Concern About Prospect of CDN Price Wars

New entrants in the CDN market are raising concerns about pricing and margins.

[...] and deter users. But if you can get past the fact that it was paid for by a company that’s lost $3 billion in market capitalization in the last month and needs to prove its service is worth t… — and I fully understand if you can’t — there’s some interesting statistics [...]

[...] Akamai & the CDN Price Wars Akamai Technologies (AKAM) investors are the stock market’s walking wounded. Over the last month, the stock has […] [...]

[...] came across an interesting post my Om Malik in this [...]

[...] that all of this competition won’t be very good for profits. Indeed, it seems that a bitter price war has already broken out, as the core CDN product rapidly becomes a commodity. This trend [...]

[...] that all of this competition won’t be very good for profits. Indeed, it seems that a bitter price war has already broken out, as the core CDN product rapidly becomes a commodity. This trend [...]

[...] Limelight Networks (LLNW), an aggressive player in the CDN market is feeling the blow back of the CDN price wars. The stock is tanking today, mostly because Wall Street didn’t like their second quarter [...]

[...] media-savvy. Laurie Sullivan takes a closer look at EdgeCast, another CDN on the prowl amidst falling prices, while Craig Rubens asks readers to take a closer look at [...]

[ITHD-4180] Research Content Distribution Network for pgp.com

We are going to begin delivering a lot more rich media via pgp.com and it might be time to have the content distributed in order to ensure fast load times, particularly in Europe.

Dave has approved and agreed to this.

Akamai are the biggest play…

[...] of them all. How expensive? Dan Rayburn recently took a look at CDN pricing, and while it is on the downswing, it’s still pretty expensive. For example, a customer who buys 100 terabytes at $0.15 a [...]

[...] that all of this competition won’t be very good for profits. Indeed, it seems that a bitter price war has already broken out, as the core CDN product rapidly becomes a commodity. This trend [...]

[...] is the latest move in the rapidly escalating CDN price wars, despite the rising need for content delivery services for the huge amounts of video flying around [...]

[...] Level 3 announcement that they would be offering CDN services at the same rate as normal bandwidth has thrown a lot of confusion in the market. Mostly, it is creating a negative perception in the [...]

[...] Price Wars Dim Limelight I have often alluded to the brutal price wars that are raging in the content delivery network business, driven largely by the entry of newer [...]

[...] that there’s a price war among the big CDNs, a war that last fall prompted Level 3 to announce it would take its CDN prices [...]

[...] They are an effective mean of getting your content to your client’s browser quickly (taking advantage of the CDN’s geographical coverage) and at a competitive cost. [...]

[...] large content), handling all of the scalability and geographical delivery optimization. This market has become fairly commoditized, and since it requires huge investment in hardware in many locations and software to glue it [...]

[...] services. Yes, you heard that right: from sites from the technical web-hosting to stock boards to commenting on industry sites he pops up, promoting SimpleCDN. Sometimes he identifies as an employee, other times he talks about [...]

[...] comes as Akamai’s core business of charging customers to deliver their web sites faster, is facing falling prices and increased competition. Akamai addresses privacy concerns by stressing that both aCerno and [...]

Well I think a big one you missed out here is Amazon, with their S3 and other offerings is also taking a HUGE chunk out of the CDN network. One service I was advising on went with S3 instead of a CDN because it enabled them to very easily and inexpensively setup their own service, albeit not as fully covered as others but sufficient to their needs. Also is Google not gearing up to do this themselves? Shouldn’t that not frighten investors.

Fierce Competition in the service provider business? You must be kidding.

Hasn’t anyone noticed that CLEC consolidation is about complete, and gee, we are left with only Verizon and AT&T?

funny:

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Check out Jim Cramer’s recommendations on LVLT, still waiting for this one to double Jim - (link)

There is no evidence of a “possibility” that video consumption is flattening. Increasing consumption of long-form content (via IPTV/ITV) is going to push video mix to well above 80% of total Internet traffic from around 50% today.

