Akamai's Webcast Recap: Stream Buffers, No Real Answers, No New Story

Tuesday, Akamai (AKAM) held their live webcast to talk more about their HD video platform announcement from the morning and worst of all, the actual webcast stream itself didn't work well in Flash. I got lots of buffering, almost never got more than a 398Kbps stream and even though I am on a 25Mbps FiOS line, many times, Akamai's network estimated my bandwidth to be only about 1.2Mbps. Clearly not the impression Akamai was looking to give folks.

Putting the technical issues aside, Akamai's entire webcast failed because they didn't answer any of the questions asked, other than to use a lot of marketing terms. Honestly, I'm disappointed with Akamai on so many fronts. Today, Akamai is still the largest CDN for video delivery based on traffic and revenue, yet they don't act like it. At a time when Akamai needs to be building their CDN business, their revenue is declining and they continue to lose market share. The market has shifted and Akamai refuses to shift and adapt to it.

This is a time when Akamai should be leading the market by telling us where it is going, what the current barriers are to growth and how they are going to go about getting their CDN business growing again. Instead, they spend a lot of time and effort to put out out a release and produce a webcast that gives us lots of marketing fluff. No real details, no real answers, no real vision. I just don't get it. I don't think anyone, including myself, thinks of Akamai as dumb. The folks over there are smart, yet, they seem to have lost all their vision for the CDN industry and their product offering.

While Akamai is a bunch of smart technology folks, it seems no one at Akamai can price, package, productize, market and sell their CDN services anymore. At no time on the webcast did Akamai explain to content owners why they should use the service. They used a lot of generic terms to say why it's great, but nothing that would make a customer switch from one of Akamai's competitors. Customers want real value propositions, not generic statements. Ask yourself, when you think of Akamai's CDN service for video, what message comes to mind? The "edge" story? The number of servers they have? That they are the biggest CDN? Where is their message? It doesn't exist.

The entire webcast was simply a sales pitch for Akamai where they made sure they talked about all of the major buzz words and subjects. They spent five minutes to tell us how their "edge" network is so unique, which is the exact same story they have been talking about for the last ten years. If it's so unique, why is their CDN revenue declining? This is not the year 2000 anymore. Akamai needs a new marketing message and can't keep going back to the old "edge" story time and again. Do they really think that resonates with customers? If it did, then Limelight (LLNW) and Level 3 (LVLT) would not be giving Akamai some serious competition for their CDN business and not because of price. If Akamai's network was so much better for video delivery, then customers would still be willing to pay more for the service. The fact that many aren't willing to is not a reflection of competitors offering lowering pricing, it's that competitors have a service that is equal in performance for video and at a lower price.

While Akamai did take questions from the audience during the webcast, they didn't actually answer any of the questions asked. The first thing they acknowledged was that they know delivering video in HD means more bits and more cost. But instead of talking about their costs to deliver video with the new HTTP platform, which should be cheaper, and how they might help lower that cost for content owners, they chose to answer the question with no specifics. Tom Leighton addressed it by saying, "we've made a large investment in our HD network to minimize the impact of the cost on our customers". What does that mean? Please define "minimize".

Later, when Paul Sagan was asked about pricing, he spent 65 seconds talking about Akamai's history in working with customers, how their pricing today is cheaper than it was ten years ago, how the company has helped their customers scale and threw in phrases about video advertising, quality, broadband models and all sorts of other topics not relevant to the question. Can anyone at Akamai answer a very simple and straight-forward question with a simple and straight-forward answer?

Akamai also talked about video monetization, the growth of broadband, TV sized audiences and just about every other buzz phrase you can think of, yet none of that made any impact on the webcast. Akamai wants to keep talking about broadband adoption and the future, yet I have a 25Mbps connection today and they couldn't deliver me a 1.5Mbps stream successfully. Their CEO made a bunch of references to HD video initiatives by customers for 2010 and "beyond" but that's all Akamai seems to be talking about, the future. What about today? I get the sense that Akamai is sacrificing their business today for what business will look like in the future. Maybe they can do that. They have a lot of cash in the bank and aren't in any risk of going under. But while you want to look to the future, you also have to deal with what's taking place in today's market, something they are not doing.

I just don't understand the company. They have all the tools and advantages over their competitors to really grow their CDN business, even in the down economy, yet they can't seem to get out of their own way. Today alone I spoke to three content owners in regards to Akamai. Two of them contacted Akamai as they wanted pricing for new CDN services, but Akamai didn't respond. Both customers fit nicely into Akamai's sweet spot and spend six figures a year. Both of them commented that Akamai never responded to their requests for a call back and it took one of the content owners contacting someone he knows who was friends with someone at Akamai just to get a response. The third customer I spoke to is someone whose contract is up and upon asking for better pricing, was only offered a 7% price reduction, even though Akamai's price is about 85% more than their competitors. And this is a customer spending hundreds of thousands of dollars a year.

When does Akamai make this stop? Why do many of us in the industry still continue to hear from potential customers that Akamai does not return calls? How can a sales organization be run this way and be expected to grow revenue? After the clear decline in their CDN revenue, how can calls and emails to their sales team go un-returned? Ask anyone who has sent in an RFP to multiple CDNs and they will tell you Akamai is always the last to respond. Why can't the company make changes to react faster to the market? CDN sales is all about being fast and flexible, something Akamai still has not been able to accomplish.

