I've been getting a lot of questions over the past two weeks asking me how much revenue Akamai (NASDAQ:AKAM) could get in Q3 and Q4 of this year, due to the new iOS7 update from Apple (NASDAQ:AAPL). Akamai is not the only CDN that does software downloads for Apple, Level 3 (NASDAQ:LVLT) does them as well, but Akamai still has the largest percentage of Apple's download business. While we don't know how many iOS7 downloads will take place, over what period of time, you can make some estimates and get a range on what the business is worth to Akamai.
Based on data Apple has given out, Apple has about 750M iOS devices (iPhone/iPad/iPod) in the market globally. From that number, let's figure that 500M of the devices will be capable of getting the new iOS7 software and will be updated. For the sake of estimating numbers, let's assume that every single one of those 500M devices will be updated by the end of this year and that Akamai will do 100% of the downloads.
Apple's new iOS7 download, on my phone at least, is 754MB. If Akamai delivered 500M downloads at 754MB they would have delivered a total of 377,000,000,000 MB, which converts to 377,000,000 GB. If Apple was paying $0.015 (one and half cents) per GB, the total value to Akamai would be $5.65M. Apple pays based on a per Mbps sustained model, not per GB delivered, but per GB at least gives us an estimate. While this seems simple to calculate, there is one variable you have to factor in.
CDN delivery in the U.S. is cheap, but that's not the case in many other countries where iOS devices are located. So using a per GB delivered price of one and half cents does not work when you're talking about delivering iOS7 downloads in countries where bandwidth is more expensive, especially in Asia. So you have to factor in a percentage of the 500M downloads costing more than they do in the U.S. to deliver. You also can't expect 500M devices to all be updated within three and half months. So there are some variables that skew the final numbers.
Based on my calculations, and factoring in some other details I know of Apple's business, I estimate that on a low end, Apple's iOS7 download business is worth about $10M to Akamai, over the course of iOS devices being updated. Realistically, that's a couple of quarters. That $10M estimate could go a bit higher depending on the percentage of downloads that come from countries where delivery charges are more expensive, so I would estimate it at $12M on the high end.
Coming up with estimates is not an exact science, there are a bunch of variables, but we have enough data in the market on file size, number of devices, and the going rate for CDN pricing in the U.S. to be able to come up with pretty realistic estimates on what a business like this is worth in today's market.