Akamai (AKAM), the leading web content delivery company, grew revenues by almost 9% in 2009 despite the economic recession and expects to grow its revenues by mid double digits in 2010.
Such growth is expected to propel the company’s revenues close to the $1 billion mark. We expect that Akamai will be able to maintain high growth in future as it expands into certain key areas. Below we highlight three growth areas for Akamai:
1. High Definition Web Video Content
About 28% of the $27 Trefis price estimate for Akamai’s stock is attributable to the company’s Media Content Delivery business which we expect will grow as a result of demand for high definition video content on the web.
Successful online video content distribution models like Netflix (NFLX), Hulu, and iTunes (AAPL) are increasingly driving growth in HD (high definition) video data over the internet. HD live sports events generate significant amount of viewership and require high bandwidth. For example, the Masters golf tournament generated traffic exceeding 3.4 terabits per second over Akamai’s network.
For content delivery, Akamai charges its customers based on quantity of the data delivered. As amount of HD content over the internet increases, Akamai will generate more revenue from its media customers as HD content has much larger data quantity compared to normal video content. Below you can see how Akamai’s stock can be impacted by change in revenue per media customer.
2. Cloud Computing
Akamai states that cloud based solutions are gaining traction in the marketplace. The company plans to focus on enterprise cloud computing to improve performance of mission-critical online systems. Cloud optimization services represent one of the high growth segments of Akamai’s value-added services and have grown at high double digit rates.
As more businesses shift into the cloud computing model, Akamai’s value-added services that enhance the performance of the cloud and provide optimal security, will gain wider acceptance.
3. Mobile Web on Smartphones
The increasing adoption of smartphones has resulted in large amount of data used over mobile networks. It is estimated that about 50% of US mobile subscribers will be using smartphones by the end of 2011.
Delivering a fast mobile browsing experience will be important websites and Akamai can leverage its network optimization capabilities for faster web content delivery.
In international markets, Japan presents a significant opportunity in terms of mobile web content delivery as it has large number of mobile web users (close to 100 million).
Disclosure: No positions