors went into DO thinking of a AWS/GCP/Azure unicorn, but after 6 years it appears to be a small rainbow pony than an almighty unicorn. This restructuring appears to be a realization of what happened with that vision and how it panned out, I may be wrong though.
I personally love DO, I don't want to deal with AWS complexity for basic needs. Minimalism and simplicity certainly has value.
Perhaps because they don't heavily advertise large anchor customers? Sure, there are a bunch of brands on the front page, but that doesn't tell you whether they run 100% on DO or if they maybe used DO once for a side project. Digital Ocean needs a "Netflix", or at least more publicity around how their existing whales use their offerings.
Everyone is seeing this as negative and a warning sign for DO... but they're an 8 year old privately owned company that has raised over $300m. The last time they obtained funding was a 130m credit line in 2016. It's been 4 years since then... and if they're still losing money, they likely need to either make this profitable, or they're going to need to raise more money.
If they're close to being profitable (likely given their past fund raising, and how long its been), why would they want to sell more of their business?
They may also want to finally go public. 8 years is a long time to wait for a return. And it seems to me the stock market is tired of these unprofitable unicorns doing IPOs (at the moment anyway).
You could also read this as: Digital Ocean raised a $130M credit line and their creditors have noticed that profits aren't what they will need to be in X years time, hence the hair cutting. Their headcount only increased by 4% in the past six months. AWS increased its 10,000+ headcount by 16% in the same time period.
I mean, it's all sheer speculation, but I think it is equally likely that Digital Ocean is having a hard time vs. just restructuring to do some housekeeping... I don't know how any 600 person cloud company survives in the same world as AWS these days.
FWIW, this is basically my take as a DO employee. They could be lying to us and saying it's primarily reorganization so that we don't worry, but that's not my read on it.
Agreed in that this isn't an absolute negative. Cost cutting, flattening org structure and pointing towards break-even/profitability is always good.
The old mantra, change or die, is ringing true here. I personally want to see the success of DO because only having good experiences for my pet projects. Sadly no professional prod environments for me.
It’s been both for me several times, and the management team made it sound perfectly normal in each case.
When you’re courting investor it’s not uncommon to look at your finances and do some work to make the balance sheet look better. You goose your margins a percent or three. But it’s kinda gaming the numbers because you can’t keep doing it without hurting your revenue. You’re putting a little S-curve on the graph of your margins and what? Hoping some people see the beginning of a hockey stick instead? If the round closes successfully you probably will get a hockey stick soon afterward. But this isn’t when it started.
WakaTime switched to DigitalOcean and we're loving their performance to cost ratio. Their compute droplet machines are much better than AWS ec2[1], especially if you need low-latency SSD IOPs. The only AWS services we still use are S3 and Route53, because S3's performance is better than Spaces[2]. Really hope this doesn't spell bad weather ahead.
[1] DigitalOcean Droplets > AWS Ec2 (based on our production metrics)
[2] AWS S3 > DigitalOcean Spaces (based on our production metrics)
We just switched to DO thanks to their Hatch program. The support they have shown and the energy we’ve been getting from the people at DO has been next-to-none. Obviously it’s concerning to see people being laid off, and my thoughts and concerns go to those who are facing what is probably their worst days. Based on the stated reasoning from corporate I can’t say anything other than I believe them. They have been releasing so many great things recently, and looking at the number of open-source projects on Github it seems that the proof of a flat organisation is in the pudding. We’re spending +1.5k USD monthly and based on their product roadmap shared with us developers I have no reason to doubt that we’ll be moving more of our infrastructure to DO soon.
We used to be on Linode and they were great too. The competition has really forced them to up their game and start innovating. The segment is vibrant and the cash is there. I’m not worried.
The RGPD wall of Techcrunch is a real put-off (Choice partners that cannot be deactivated, IAB partners that must be unsubscribed from the third party website (which of course does not work), seriously?). No reason to accept this cancer, I will read about this subject elsewhere.
