While many content delivery vendors continue to add new services tied into the video ecosystem, the CDNs as a whole have been very slow to diversify their product portfolio outside of delivering video, software and small objects. For a long time, Akamai (NASDAQ:AKAM) has been the only game in town for services tied to commerce and application acceleration and has dominated the market with very robust offerings.
Today, Akamai still has the vast share of the market for services outside of CDN that Akamai classifies as "value added services," of which application acceleration is one of those offerings. But over time, Akamai is going to start to see some competition for these services because the other CDNs know that services like application acceleration have very high margins, aren't being sold purely on price and will enable CDNs to diversify their revenue away from video.
Last year, Limelight (NASDAQ:LLNW) launched some new services aimed at the enterprise, government and commerce sectors, for which they now have more than 200 customers, and a new startup called Cotendo launched in the market specifically focusing on application acceleration. Next week, CDNetworks plans to launch a new application acceleration offering, which over time, will also start to compete with Akamai for some of their business. While I am not suggesting that these offerings by Cotendo, Limelight and CDNetworks will grab Akamai's market share overnight, clearly we are starting to see a trend by CDNs who want to do more than just deliver large objects and video streaming.
There is no question that today, Akamai's services still have a lot of functionality that the others don't yet have, like being PCI compliant. But over time, services by Akamai's competitors will come up to speed and Akamai will have a couple of companies competing with them for a portion of their value add services based business. While it is too early to predict what percentage of Akamai's market share these companies can compete for and how quickly they can ramp up their platforms to be on par with Akamai, it's something to keep a close eye on over the next twelve months.
Make no mistake that multiple CDNs now have their sights set on Akamai's high margin value ad services business and plan to make it more of a challenge for Akamai to dominate the market like they have for so many years. While I've always been mainly focused on video, over the next few months I'll be diving a lot deeper into the application acceleration topic on my blog and review some of the features and functionality that these platforms have to offer. The last time I visited Akamai's HQ in 2008 I wrote up two detailed posts on their application delivery service which you can read more about at "A Detailed Look At Akamai's Application Delivery Product - Part 1" and "Overview Of Akamai's Application Delivery Customers - Part 2."
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