And so that doesn’t assume any improvement in the cohort. It doesn’t assume any dramatic improvement in the rates of growth around our monetization initiatives or on the go-to-market initiatives. It assumes a very modest impact from the Paperspace at less than $5 million. So we believe that we rotated to a, I’d say, a reasonably conservative view of what the potential is for the second half. And I think that’s appropriate until we see a bottom because we can’t keep hoping every month that hit a bottom. We have to accept the reality that it may not for a couple of more months or quarters.
Operator: Your next question will come from the line of Patrick Walravens with JMP Securities.
Patrick Walravens: Maybe Paperspace, first. Just — so, I saw that just this morning, Yancey, there’s a company called [indiscernible] that I think did a $2.3 billion debt financing secured in part by the NVIDIA. It seems like a Paperspace you’re entering that same general area. How are these businesses similar? And how are they different?
Yancey Spruill: Well, as I mentioned on the prepared comments, we — Paperspace has sort of a delivered product with an API that makes it simple and easy for people to build applications on top of the GPU capability for language models and machine learning applications, what have you. And it’s a traditional or cloud service I think other folks who are sort of focusing on essentially renting GPU for higher for — and don’t have the other applications, don’t have the other build-outs. And so for our customer base, we think they’re going to need that because, again, our customers don’t have big DevOps, IT development capabilities and whatever they have, they want to dedicate that to their end products. And so I think what we have is an offering tailored towards developers, start-ups and small businesses.
And I think other folks in the space are catering to the large enterprise opportunity. We think our opportunity is large as well. So I don’t know if it’s a winner take all. I think it’s — a lot of people are going to win in this market. We think we’ll be 1 of them. And we’re sticking to our knitting which is focusing on the — our end of the market where people need the core value differentiators we have which is support, our community investment and simplicity.
Patrick Walravens: All right. Great. And then, Matt, I think you addressed it but just to be really explicit about it. Are you seeing higher churn?
Matt Steinfort: No. The churn, as we talked about, term saw elevate over the balance of last year but then moderated in the beginning of the year to more historical levels and it’s been relatively steady. So it’s not customers leaving us. It’s the combination of higher contraction which is really customers that are staying on the platform but optimizing that has been of the 3 drivers, probably the biggest headwind for us over the first 6 months of this year. And as Yancey said in his remarks, several hundred basis points higher than it has been historically. But it’s moderating — it’s not getting worse. It’s at an elevated level but it’s not increasing. But what we’ve seen is that expansion still continues to come down a bit.
So the customers just aren’t growing as fast as they were a year ago and we’ve seen kind of month-over-month that, that has continued to get a little bit worse. And so when we say that we’re looking to see deceleration, we’ve seen stability in churn which is in a good spot. We’ve seen stability recently in contraction but it’s still elevated. And we’ve seen a continued kind of decline in the rate of expansion. And that last one, the decline in the rate of expansion, that’s what you need to see flatten or turn that the direction before you’re going to be able to say, okay, we’re at the bottom and now we’re going to start to pick growth up as contraction moderates more. And contraction is stable but it’s at an elevated level and expansion is continuing to weaken.
But churn has been fine this year.
Operator: Your next question comes from the line of Michael Turits with KeyBanc Capital Markets.
Unidentified Analyst: This is Billy [ph] on for Michael. You talked about how potentially there is some indication that optimizations are moving behind us. So when you speak about optimization in your customer base, kind of what does that look like? Is it more or less what we’ve heard from the hyperscalers? Or are there differences in how customers optimize spend on DigitalOcean? Just some more color on that would be great.