Most of AKAM’s business today is not video, it is traditional web acceleration, priced on a $/GB delivered basis. Their distributed infrastructure simply cannot be scaled as cost effectively as more centralized systems such as Limelight, S3, and Google who can always push harder on $/GB.

@Random_Graph:

IPTV traffic won’t help Akamai because it is on private networks operated by the Telco’s. Akamai is only relevant to traffic on the public net.

We’ve seen many generations of CDN companies arrive to compete in the market and then vanish. These arrivals are often accompanied by articles talking about price wars, deal losses, and decreasing margins. Yet these articles never show any analysis to back up those claims. Stock price movement cannot be correlated with anything but the movement of stock price. Enron used to have a stock price…

Content delivery networking is a crucial component of the internet- you see the delivery from CDNs during just about every minute of time you spend online.

But the welcome arrival of new competitors does not instantly guarantee the failure of those who already have existing business. There is plenty of room for all types of vendors in any market.

P.S. For all your CDN vets- remember Microcast, Cidera, Enron Media, Ibeam, Axient, Sonicity, Inktomi, and Volera?

I’m waiting for Amazon to release this as a utility service built on S3 and EC2. I did some work making a java servlet filter to make the process of automating the upload of files to S3 a seamless process, thereby creating a poor man’s CDN. If the latency on S3 was lower or if it was possible to do this, I’m sure that Akamai would lose the bottom half of their business. More here:

(link)

Surprised that no one has mentioned peer-assisted content delivery services. Managed peer networks reinforcing traditional CDNs…this is getting interesting!

Sad for the CDN providers, and perhaps another example of fierce competition. Hopefully, good for the internet!

Its just beginning to heat up, there is plenty of pie for a number of companies.

see the list on streamingmedia
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While I don’t disagree with Om’s idea that many companies are now competing with one another, it’s not fair or accurate to list companies like Panther Express going up against Akamai. Panther Express does not support streaming media via any streaming protocols, they only support downloads. So that means that they can’t do streaming of Flash or Windows and can’t do any delivery for live events.

I don’t believe that a negative cloud should be cast over the entire CDN sector. Yes, there is a price war starting to occur but in more of the CDN commodity services. But you need to dig deeper and take a look at the innovation that is being brought into the CDN business like that at Internap, symbol INAP, who just reported a great quarter on 7/31 and raised both their 2007 guidance as well as their guidance for 2008. INAP had done a great job in integrating its recent acquisition of Vitalstream and can now offer its customer a suite of CDN services now including Vitalstream’s ad insertion apps to its proprietary route optimization algorithms that are the backbone of its 100% uptime SLAs. So don’t paint all of the CDN players with the same brush. And do yourself a favor and take a better look under INAP’s covers!

Excuse the late response, however I have enjoyed the thread resulting from Om Malik’s post and wanted to comment. I am conducting market analysis in regards to the price and service break down among the CDN vendors. Their has been much recent discussion as price war debate continues to march onward however their seems to be limited factual information or details.

For example I would debate that the “price wars” are NOT the sole or even a key reason for Akamai’s market decline. They are well diversified from web performance product standpoint, with CDN and web acceleration as core offering. They stand in a unique and strong position in the CDN space. Furthermore the markets have been turbulent over the past few months with many moving parts that contribute to the decline.

While the competition is fierce which will undoubtedly impact and contribute to shaping the marketplace, it is also important to understand that the CDNs range greatly in terms of core competence, service offerings, customers that they are targeting, etc. Thanks!

It seems the price wars may have taken a different turn… Take a look at SimpleCDN, they offer flat-rate CDN delivery pricing. No bandwidth or usage charges… will this impact the big guys, and will they move to this model as well?

This is natural for any business. The tastier the pie, the more players. and there should not be a monopolistic market.