DigitalOcean buys Cloudways for $350 million in cash
DigitalOcean’s acquisition of Cloudways is an investment in the WordPress ecosystem with an emphasis on “digital agencies, eCommerce sites, bloggers, freelance developers and builders hosting on WordPress.”
Estimated reading time: 3 minutes
“Is this a WordPress acquisition?”
That question led to some discussion in Post Status Slack this week. The consensus was “yes it is,” although we’ve certainly included many WordPress-adjacent or partnered companies on our (updated) Acquisitions page. The number-filled announcement to investors and infographic from DigitalOcean make it clear they know they are buying (or rather getting deeper) into the WordPress ecosystem by acquiring Cloudways:
“The acquisition of Cloudways expands DigitalOcean’s serviceable market within global SMBs and increases options for digital agencies, eCommerce sites, bloggers, freelance developers and builders hosting on WordPress, PHP and Magento. WordPress is the most popular content management system (CMS) and, according to W3Techs, it powers 43% of all websites on the internet.”“DigitalOcean to Acquire Cloudways” • bold text added for emphasis
DigitalOcean is embracing its role as a WordPress host and pivoting to define its market as, well, us. The bold text above highlights a large part of our membership and the WordPress community.
- Big emphasis on SMBs. DigitalOcean sees itself expanding to gain small-to-mid-sized businesses (SMBs) in its customer demographic, and acquiring Cloudways with its WordPress and other open source eCommerce customers achieves that.
- Cloudways fills a big gap. There’s no easy button within DigitalOcean itself for setting up a WordPress site or anything else, but their 1-click apps are the latest progression toward something like that. It’s just not likely to appeal to most people in the low-end market in its current state. DigitalOcean marketing is still locked onto startups and developers too. I imagine all this will change if Cloudways is brought in as a SMB customer-facing easy-button.
- New Competition. Focusing on less-technical end users and the people who build their sites will put DigitalOcean in direct competition with other WordPress-focused Infrastructure-as-a-Service (IaaS) providers or hosting panel middleware like ServerPilot — which only works with DigitalOcean — and SpinupWP. Even more so than Cloudways, SpinupWP is host-agnostic — any server with a public IP and (currently) Ubuntu 20.04 or 22.04 will work with SpinupWP.
- Will DigitalOcean drop Cloudways’ support for competitors? In addition to DigitalOcean, Cloudways can be used with Google, AWS, Vultr, and Linode. Many of us wonder if that flexibility might go away now. If it does, that’s a wasted opportunity. Post Status Member Kevin Ohashi optimistically (and I hope rightly) opined nothing will be changed: “If the customer isn’t going to choose you, might as well still make money off them.”
- The terms “Build” and “Builder” are a large part of DigitalOcean’s messaging about the acquisition. In fact, the company’s mission is defined this way, in the context of the acquisition news release: “DigitalOcean simplifies cloud computing so builders can spend more time creating software that changes the world.” This sounds a lot like WordPress’s mission updated for the era of (increasingly low/no-code) website builders (the software and the people). It’s also rather different from DigitalOcean’s main public-facing messaging which is still focused on startups and developers.
Some interesting numbers from DigitalOcean:
- DigitalOcean and Cloudways have been close partners since 2014.
- Cloudways has approximately 50% of its customers on DigitalOcean servers.
- This acquisition increases DigitalOcean’s high spend customers by 18%. They will come away from the deal with a total of 124,000+ (new plus existing) customers paying $50+ per month, which is 84% of DigitalOcean’s total revenue. ($6.2M/mo. * 12 = $74.4M/yr.)
- Cloudways is projected to contribute between $13 and $15 million of revenue to DigitalOcean’s bottom line in the remaining months of FY2022 after the deal closes in September.
- The acquisition of Cloudways will expand DigitalOcean’s global employee base by 30%. A good deal of those jobs are in Pakistan, and the sale represents the “Pakistan tech sector’s largest exit to date,” according to Jawwad Farid. (Thanks to Rae Morey at The Repository for picking up on this.)