I love DigitalOcean, my second favorite hosting company so this is concerning. As a recent Layoff survivor, this whole paragraph sets off alarm bells:
> In that context, it’s notable that the company not only appointed a new CFO last summer, but also a CEO with prior CFO experience. It’s been a while since DigitalOcean has raised capital. According to PitchBook, DigitalOcean last raised money in 2017, an undisclosed amount from Mighty Capital, Glean Capital, Viaduct Ventures, Black River Ventures, Hanaco Venture Capital, Torch Capital and EG Capital Advisors.
Nothing in particular, but finance guys and VCs tend to squeeze companies dry or push hard for acquisitions. Hopefully I'm wrong here.
> DigitalOcean continues to be a high-growth business with $275M in [annual recurring revenues] and more than 500,000 customers globally. Under this new organizational structure, we are positioned to accelerate profitable growth by continuing to serve developers and entrepreneurs around the world.”
If not obvious this can be translated as positioning the company so it can be acquired by a larger entity for it's customer base and remaining employees.
> It says it works with more than 1 million developers across 195 countries.
I always love marketing statements like this. For sure 1 million is a large number. But what makes someone a 'developer'? It's not something defined like 'Physician' or 'Pilot' or 'Attorney' which require some type of certification to use the title. To DO (in terms of the marketing) a 'developer' is almost certainly only someone who signed up for an account and perhaps (as with other web properties) multiple accounts.
(I have used DO and was happy although I don't have a need for what they offer anymore).
I love DO, been a customer for over 10 years. Maybe just me, but apart from AWS, it's the only cloud provider that has competent support team. Azure, Google Cloud are mostly unreachable. But raise a DO support request and you get a response in 1 hour!
For my hobby projects, I strongly prefer DigitalOcean's $5/month droplet to Amazon's EC2 t2.nano instance (their lowest-resourced offering; ~$4.18/month) purely because I know that I can't screw up the DigitalOcean configs badly enough to get an unexpectedly enormous bill. For simple stuff, the DigitalOcean UI is just so much easier to navigate than the enterprisy AWS console.
While better pricing is always nice, I really wish they would refocus on the user experience in their platform. When adding up droplets + storage + LB + database, the price difference is there, but mostly you don’t feel it’s worth it - you still have to do configure everything yourself. If they offered something more akin to Heroku or Now I’d be jumping all over it.
Slightly unrelated, but does anyone actually use DO in production?
We're on GKE and with their new Kubernetes offering, I've considered switching but just haven't talked to a single person who uses it in production at work.
All that ops automation they were working on finally comes to fruition. Automation creates surplus labor, and that surplus is realized with the elimination of humor labor, reaping profit in the form of lowering costs.
[+] [-] raiyu|6 years ago|reply
Cofounder of DigitalOcean here.
Letting people go is always a complicated matter at any scale. Whether you are a ten person company and firing one employee or you are 500 people and firing a larger number.
Wanted to address a few statements from the hackernews community here.
We are not prepping the company for sale.
As unfortunate as the layoffs are they were really due to two CEO changes in the past 18 months and leadership changes that created competing directions in the business, which Yancey our new CEO, is now addressing.
We are not running out of money, nor do we have an immediate need to raise capital, and the lay-offs aren't related to any sort of "cost-cutting".
We last raised an equity round in the summer of 2015 and haven't had a need to raise capital since. This is because we are very capital efficient and have been since our founding.
There are no profitability issues with $5/mo customers as the unit economics are the same as larger accounts. As we have grown we have added more products and features so that scaling teams and companies can also be successful on DigitalOcean, but we are not changing our commitment to the individual developer and those who are just getting started.
Lastly, it pains me to see people let go, having been on both sides of the table, it honestly just really sucks.
[+] [-] Meekro|6 years ago|reply
That $5/mo has to cover the hardware costs: you're buying expensive physical servers to put the VPSes on, and lots of SSDs too. SSDs have a limited lifetime measured in writes, and some of your customers will leave broken programs running that chew through this precious resource for no reason. If you throttle them, they'll complain.
