Billion Dollar Idea for CDNs (Akamai): Part 2

In my previous post, I noted that Akamai needs to create $1B in additional annual revenue by 2020, in order to reach its $5B in sales/year milestone, set by Paul Sagan (ex-CEO) in 2012. And that’s after taking into account 10% annual growth starting from 2014, and a few acquisitions along the way. The short of it, Akamai needs to develop a “killer” game changing service, that propels it into the ranks of EMC. And I’m not talking about the DSA Premier Edition, or cloud transcoding.

If someone was to measure the value of the untapped product potential within Akamai, that is festering on the minds of its engineering staff, how much would it be, $100B, $250B, or $500B? Akamai employs a tremendous amount of intellectual firepower within its ranks. They can surpass the impact that the PayPal Mafia had on the technology landscape. Akamai should look West and take a page from Google’s handbook. Take a risk, invest in some crazy ideas, and see what happens. Akamai can change the world of TCP/IP, protocols, VoIP, content delivery, mobile content delivery, last mile mobile delivery, and the Internet.

Billion Dollar Idea

For now, let’s discuss my idea for Akamai. The big idea I have for Akamai is simple. Do logs. Logs on steroids. Server logs, router logs, switch logs, OS logs, device logs. Logs are a massive industry. Right now, Wall street is madly in love with a log company. And if Wall Street is in love, so are VC’s. That’s why their funding a dozen of these log startups. Even the NSA loves logs.

That means, Akamai should do logs, invest in it, nurture it, and create an industry from it. A fancier name for logs is intelligence. Akamai should learn from the log company Splunk. The best part of it, Akamai knows logs, more than Splunk, and more than most companies, because it has been doing log collection on a massive scale for the last decade. Plus, Akamai knows intelligence, after all, their platform is called the “Intelligent Platform”.

The Numbers

Let’s compare the numbers. Here is a ratio that I call Market Cap to Sales (Market Cap/Annual Sales). The ratio for Akamai is $8.6B/$1.5B = 5.7. Level 3’s ratio is $7.68B/$6B = 1.3. Splunk’s ratio is $8B/$200M = 40. Splunk generates 7x less in annual revenue than Akamai, but is valued almost as much as Akamai. At the same time, Splunk is worth more than Level 3, even though it has 30x less the revenue.

What does this tell you? Two things. First, Akamai should never become a telecom company, or think of buying one. Second, Akamai should get into the log business, or intelligence business, on the same scale as Splunk. Splunk the company, their product, value prop, story and their ecosystem is hot. One of the very big reasons for their success is security. Log collection, correlation, and analysis provide the foundation for all things security: threat prevention, compliance, forensics, and so on. Here is a summary of the numbers:

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Splunk is changing the game. At its core, they are a log company, a sawmill on steroids, that collects log data from a variety of sources, then compiles it, correlates it, and provides business intelligence and security intelligence to the business community. Akamai can do the same. Let’s not forget, Akamai delivers 30% of Internet traffic, has 140,000 servers, and thousands of POPs. That is a lot of intelligence in the Akamai ecosystem. In part 3, I’ll describe how they can do it.