Honestly, I just don't get it. This company completely baffles me when it's very clear what needs to be done to grow their business, but those steps aren't being taken. I don't get the lack of message coming from the company, the way they sell their services, the pricing they have or the lack of any sense of urgency on their part.

Akamai flat out owned this market at one time, but unfortunately for them, they are losing it when it comes to their CDN business. May not be overnight, but we're all seeing the signs of what's taking place and I hope that at some point, Akamai puts a stop to it and takes the necessary steps to fix their CDN business.

Disclosure: I have never bought, sold or traded shares in any public company, ever. I have no vested interest in the share price of Akamai or any other content delivery network.

Comments

[CGP:]

Interesting background info. - thanks.

In passing I thought I saw them saying their drop in revenues was because they were pricing to add share and because of seasonal issues - from your article it sounds more like they're dropping the ball with their sales staff, no excuse for that. The question is are they pushing spending to build infrastructure (to the detriment of sales) or are they just plain directionless?

Does seem like the once dead LVLT is a least twitching now.

Sep 30 10:57 AM

[CatsJam:]

LVLT will straight up pwn AKAM in this next decade!

Sep 30 02:02 PM

[thesmay:]

Two new six figure clients couldn't get a call back? You heard from a friend of a friends brother-in-law? LOL Nothing in this makes sense. If you believe AKAM is going to miss revs or earnings, back it up with facts . Even your blogmates disagree with you
seekingalpha.com/artic...

Sep 30 05:10 PM

[Dan Rayburn:]

The facts speak for themselves. Akamai's CDN revenue has been down for two quarters now. Akamai's traffic growth has been slowing for longer than that. I don't need to back up anything, just listen to Akamai's earnings calls.

I don't need to predict if Akamai is going to miss earnings or not, I don't own any stock in them, or any other public company. I have no vested interest in their stock price.

Sep 30 06:26 PM

[thesmay:]

Facts Dan? Naming the two so called six figure clients would be facts, not throwing innuendo out in the air. I'm supposed to believe you over AKAM that two big clients wouldn't get their phone calls returned when one out of every five Fortune 500 companies uses Akamai, and over 20% of all web traffic goes through them as well? You're right about one thing, you don't have to back up anything, especially when you're writing fiction. Hatchet job, pure and simple.


On Sep 30 06:26 PM Dan Rayburn wrote:

> The facts speak for themselves. Akamai's CDN revenue has been down
> for two quarters now. Akamai's traffic growth has been slowing for
> longer than that. I don't need to back up anything, just listen to
> Akamai's earnings calls.
>
> I don't need to predict if Akamai is going to miss earnings or not,
> I don't own any stock in them, or any other public company. I have
> no vested interest in their stock price.

Oct 01 12:05 AM

[Jonha's Pop:]

If you don't own any Akam, it must be in your spouses name, or perhaps your brother. I have never seen a article written by you, that was favorable to Akamai. Every piece you've written has been a "hatchet job" and as a writer, you are a 'hack'. I will never again waste my time reading your garbage.

Oct 01 09:32 AM

[Dan Rayburn:]

I don't have any brothers and my Spouse has no stock either.

When I write positive things about Akamai, you shareholders love it. and I see no complaints.

When I write negative things, you guys want to complain all day. What a surprise.

Next you'll ask, when have I written anything positive about Akamai? Read:

Why Amazon's CDN Offering Is No Threat To Akamai, Limelight or CDN Pricing
blog.streamingmedia.co...

AT&T's CDN Offering Not Displacing Akamai or Limelight Anytime Soon
blog.streamingmedia.co...

Goldman Has It Wrong: Akamai Not Affected By Network Operators and P2P
blog.streamingmedia.co...

Internap Is Not The Next Akamai
blog.streamingmedia.co...

Akamai Confirms No Outage Of Their Web Acceleration Network
blog.streamingmedia.co...

A Detailed Look At Akamai's Application Delivery Product - Part 1
blog.streamingmedia.co...

Highlights Of My Day In Cambridge With Akamai
blog.streamingmedia.co...

Oct 01 11:40 AM

[JS Partners:]

I have followed AKAM for a while. Bought and sold when it was around the 40$ mark.

I have now re-entered but don't quite know what to do with my position?? It feels like the company is stagnant but at the same time they have a product which is in need and they just need to put themselves out there a little more.....

I am looking for reasons to hold but am finding it difficult. Should I sell out? Anyway, time will tell where we go with this stock....

Oct 01 03:43 PM

[JustBlah:]

Easy to figure this one out...Flash sucks. AKAM should have used Smoothstreaming and Silverlight.

Oct 02 04:09 PM

[wobatus:]

Your disclosure is a mere fig-leaf. There are many ways to have an agenda. You have one.

Oct 07 08:31 AM

[Dan Rayburn:]

@ Wobatus: You are right, I do have an agenda, which is to write about things I think are relevant to the industry and explain the difference between facts and opinions.

I don't know why it is so hard for some investors to believe that someone like me does not actually play the stock market and has never bought shares before.

Oct 07 10:57 AM