Then there's the support. Handling a support ticket costs you at least $3 in salary and benefits (remember, your typical customer pays $5/mo), and people will demand that you help them fix their broken MySQL server or whatever. They'll yell and threaten when you tell them that this is outside the scope of what you can do.
And don't forget security. Your customers will install broken-ass Wordpress sites and forget to upgrade them for 5 years. Then a worm sweeps through and now a whole bunch of them have been pwned and are mining cryptocurrency. Those pwned customers are complaining and demanding that you fix it, and the regular customers are also upset because of slowness due to the "noisy neighbor" problem inherent to all VPSes.
Speaking of which, preventing one VPS from hogging all the CPU or disk bandwidth is harder than it looks. The two dominant software platforms are Xen and KVM, and neither gives you great tools for dealing with disk bandwidth. Limiting CPU is much easier, but there's still the problem that you're overselling. Which is fine until half the VPSes on your machine are trying to mine Ethereum.
On the bright side: half your customers will buy the VPS, leave it running, and forget about it for years at a time. That's what makes the $5/mo business model work out.
Anyway, I do hope they can become profitable! They run a much better operation than the incumbents they replaced (slicehost, etc).
[+] [-] walrus01|6 years ago|reply
We are considerably smaller than DigitalOcean in staffing head count. But we have a network that is spread out geographically across five states and 30+ cities and towns, built a combination of third party lit L2 transport, dark fiber IRUs, and fiber we built ourselves. We're a facilities based WAN provider.
There are so many different possible types of ISPs. For a small organization it only makes sense to decide whether you want to go after a huge number of $5 a month customers, or if you want to focus your time and effort on customers that spend anywhere from $250/month upwards for last mile broadband services, colocation/hosting services, etc. As a generalization, the higher the dollar value of the customer, the less of a headache they are, and the higher the clue level of the customer is.
I concur with 100% of what the above poster says about the hosting business.
Bulk hosting/VPS/VM hosting is an incredibly brutal race to the bottom in pricing. Extensive well crafted automation tools and massive economies of scale are the only thing that will save you. I truly feel sorry for the people who are working (mostly entry-level) jobs doing first tier technical support/customer service for 5 dollar a month VPS customers.
If somebody wanted to hire me to work for a consumer-facing hosting company I would run away screaming. It's my idea of a personal hell in the ISP business. Those who have found a way to make it work, not go bankrupt and not have mental breakdowns are a rare breed.
[+] [-] biztos|6 years ago|reply
I've had a "shared hosting" setup on Dreamhost for at least 15 years, also using pennies per month in capacity, at most.
I get that it can be a brutal, low-margin business, but I also wonder how many "small" customers are extremely high-margin like me, and whether that can aggregate into a better overall margin than you might guess?
Or will you always have a few outliers running at capacity and calling the help desk and blowing out your margins?
[+] [-] mrtksn|6 years ago|reply
For 6-7 years now I'm using DO for free but my only resource-intensive instance is a personal VPN server that I use from time to time(a few hours a day maybe?).
At first, DO use to give referral payouts in cash, then they limited the payouts to credits, then changed the structure and introduced expiration date to these credits.
I would guess that this referral program that probably helped them a lot with the growth at first is now a burden.
[+] [-] derefr|6 years ago|reply
This makes it sound like you could get a big win in the VPS-provider space by drawing an ROI line at ~$20, and making all instances below that size diskless, with their rootfs being either a tmpfs overlay of a shared SAN-mount of a base image (like a LiveCD environment), or a tmpfs into which was dumped a PXE initramfs image (as e.g. CoreOS does in its idiomatic deploy style.)
I feel like many customer use-cases would still be satisfied by such instances (especially if you also offer local object-storage for the diskless instances to interact with.) It'd sort of be a hybrid position between ephemeral PaaS containers, and actual persistent VMs.
