Entering text into the input field will update the search result below

Does 21% Drop Of Aliyun’s CDN Price Show Any Lack Of Sincerity?

May 28, 2015 5:38 AM ETBABA3 Comments
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

On May 22, Alibaba's cloud computing company, Aliyun announced that it would cut the price of its Content Delivery Network (CDN) service. According to Aliyun, after the 21 percent price cut, its price would be only one-third of that of ChinaNetCenter.

In response to Aliyun's most tempting advertorial marketing, I conducted a thorough analysis of Aliyun's price schedule out of curiosity.

Aliyun always had two ways to charge its bandwidth CDN service: one by traffic and the other by daily peak bandwidth. Let's take a look at charge by traffic first.

Product

Traffic schedule

Original price by traffic(RMB/GB)

New price by traffic(RMB/GB)

Drop

Aliyun's

CDN

0-2TB

0.4

0.36

10%

2TB-10TB

0.38

0.36

5.20%

10TB-50TB

0.35

0.32

8.50%

50TB-100TB

0.33

0.3

9%

Over 100TB

0.33

0.26

21%

The new price by traffic Aliyun publicly announced did drop by 21 percent. However, compared with the original price before the price cut, for the schedule of 0-100TB,the actual price cut fluctuated between five and 10 percent. Only for traffic of more than 100TB, the unit price did drop to 0.26 from 0.33, in line with its declared 21 percent price cut. The price range of 0.3 to 0.4 is actually quite common among some small CDN providers already.

Why did Aliyun's recent action fail to show any sincerity? We noticed a line of statement in small prints in Aliyun's price schedule:

  1. Charge by traffic

Billing item

Trafficschedule

Price (RMB/GB)

Downstream traffic

0-10TB

0.36

10TB-50TB

0.32

50TB-100TB

0.30

Over 100TB

0.26

Note: For charge by traffic, the default bandwidth upper limit is 1 Gbps.

Billing rules:

  1. Billing item: traffic
  2. Payment method: post-paid
  3. Billing rules: progressive rates based on monthly totaltraffic (using natural month as a cumulative period)
  4. Billing cycle: billing every hour, real-time deduction (billing and deduction hourly).

Yes, that default bandwidth upper limit is indeed 1Gb. Don't you know how difficult it is for a client to generate 100TB of monthly traffic with a 1Gb bandwidth? I will conduct a further analysis in detail later.

Let's take another look at Aliyun's CDN billing schedule by bandwidth:

  1. Charge by peak bandwidth

Price:

Type

Peak bandwidth schedule

Price (RMB/Mbps/day)

Peak Bandwidth

0-512 Mbps

1.00

512 Mbps - 5Gbps

0.90

Over 5 Gbps

0.76

Note: Charge by peak bandwidth means you are billed by the peak bandwidth (Mbps) generated by the CND service (with no bandwidth upper limit for clients).

We noticed here that when Aliyun charges by bandwidth, it does that daily, and by daily peak bandwidth. Isn't that identical to billing monthly by the "average peak"?

Let's use bandwidth of no more than 500Mb as an example. The unit price by bandwidth is actually 30 RMB / Mbps / month. Please note: we are talking about the average peak here.

If your website'sregular peak bandwidth were10Mb, but during this month there were a peak bandwidth of 200Mb (which is quite common for shopping websites), then for this month youwould need to pay 10 * 1*29+200 * 1 = 490 RMB, which is equivalent to a unit price of 49 RMB / Mbps / month!The price is much higher than many traditional CDN provider would offer. In this extreme case, itis quite obvious whether Aliyun's CDN is cheap or not.

Let's come back to the story about Aliyun's billing by traffic. According to mymultiple years of experience as an Internet user, usually a 1Gb bandwidth would generate a monthly traffic between 50 and 100TB, mostly below 80TB. Bandwidth utilization rate is always an issue that everyone wants to improve but fails. Large size clients try to maximize their bandwidth utilization by increasing business diversity, enhancing regional business coverage and customer base. It is not that easy for mid- and small-size clients on this issue, because it is quite hard for them to solve the problem of bandwidth utilization.

It already sounds quite good to generate 60TB of traffic with a monthly bandwidth of 1Gb. It is absolutely impossible to pass 100TB.Aliyun'sprice schedule and usage restriction send a clear message to you: although my price is very low, only at 0.26 RMB / GB, it is impossible for you to get this price. Out of more than four million websites nationwide, companies with a bandwidth of up to 1Gb are very few. A vast majority of websites have a bandwidth under 10Mb. At most, each of them can generate 1TB of traffic per month.

Now you know, Aliyun failed to show any sincerity when it was offering a price cut to 0.36 RMB/ GB to its customers. Many small CDN providers also offer the same price.

Aliyun's newly released price schedule failed to knock out the traditional CDN providers and third-party CDN brokers. Rather, it just put out some smoke to mask the real deal. When the smoke is blown away soon, everyone will see that the attraction is no longer there.

Obviously, traditional CDN vendors offer a variety of billing schedules to their customers, including average bandwidth, removing three peaks, 95 billing, billing by traffic, and billing by the average peak (which Aliyun offers).Large customers are always smart by choosing a billing method in their favor. Meanwhile, mid and small CDN platforms, including the brokers, don't have to be too concerned. Aliyun's CDN offersno advantage in their price below 100TB.What is worse, it also limit the bandwidth.

In addition, I have to say that, quite obviously, CDN vendors offer various services inChina to meet the needs of all kinds of enterprises. Price is just one of the factors that affects the customer when they make their selections.

Analyst's Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.