
Ask HN: What Happened to Digital Ocean? - swyx
Not too long ago DO was touted as the #2 cloud behind Amazon [1]. I&#x27;ll grant that was always a little suspect but it really seems like things have gone off the rails in recent years:<p>- in 2016 Moisey Uretskey literally Q&amp;Aing on &quot;What happened to DigitalOcean?&quot; on Quora [2]<p>- in 2018 Ben Uretskey handing off to Mark Templeton [3]<p>- in 2019 replaced by Yancey Spruill [4]<p>- in 2020 laying off 10% of the company [5]<p>How do you go from one of the most hyped IaaS companies to suddenly losing steam? If it worked for them from 10m - 100m ARR, how do they lose steam from 200-275m? Its not like the market for their stuff is that small, Azure and even GCP have proved that. I&#x27;d love for some perspectives from people who know this market, because it&#x27;s baffling to me.<p>1: https:&#x2F;&#x2F;a16z.com&#x2F;2016&#x2F;01&#x2F;06&#x2F;a16z-podcast-what-software-developers-and-therefore-every-company-need-2&#x2F;<p>2: https:&#x2F;&#x2F;www.quora.com&#x2F;What-happened-to-DigitalOcean<p>3: https:&#x2F;&#x2F;blog.digitalocean.com&#x2F;the-next-wave-digitaloceans-new-ceo&#x2F;<p>4: https:&#x2F;&#x2F;techcrunch.com&#x2F;2019&#x2F;07&#x2F;30&#x2F;digitalocean-gets-a-new-ceo-and-cfo&#x2F;<p>5: https:&#x2F;&#x2F;techcrunch.com&#x2F;2020&#x2F;01&#x2F;17&#x2F;digitalocean-layoffs&#x2F;
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ksec
>Not too long ago DO was touted as the #2 cloud behind Amazon [1]

Is there a time of where that was said in the podcast. I could bet money at no
point in time was DO no.2 in Hosting or Cloud Hosting in revenue, profits or
customers. They might have been the case if you count instances / droplet or
Domain name, but both of these are quite irrelevant.

They have growing pains, as with _ALL_ companies does, and they reach a point
where growth has slow down due to market interest and competition. Not only
has Linode becomes better and more competitive thanks to DO, there are also
new comers into what I considered as Middle Class Cloud Hosting such as
UpCloud and Vultr. You also have Giants ( in their own right ) such as OVH and
Hetzner.

>Its not like the market for their stuff is that small, Azure and even GCP
have proved that.

No one gets fired for buying IBM. That mentality is the same for Intel ( vs
AMD ), using SalesForce rather than other CRM or ERP, and across _All_
industries, from toilet paper roll, food, water, cleaning solution etc. Big
Enterprise wants to works with other Big Enterprise. If you have ever sit in
the chair of the purchasing, or Supply Chain director you will understand the
risk of working with smaller companies is far too great. DO aims at people who
are willing to take that risk, SME or startups. And that market is
fundamentally different to Azure and GCP serves.

So your answer aren't really technical, but more on the economical and
business side of things.

~~~
swyx
yes, there was those exact words were said. at 15:30, peter levine (a16z GP)
says 'recent studies show you guys are the second largest cloud provider by
number of server instances, second only to Amazon'

I'm still pretty new to cloud - do you mind explaining why number of instances
is not significant? sounds pretty significant, it indicates active, paying
usage i think?

> So your answer aren't really technical, but more on the economical and
> business side of things.

i can accept this. but are all "new cloud startups" doomed this way? (I work
at Netlify so I have a vested interest in this haha). At some point there's
some sort of Glass Ceiling where you run out of everyone willing to Not Buy
IBM.. and then the Big 3 clouds just clone you and run away with it? seems
pretty bleak for the risk/reward of innovation/VC money.

~~~
ksec
>'recent studies show you guys are the second largest cloud provider by number
of server instances, second only to Amazon'

It is just like any theory of economics. You can have a huge number of $5
Droplet ( aka Instances ), but limited number of high end. Imagine of you have
a Million instances and 90% of those are $5, that is only $4.5M monthly
revenue.

Having said that, I seriously doubt that studies to be correct. Because there
is no way of knowing AWS's true number of instances. And that sentence
actually said "serve out", which means they could be counting instances or
Address that serve directly to the internet. i.e Excluding instances that are
not served on Internet, or background instances. You can spin whatever way you
want, by the only single source of truth ( At least at this point in my life
and current knowledge tells me, ) Revenue dont lie. You can muddle around with
Margin, Net Income etc. But Raw Revenue speaks volume.