Anyone know of a provider that provides low-cost long-running diskless VPSes like this?
[+] [-] milankragujevic|6 years ago|reply
Well, to be honest, Vultr has 2.5$ (IPv6 only) and 3.5$ plans. So, if they're getting by, so could DO.
https://www.vultr.com/products/cloud-compute/#pricing
I actually migrated from DO to Vultr because at the time DO offered 512 MB RAM for $5, while Vultr offered it for $2.5. And Vultr gave me $50 bonus platform credit on sign up, valid for about 18 months (accounting for possible overage fees).
I'm still on Vultr, 3 years on. No problems at all, other than billing issues (accidentally was assigned Australian VAT despite living in Serbia), I had no support tickets. After some time I started using more instances, and more powerful instances, and more services (block storage, "portable" IPs, object storage, internal networks, etc).
I've had a lot of problems with DO's Object storage which was also one reason to move away from them. Problems were quite catastrophic in nature, i.e. the files were unavailable for a few hours every few weeks.
[+] [-] stanferder|6 years ago|reply
[+] [-] ksec|6 years ago|reply
I remember at the time I suggested $5 plan should be limited to 1 per account or only for non- public internet facing usage. But the $5 plan made lots of headline and new customers during the growth at all cost stage.
So if $5 plan were really the problem that it was really their own making. Having said all of that I dont think $5 is really their concern. Hardware is cheap, and those plan with vCPU are shared and always over sold. The number of bad actor within the lowest plan are statistically quite small.
I actually think the future should be more like Render[1],
[1] https://render.com
[+] [-] pascalxus|6 years ago|reply
I've used other hosts in the past and had nothing but trouble. Joyent ended one of their hosting plans and I had to migrate EVERYTHING which took forever. Then Rimuhosting had an actual hardware failure that resulted in non-reproducible errors happening very frequently - that company nearly brought down my whole business. Then there was Serverpronto which had too much downtime.
by comparison, DO has been much much better, always up, always trouble free.
[+] [-] jldugger|6 years ago|reply
I wonder if the Always Free tiers of GCP / OCI have helped DO in this regard. You can get a lot of free VMs these days, so maybe other cheapasses like myself have left the DO / Linode / etc platforms.
[+] [-] MaxBarraclough|6 years ago|reply
A customer's need for additional resources should translate to a price-point question, rather than to uncertainty about what they've already paid for.
> SSDs have a limited lifetime measured in writes, and some of your customers will leave broken programs running that chew through this precious resource for no reason. If you throttle them, they'll complain.
High IO doesn't always mean an instance was compromised.
There should be clearly defined limits, and/or a clearly defined throttling policy, and the customer should have the option to buy their way out. Amazon gets this right. There should be no guessing game about reasonable use, or goodwill.
> Those pwned customers are complaining and demanding that you fix it, and the regular customers are also upset because of slowness due to the "noisy neighbor" problem inherent to all VPSes.
High CPU load doesn't always mean an instance was compromised. If you've sold CPU resources, the customer is entitled to use them. Obvious example: build servers.
If other customers experience unacceptable degradation, that means you overpromised, or else your isolation solution isn't fit for service.
Again, Amazon gets this right. They're criticised for their complex billing schemes, sometimes rightly, but it clearly makes sense to measure and be explicit about all resource-consumption. They even have an elaborate scheme to incentivise customers to tame down their CPU usage, in the form of 'burstable performance instances'.
> Anyway, I do hope they can become profitable!
Agreed. It's good to have smaller players, not just the big three of Amazon/Google/Microsoft. Competing on price-point without having the same scale, must be really tough.
