Comments on: Akamai Alpha No More

By: Nocturnien

Nocturnien — Fri, 01 Dec 2006 19:16:20 +0000

Akamai makes its money, for the most part, on $/bandwidth consumed. If you look at the innovations behind p2p broadcasting for on-demand and live streaming, you will see that CDN is not a long term viable solution for delivery of video. I dont think Akamai will go away and replaced by GYM, but I dont expect it to be a primary beneficiary of the upcoming video trend.

By: Justin Shaffer

Justin Shaffer — Tue, 21 Nov 2006 20:33:43 +0000

With a little bit more intelligence on the client side, the value proposition of reliabile service is eroded. With a little bit more intelligence, the value proposition of high speed can erode as well. Agreed that this will become a commodity market, hopefully sooner than later.

By: SIPlified Content Distribution at Nyquist Capital

SIPlified Content Distribution at Nyquist Capital — Wed, 15 Nov 2006 15:52:18 +0000

[...] Wading through my morning reading I happened upon an Acme Packet (APKT) white paper that did a good job explaining my apprehension about Akamai (AKAM) and how their business might be commoditized. In the long term, do SIP and managed media sessions replace the media caching model? For decades, the experts have been telling us that content is king. Whoever controls content, they say, will profit the most from network services. And video-on-demand will be the ultimate Internet moneymaker. [...]

By: GigaOM » Akamai in talks to acquire Nine Systems

GigaOM » Akamai in talks to acquire Nine Systems — Mon, 13 Nov 2006 21:03:58 +0000

[...] Some view Akamai’s CDN business as ripe for commoditization. Andrew Schmitt is one of them, and he has some good reasons. Additionally he sees emergence of networks such as Brightcove a challenge to parts of Akamai’s business. [...]

By: Andrew Schmitt

Andrew Schmitt — Mon, 13 Nov 2006 13:48:05 +0000

No. Given the sentiment surrounding this company, that would be crazy. The reality is that in the near term they are likely to be tremendously successful. Likewise, I believe Cisco has a gaping hole in it's fundamental ability to generate returns on R&D, but this is something that will not make itself evident immediately.

By: PRoales

PRoales — Mon, 13 Nov 2006 13:42:27 +0000

So then are you going to short it?

By: Andrew Schmitt

Andrew Schmitt — Tue, 07 Nov 2006 03:50:57 +0000

My big question is the following:

Does massive, parallelized, centralized host plus unlimited bandwidth equal a distributed CDN? Where exactly is the value add? Can it be broken using brute force?

I’ve been contacted by the Akamai CTO. This is the question I have. I’m looking to be educated.

By: William Burnham

William Burnham — Tue, 07 Nov 2006 02:48:58 +0000

Hi Andrew,

Great blog. Happy to have found it.

I agree with your top line thesis about AKAM in that it is priced to perfection (which is always a fleeting achievement on the street).

However, just from a technical standpoint I think it’s worth pointing out that a true Content Delivery Network is actually quite different from a commodity hosting provider which is just offering cage space. If provoked (which I don’t suggest), CDN architects can bore anyone for hours with intricate descriptions of their distribution and caching algorithms and while I don’t understand most of them, it does appear to take more than a few PhDs to put a decent one together. (I am actually surprised not see comments from them on this post.) The same cannot be said for a regular hosting operation which can pretty much be put together with a Hosting for Dummies book and a few million.

That doesn’t mean that margins won’t come down in the CDN space over time as you suggest, but it does mean that it is a bit more complicated/value added than you give them credit for and it is possible that they will be able to sustain some premium pricing relative to commodity hosting based on actual or perceived superiority of their CDN design and operation.

By: Andrew Schmitt

Andrew Schmitt — Wed, 01 Nov 2006 03:40:02 +0000

Please do share.

By: Terry Johnston

Terry Johnston — Wed, 01 Nov 2006 01:48:26 +0000

Your concerns are unfounded, and your analysis on Akamai’s business model is flawed. This is because you’ve overlooked or got wrong *several* important facts about Akamai, Microsoft, Yahoo, and Google.

And to try and boil this collection of companies down to simply “infrastructure” or “advertising” is a gross oversimplification.

>I rarely read articles or speak with anyone who has anything bad to
>say about Akamai. This indicates the market has built in perfect
>expectations to the price.

This is just not sound logic. A little homework and you would’ve found different, but still interesting, points to discuss.