Another point worth mentioning is these sentences are often without context,
much like the recent headline "Dow has the largest drop in history", ( or a
_slightly_ better headline would be) "Dow has the largest _point_ drop in
history". It is irrelevant without knowing the percentage. Dropping 10,000
point when Dow is 1 million would only equate to 1%. Not to mention A16z is a
board member of DO, so a clear conflict of interest and remember to read it
with cautious, as they are _designed_ to trick its reader into thinking, for
this instances ( no pun intended ), DO is the 2nd Cloud Provider. So they
could market themselves as big enough for many other customer.

> i can accept this. but are all "new cloud startups" doomed this way? (I work
> at Netlify so I have a vested interest in this haha). At some point there's
> some sort of Glass Ceiling where you run out of everyone willing to Not Buy
> IBM.. and then the Big 3 clouds just clone you and run away with it? seems
> pretty bleak for the risk/reward of innovation/VC money.

Absolutely not. History has been clear most big companies fail to innovate. I
will point you to a tweet from the same A16z BE [1], "Zoom, Shopify and Stripe
are three fun examples of companies that were obviously impossible because the
'tech giants can easily expand into new areas and squash competition'. And
Zoom wasn't even doing anything 'new'. Combined value of $123bn."

And for DO, they are still doing great. They are growing, just not as fast as
they were, they are not aiming to be AWS or Azure, they are perfectly happy
within the 2nd Tier in Cloud Hosting. They are expanding SaaS model with
Managed Database. The market itself is still growing, there are plenty of
space for everybody, including Netifly. Which in its own niche is possibly the
best there is.

No one has even reached or seen the ceiling yet. Not for another 5+ years at
least. And when that point is reach, you pivot into other relevant thing.
Apple didn't start by making a Phone.

[1]
[https://twitter.com/benedictevans/status/1234622648363163649...](https://twitter.com/benedictevans/status/1234622648363163649?s=20)

~~~
swyx
great answers, thanks very much!

------
wmf
Maybe the cloud has bifurcated and DO is #1 within the "light cloud" market
which is a lot smaller than the "real cloud" market.

~~~
oblib
That seems accurate, and that's actually a pretty big market.

For me, DO has been great. The apps I host don't have a lot of heavy traffic
and run great on a $20 a month VPS. I have 3 of those running to spread the
load. One serves the app files, one holds the database, and another handles
email and DNS.

For the most part, everything I've done there has worked as expected and I've
not had any serious issues with downtime due to DO internal problems.

I've been using hosting services for over 20 years now and DO has been leaps
better than any of those I used previously. That's not to say Linode or others
aren't great, or even better than DO. Since I've not used any of those
mentioned by others here I can't speak to that, but I do wonder if those who
dump on DO may have pushed their setup a bit too far.

Many of the complaints I see are about having issues with WP. The few times I
looked at that I came away thinking it was an overweight convoluted mess. One
might be able to squeeze it into a $20 per month VPS but that doesn't mean
it's a good choice on the DO platform. And on my own server logs there is a
constant stream of requests looking for it and I have to suppose they're
seeking potential exploits.

So, for me, "light cloud" is exactly what I need and DO does a great job of
providing it as a service.

~~~
swyx
great answer. thanks for sharing!

------
searcheye
This is an interesting one for me. I run a small network of sites, around 130
or so (Wordpress) that used to be hosted on DO. We had CDN and heavy caching
implemented, as well as fail2ban and other security features. For some reason,
every site would go down at some point monthly: error connecting to database,
Apache crashed, etc... couldn’t get any support on it.

We switched to WP-engine and haven’t had a single issue. We now host our web
apps with Azure without issue as well. We spend maybe $5-$7k / month on
hosting (which is a drop in the bucket for larger companies), but I can’t
imagine we are the only ones who encountered this.

~~~
swyx
that sounds awful. i would certainly be interested in hearing from someone at
DO about the real behind the scenes on why it was so bad.

It sounds like you would have stuck with DO if they were simply more reliable
though - so their losing you is entirely their fault.

------
mattbillenstein
Among the lesser clouds, I think Linode is better than DO if you just want a
reasonably priced vps. I ran dev and CI workloads there while running the prod
stuff on AWS and was always happy with them.

------
brentonator
We stopped using it when we were always the first to notify them when they
were having data center issues...always a switch or gateway or some other
excuse causing major network issues.

Not to mention their security model allowed any instance to talk to another
instance from any account until 2019....

~~~
swyx
would you say you outgrew them? bc is seemed like their value prop has been
fine (for small usecases) and consistent since the beginning.

or would you instead say they mis-executed - if they were only better on their
network issues and security model you'd have stuck with them all the way?

~~~
brentonator
It was a bit of both. I don't think they had the infrastructure to support
everyone, I think they had major growing pains as they tried to scale, and I
don't think they had the experience to identify sources of partial-failure
proactively which resulted in 40-360 minute effective outages that weren't as
easy to fix as with AWS where we can shift the stack to a new AZ in minutes.