[+] [-] 867-5309|6 years ago|reply
they are heavily throttled on disk I/O, so much so that I had to switch to AWS and pay per I/O for one project.
also the network seems throttled to 100Mbps up/down, and a few TB/mo, something which Scaleway for $3/mo is unlimited TB/mo and at certain times 2.5Gb/s
[+] [-] blackflame|6 years ago|reply
[+] [-] krn|6 years ago|reply
The founders of NordVPN have recently invested in Hostinger[1], which has successfully adopted their extremely profitable pricing model: charging for 2-4 years in advance, by default. This way, even those who would have paid $5 / month and cancelled and a few months later, end up spending $100+ for 24-48 months at once, often without having a clear need for it, thus leaving a lot of resources underutilized – and available for overselling. The company has more than doubled in size in the last 3 years, more than a decade after its inception.
[1] https://www.hostinger.com/
[+] [-] gbrown|6 years ago|reply
[+] [-] scarface74|6 years ago|reply
And they are competing with AWS Lightsail that have similar prices and offers Windows instances for people who want it.
But even though I am very steeped in the AWS ecosystem and the price of Lightsail is competitive, if I just needed a VPS I would still go with Linode. I can’t imagine AWS’s support being good for anyone who doesn’t have a business support plan.
[+] [-] JDiculous|6 years ago|reply
[+] [-] justicezyx|6 years ago|reply
But DO cannot have the monopoly margin enjoyed by AWS and alike.
One example, the hardware cost for AWS probably will be significantly cheaper than DO. That alone can sentence Do to death.
And frankly, DO is better at UX, its technology is not innovative in any measure. By definition, that's a death penalty to a firm of its size.
[+] [-] Townley|6 years ago|reply
Cloud resources should be a commodity. Providers should offer compute resources, persistent storage, load balancers, and MAYBE a small handful of other services.
The way Digital Ocean succeeds against AWS is by aligning itself with this idea, and competing on specialization. Forget competing with lambda; let me run my own serverless application. Don't worry about IAM; let me configure LDAP. Don't waste developer hours on service-ifying the latest NoSQL storage trend; write high-quality tutorials explaining how users can do it themselves.
And most importantly, continue to invest into open source and community resources. There are developers willing to fight the good fight against proprietary walled gardens like AWS/GCP/Azure, but it has to get easier. Configuring HA postgres is harder than paying for RDS. Paying for GKE is more feature complete than using rancher or kubeadm to make my own kubernetes cluster. This friction is an existential threat when Azure can make my problems go away for cash.
I don't know if Digital Ocean can succeed against the big cloud providers, but if they do it won't be because they made a better platform; it'll be by playing a totally different game.
[+] [-] dothrowaway|6 years ago|reply
I'm a DO employee on the tech side of the house. According to the CTO, the primary reason for this was actually reorg, not financial though that obviously played a part. Mostly managers got cut, with the goal of flattening the org. I'm keeping my ear to the ground but it doesn't seem like there's going to be more cuts any time soon at least. Apparently we're still hiring a ton this year, so that jives.
[+] [-] ogre_codes|6 years ago|reply
The fact that its mostly management is encouraging though.
[+] [-] tempsy|6 years ago|reply
[+] [-] adamc|6 years ago|reply
[+] [-] irjustin|6 years ago|reply
I love DO and what it stands for. Sadly, I don't use it outside of personal pet projects.
[+] [-] cabaalis|6 years ago|reply
I'm inclined to trust HN and it's community to a pretty strong degree. But forgive me for simply not seeing this as anything but controlled information release.
[+] [-] wgerard|6 years ago|reply
That being said, and I can’t put my finger on why necessarily, it sometimes feels a bit like Heroku - the thing you use before you “graduate” to just using one of the major cloud providers.
[+] [-] chadlavi|6 years ago|reply
[+] [-] spectramax|6 years ago|reply
Investors went into DO thinking of a AWS/GCP/Azure unicorn, but after 6 years it appears to be a small rainbow pony than an almighty unicorn. This restructuring appears to be a realization of what happened with that vision and how it panned out, I may be wrong though.
I personally love DO, I don't want to deal with AWS complexity for basic needs. Minimalism and simplicity certainly has value.
