2014 is going to be the most critical year ever for Limelight Networks (LLNW). In 2013, Akamai’s revenue grew 15% year-over-year. EdgeCast Networks (#2 CDN) had similar growth, if not better. Akamai and EdgeCast are likely to grow at the same rate in 2014. In 2013, LLNW (#3 CDN) had zero growth. In 2014, LLNW is likely to have zero growth, or negative growth, if the Netflix departure that occurs mid-year is not absorbed by new customer acquisitions.
Gap Widens between #2 CDN and #3 CDN
By the end of 2014, the gap between the #2 CDN and LLNW (#3) is going to widen dramatically, unless LLNW takes dramatic action. At a very minimum, LLNW needs to grow at the same rate as Akamai. That shouldn’t be impossible, since their annual revenues are under $200M. LLNW needs to innovate its way out of this difficult situation, and upgrading SSL, DRM, or cloud storage is not going to cut it.
Many in the industry are wondering what’s going to happen to EdgeCast, now that it’s part of Verizon. The answer is obvious. If I’m Verizon, and I just made $10B+ in profit in 2013, I simply open up my wallet, and throw $500M on EdgeCast’s lap, and say to them, triple your infrastructure, we are taking you to the next level. So don’t be surprised at the sudden announcement, that EdgeCast now has 100 POPs, and 20,000 servers running on SSDs.
EdgeCast is a vital component to Verizon’s VOD strategy in three key areas; Verizon is going to use EdgeCast for their B2C CDN business, the back-haul OTT business that delivers content to the FIOS consumer, and the business of content delivery to the wireless customer. You don’t spend $400M on the fastest performing CDN to let it sit on the shelf.
The Year of Limelight Networks
LLNW has its work cut out for it in 2014. They need to develop a killer product, that has the potential to generates hundreds of millions of dollars. For starters, it can borrow some ideas from FireEye, the $8B company that generates $200M in annual revenue. How does this sound, the Limelight Advanced Threat Analytics Platform. The ball is in LLNW court.