] HipMojo.com » Are CDNs Becoming Commoditized, Again?

Are CDNs Becoming Commoditized, Again?

Being a fairly large producer of video content over at WatchMojo.com, I’ve come to appreciate the need and desire to serve videos in a crips, quick and reliable fashion.  Having viewers from Bombay to Boston, having a global grid that can serve videos is not an option, it’s a must.

Relying on a host is just not optimal, usually, and so enter CDNs, or content delivery networks.

Last year when CDNs began to capture both private and public investors’ attention, you knew the good times were back.  But CDNs were commoditized the first time around for a reason.  Should you invest in something that is, in fact, a commodity?

The leader in the space, of course, is Akamai.  Akamai has had some competition of late from Limelight Networks, backed by $130M in financing from Goldman Sachs.  Akamai managed to woo then startups MySpace and YouTube and rode their growth to an IPO.   The stock’s performance has been clouded by legal liabilities stemming from a lawsuit from Akamai, which has proven to be a legal bully against startups.  After the most recent slide, I bought a few shares… I’m not sure if I’m a long term investor in Limelight, frankly, because every day that goes by, I see more and more downward pressure on CDN pricing power.  It should be noted, that just because there is pricing power on a stock does not mean the overall macro, fundamentals of a company or industry are bad.  Limelight, for example, is seeing massive revenue growth, and if the lawsuit cloud disappears, then you can see the stock pop a few dollars.

But before you dive into the stock, note that there are upstarts crowding the space: former Doubleclick founder and managers launched Panther Express… who some say is doing to Limelight what Limelight did to Akamai: undercutting prices and winning over clients.

Today, a new player enters the space: Edgecast.  According to James Segil, co-founder and president of the company: “We give the bandwidth to customers at cost and plan to make the profit on the services, such as reporting tools,” Segil says. “More important, we improve their performance, give them more features, offer dedicated edge space, and more - all while reducing their costs as much as 50 percent.”

Customers like IMAX Corp., one of a dozen businesses in entertainment and media, are not complaining and have signed up for EdgeCast to deliver streaming and downloadable video to their websites. Segil says he and partners pulled together enough private capital to launch the network globally, rather than regionally, “to compete better against Akamai and Limelight.”

Read more on NewTeeVee.   Also, worth checking out this post on 10 P2P players in the CDN space.

Related:

- Why Limelight Networks Shot Up 27% Friday
- Akamai vs. Limelight Networks - Start Your Engines
- Grid Networks Tackles CDN market with P2P Solution
- Akamai and Level3 - Who will win?

Disclosure: I own shares in Limelight, my former boss Mark Jung sits on Limelight’s board but I have absolutely no insight into the company by way of that relationship.

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Posted By: Ashkan Karbasfrooshan | Aug 6th

3 Responses to “Are CDNs Becoming Commoditized, Again?”

  1. GigaOM Akamai & the CDN Price Wars « Says:
    August 7th, 2007 at 12:49 am

    […] on, with some players being more aggressive in luring business away from Akamai. Why? because as HipMojo correctly points out the basic CDN business is getting […]

  2. Dan Rayburn Says:
    August 7th, 2007 at 9:12 pm

    Panther Express does not support streaming media, only progressive download, so comparing them to Limelight Networks from a product to product perspective is not a true apples-to-apples comparison. Companies can’t be compared on to the other. You can only compare the products that each company does or does not support.

  3. HipMojo.com » How VCs Are Rendering Themselves Toxic Says:
    December 15th, 2008 at 9:27 pm

    […] As a side note, this just only adds to my bearishness on P2P as a business model and reinforces my belief that CDN have commoditized. […]

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