DO had no cross-"AZ" networking. We tried to form a tunnel but it was so
unreliable they admitted they needed their own backbone to support that use-
case but even when that did come out we'd still have to use public IPs...no
VPC peer type thing. Our only option to switch "AZ"s was to have downtime and
that wasn't acceptable.

We were able to increase capacity 300-500% on AWS for the same cost so there's
a lot going on in the equation for us. We needed better capability to
dynamically resize and more options for low-cpu high-memory. We needed better
flexibility with disks especially by network like EBS but given their network
issues I understand why they don't have that.

~~~
swyx
this is all really good feedback/food for thought for me as I learn about what
matters to people. thanks!

------
serf
personal anecdote : I quit DO for Linode after a string of fairly hostile
customer service interactions.

After having switched, I realized that Linode provided a better value for what
I needed.

As with most poor customer service interactions, I doubt I was the only person
who experienced such things from them.

~~~
bpanon
Same. On multiple occasions. I will never risk hosting on their platform to
save a few dollars. No issues with any other cloud provider. Been using
linode, AWS, GCE for years.

~~~
nik736
Ye, right, the DDoS and security incidents Linode had are absolutely no issue.

------
toomuchtodo
> How do you go from one of the most hyped IaaS companies to suddenly losing
> steam? If it worked for them from 10m - 100m ARR, how do they lose steam
> from 200-275m? Its not like the market for their stuff is that small, Azure
> and even GCP have proved that. I'd love for some perspectives from people
> who know this market, because it's baffling to me.

DO's market (raw compute and occasionally unreliable object storage) and that
for Azure, GCP, and AWS (top tier cloud ecosystems) are entirely distinct. The
former competes on price and is a commodity, the latter are premium offerings
that large companies happily write checks for.

~~~
swyx
thanks for putting it like this, i guess I could see that.

I'm also interested in the "new Heroku" startups (Render, KintoHub) that I
guess are different enough from DO that it's kind of offtopic to this
conversation. I just care as someone just starting a career in this industry.

------
siquick
At one point I was using DO for everything but then I got to the point where
spending time on server config just wasn't productive so I moved everything
over to AWS Elastic Beanstalk and RDS and never looked back.

I know DO do now have dedicated DBS products but really feel they're missing a
trick with nothing similar to Elastic Beanstalk or GCP App engine - this is
exactly the kind of products smaller dev teams and one-person operations need,
and these are most likely the kind of people who would be willing to give DO a
go over AWS and its perceived complexity.

~~~
Doxin
IMO what DO offers is ahead of Elastic Beanstalk and GCP App engine in many
ways. Instead of offering a single service they have opted to provide easy to
install images for deploying services. These days if I wanted to set up a
small service on DO I'd simply go to the DO marketplace and click a button to
launch a docker instance. For a larger or more complex service I'd probably
opt to use DOs kubernetes support, it's similarly a couple button presses to
boot up a cluster.

In either case I can then just point kubernetes to the right address and get
going with spinning up my application.

It's a bit less polished than what elastic beanstalk or app engine provides,
but it is a lot more flexible without being more complex. If anything it's a
lot simpler than any of AWSs offerings because DO actually has a _sane_
dashboard unlike AWS.

I can't comment on app engine since I haven't used it but I can heartily say
that the last day I need to touch that abomination of an AWS dashboard is the
day I'm having a party.

------
ablekh
I'm curious about the following two aspects: 1) were changes in DigitalOcean's
executive management (in particular, their CEO replacement) prompted by
founders' desire to change their focus / reduce their workload / whatever or
pushed by some of DO's investors; 2) why DigitalOcean is an LLC (to the best
of my knowledge, an absolute majority of VCs insist on their potential
portfolio companies being a C Corporation (mostly, a Delaware C-Corp).
Thoughts?

~~~
nik736
DigitalOcean was actually a C Corp, they switched to a LLC down the road.

~~~
ablekh
Why would they do that? What was their investors' reaction?

~~~
nik736
I have honestly no clue, seemed weird at the time to me as well.

------
swyx
There's also the "Digital Ocean Killed Our Company" event last year
[https://news.ycombinator.com/item?id=20064169](https://news.ycombinator.com/item?id=20064169)
that seems to be fresh in people's minds, but honestly that seems like a bad
luck one off rather than something endemic in DO.

------
icedchai
Sorry, DO was never considered in the same class as "true" cloud providers
like AWS, GCP, or Azure. DO is primarily a VPS provider with some other
services. It is in the same class as Linode and perhaps Vultr.

------
mattl
Abuse. I see so many bad interactions from their network that I have blocked
them entirely.

Bots attempting credit card fraud are common.

