Is Yottaa a Billion Dollar CDN

Yottaa, the five year old Content Delivery Network is starting to hit its stride. In 2013, they increased revenue 700% and the average sales price by 20x. In another words, Yottaa has grown up in a big way, and has entered the next phase in its CDN life cycle. All CDNs go through a life cycle, with the first three years being the most challenging. Yottaa has survived this phase, and is now thriving in the CDN ecosystem. Yottaa accomplished this milestone by pivoting and transforming itself from a traditional CDN, and into the leader of the User Engagement category. I think it’s fair to say that Yottaa is the #1 CDN of the User Engagement category, even surpassing Limelight Networks.

 Yottaa Background
  • Started 2009
  • Raised $29M including $16M from Intel
  • 80+ employees
  • Launched Yottaa Engagement Cloud in 2013
  • Doubled number of customers in 2013
  • Increased revenue in 2013 by 700%
  • Increased average sales price by 20x

Two Major Accomplishments

Although LLNW dabbles in User Engagement, Yottaa lives and breathes User Engagement, and this focus separates Yottaa from all other CDNs. In the next 2-4 years, we’ll know if the User Engagement segment is big business that can catapult Yottaa to a billion dollar valuation. Yottaa’s two most impressive accomplishments in 2013 are the 700% increase in annual revenue, and 20x increase in the average sales price. Both are good indicators for all startup CDNs, that even though they’ve been in business for four years, its still possible to see astronomical growth if smart decisions are made.

In the CDN business, pricing services is both an art and science, especially when the CDN is rolling out new features on a regular basis.  How do you price out a new service so that its competitive, yet is able to capture the most of a customers spend? For example, if a large CDN is offering a DSA type service for $10,000/month to one prospect, how does a competing CDN offer a similar product that enables it to win the business, but also captures the most of the customers spend? In the days of Cotendo, they would price out their DSA at price points between $1k/mo to $2K/mo for a similar offering, at least when I encountered them in competitive situations.

At that time many in the industry understood that their business model was unsustainable long term, having witnessed many other CDNs go by the wayside. However, in Cotendo’s case, their goal in life was to get acquired quickly and at the highest possible valuation, and they succeeded. The answer to the question of how a CDN prices out a new service so that its competitive yet increases the average sales price is difficult to answer, since there is no magic formula. You just have to be in the game for a few years, tweaking price points, competing in accounts, and not be afraid of charging high prices for specific services. It’s impossible to price out a new service perfectly from day 1 of launch, because we can’t predict what customers are willing to pay, until the sales reps have been in fiercely competitive situations day in and day out for a while.

Is Yottaa a Billion Dollar CDN

Yottaa has figured out the magic formula for pricing, and is now reaping the rewards to the tune of 20x increase in the average sales price. For a CDN in the fifth year of business, this growth is insane. There is nothing better than watching CDNs reinvent themselves, and figure out new business models that attend to the needs of a new customer segment. If Yottaa can sustain this type of growth for the next three years, I believe they will reach a billion dollars in valuation. Yottaa has changed from their early days, when their low prices were one of the main drivers of capturing new business. This is no longer the case. They offer competitive price points and a unique value proposition based around User Engagement.