[+] [-] whitepoplar|6 years ago|reply
[+] [-] rgbrenner|6 years ago|reply
If they're close to being profitable (likely given their past fund raising, and how long its been), why would they want to sell more of their business?
They may also want to finally go public. 8 years is a long time to wait for a return. And it seems to me the stock market is tired of these unprofitable unicorns doing IPOs (at the moment anyway).
[+] [-] ttul|6 years ago|reply
I mean, it's all sheer speculation, but I think it is equally likely that Digital Ocean is having a hard time vs. just restructuring to do some housekeeping... I don't know how any 600 person cloud company survives in the same world as AWS these days.
[+] [-] dothrowaway|6 years ago|reply
[+] [-] irjustin|6 years ago|reply
The old mantra, change or die, is ringing true here. I personally want to see the success of DO because only having good experiences for my pet projects. Sadly no professional prod environments for me.
[+] [-] hinkley|6 years ago|reply
When you’re courting investor it’s not uncommon to look at your finances and do some work to make the balance sheet look better. You goose your margins a percent or three. But it’s kinda gaming the numbers because you can’t keep doing it without hurting your revenue. You’re putting a little S-curve on the graph of your margins and what? Hoping some people see the beginning of a hockey stick instead? If the round closes successfully you probably will get a hockey stick soon afterward. But this isn’t when it started.
[+] [-] hellotheresirs|6 years ago|reply
They have only raised around 100M in equity investment from VCs. The last being 83M in 2015. This is the money which requires multiples.
[+] [-] wakatime|6 years ago|reply
[1] DigitalOcean Droplets > AWS Ec2 (based on our production metrics)
[2] AWS S3 > DigitalOcean Spaces (based on our production metrics)
[+] [-] erikrothoff|6 years ago|reply
We used to be on Linode and they were great too. The competition has really forced them to up their game and start innovating. The segment is vibrant and the cash is there. I’m not worried.
[+] [-] zacharybk|6 years ago|reply
https://customerexperience.substack.com/p/find-your-dream-jo...
- Zach (Former DO employee)
[+] [-] grive|6 years ago|reply
[+] [-] ogre_codes|6 years ago|reply
> In that context, it’s notable that the company not only appointed a new CFO last summer, but also a CEO with prior CFO experience. It’s been a while since DigitalOcean has raised capital. According to PitchBook, DigitalOcean last raised money in 2017, an undisclosed amount from Mighty Capital, Glean Capital, Viaduct Ventures, Black River Ventures, Hanaco Venture Capital, Torch Capital and EG Capital Advisors.
Nothing in particular, but finance guys and VCs tend to squeeze companies dry or push hard for acquisitions. Hopefully I'm wrong here.
[+] [-] gist|6 years ago|reply
If not obvious this can be translated as positioning the company so it can be acquired by a larger entity for it's customer base and remaining employees.
> It says it works with more than 1 million developers across 195 countries.
I always love marketing statements like this. For sure 1 million is a large number. But what makes someone a 'developer'? It's not something defined like 'Physician' or 'Pilot' or 'Attorney' which require some type of certification to use the title. To DO (in terms of the marketing) a 'developer' is almost certainly only someone who signed up for an account and perhaps (as with other web properties) multiple accounts.
(I have used DO and was happy although I don't have a need for what they offer anymore).
[+] [-] networkimprov|6 years ago|reply
https://www.crn.com/news/cloud/google-reportedly-set-ambitio...
[+] [-] treebornfrog|6 years ago|reply
[+] [-] gramakri|6 years ago|reply
[+] [-] kevindong|6 years ago|reply
[+] [-] jiofih|6 years ago|reply
[+] [-] unknown|6 years ago|reply
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[+] [-] hiphipjorge|6 years ago|reply
We're on GKE and with their new Kubernetes offering, I've considered switching but just haven't talked to a single person who uses it in production at work.
[+] [-] 0xADADA|6 years ago|reply