Wall Street is punishing the information security sector right now. Investors are heading for the exits, running away from FireEye and Imperva. Imperva is down 43% today on the news that they will miss quarterly revenues by $4.5M, when they officially report on May 1. Quarterly sales will come in at $31.5M, down from previous estimate of $36M. Missing the quarterly sales target by $4.5M wiped out $500M+ in market valuation. At times, Wall Street is ruthless, and hates negative surprises. Since Imperva is in the CDN business, we’ll do some high level analysis of their potential in the CDN ecosystem, and see if there are opportunities for higher revenue growth.
How Can Imperva Incapsula Recover
For starters, in the CDN business, there are several companies spending $500k, or more, every month on CDN services. All of them belong to Akamai, but there’s always room for two CDNs. The dual CDN strategy is very popular, and makes sense for many reasons, which I’ll cover in a later post. However, the majority of the companies spending six figures per month on CDN services are media companies. If Incapsula really wants to increase the total volume of petabytes it delivers monthly, than the media business is the way to go. The other benefit of delivering massive amounts of video content monthly, bandwidth cost drop dramatically, so you get more bang for the buck.
The video delivery business is a whole different animal than small file and large file delivery. It won’t be easy, but it’s not impossible. Fastly went from basic caching to live streaming, and is quite successful. It depends on how hungry Incapsula is for doing something new. The good news, RTMP streaming is giving way to HLS and HDS HTTP streaming. That means no more dedicated RTMP servers. For encoding, Incapsula can partner with encoding.com and zencoder.
Fortune 1000 Opportunity
The second area of opportunity for Incapsula is the Fortune 1000. Akamai dominates the Fortune 1000. My guess is they own about 95% of this market. There is definitely room for another player in the demographic. Even if Incapsula wins a few of the Fortune 1000 accounts, it will have zero impact on Akamai. Akamai is too big and too strong for anything to happen to them. There is only one person that can hurt Akamai bad, Wall Street.
However, selling CDN services into the Fortune 1000 is way different than selling to the top Alexa accounts. First of all, the sales cycle for selling into the Fortune 1000 is 1-2 years. Second, the Fortune 1000 is a slowly-build-relationship-sale over a long period of time kind of business model. The sales skill set required to do this kind of sale is rare, and difficult to find. But that is a topic for another post.
B2B CDN for Web Applications
Third, Imperva can get into the B2B CDN business, and assist enterprises with the acceleration and security of their B2B web applications, that are private, and closed off to the world, but run over the Internet. Imperva would need to take a little from Aryaka Networks, Akamai, and Riverbed to make it work. When its all said and done, $4.5M of new revenue for the quarter isn’t out of reach. It’s not easy, but it’s not impossible either. This is the land of abundant opportunity, and Imperva must choose its path wisely.