The CDN Debate: Seeking Alpha vs Bizety

Over the last three weeks Limelight Network’s (LLNW) stock has steadily declined, dropping from $3/share to $2.78/share. In a Seeking Alpha article published on July 23rd, an analyst named Adam gave his reasons why LLNW will eventually bottom out at $1.50/share. Supposedly, Adam talked to several CDN experts before writing the analysis, but in my book, there is one other CDN analyst who is super cool and his name is Mr. Rayburn. However, Mr. Rayburn is not always right. Based on his findings, Adam created a list of assumptions about the CDN industry and LLNW. In this post, I’ll debate the majority of the assumptions. For once let’s make this a little entertaining, since there is very little CDN debate in the public forum.

Debating the Rankings

The first data point that sticks out like a sore thumb, Adam ranked the top five CDNs as follows: Akamai, Level 3, Amazon, Limelight and EdgeCast, respectively. The only thing I agree on is the ranking of Akamai. However, all other rankings are off. In my viewpoint, the #2 CDN is EdgeCast, by a long shot. Why? Because by year end, if they aren’t already, will be pushing more bandwidth than any other CDN, including Level 3. I don’t know exactly how much bandwidth EdgeCast is pushing at the moment, but since I’m a Yes man, I will guesstimate its around 4-5 Tbps. By the end of next year, EdgeCast will be pushing 7Tbps+ as Verizon swaps out Akamai for EdgeCast, if Verizon decides to go that route, which I think they will.

From a revenue standpoint, all four CDNs, with the exception with Akamai, are generating revenues in the same ball park of $150M to $200M per year. Since that’s the case, I take another data point into account for the rankings, and that is the strength of the CDN product portfolio. The better the portfolio, the higher the ranking. As of today, Limelight Networks has the most extensive product portfolio in the CDN industry after Akamai and EdgeCast.

CDN Ranking Comparisons: Bizety Wins 🙂
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Debating the Other Data Points

The other data points that are up for debate are listed below. Besides that, the one theme I noticed from the analysis on Seeking Alpha, is that there was a lot of love given to Amazon Cloudfront. Amazon does have an awesome cloud compute/storage platform, but Cloudfront the CDN offering is an average CDN with basic bells and whistles. My research concludes that Cloudfront in the same bucket as Internap. All other CDNs in the ecosystem have a better CDN platform than Cloudfront. Why? Cloudfront is a CDN solution for the SMB market, ideal for customers spending $100 or less.

  • Amazon has one of the fastest, best performing CDNs – not in my book. Their CDN performance is average at best, compared to Akamai and all other high performance CDNs
  • Amazon is likely #2 CDN in terms of revenue, generating about $300M – I find that hard to believe. I think their pure CDN revenue, not including S3, is more in the range of $150M-$200M annually
  • CDN is a commoditized service so pricing doesn’t vary much among different CDNs – that was true 3 years ago, that is no longer the case. A new crop of innovation based CDN are changing the CDN game and charging premium prices for their services
  • Over the coming years there has been constant CDN price erosion – yes, there has been price erosion for plain vanilla large file http delivery. However, there is a whole new set of features that CDNs are charging a premium for like WAF, ADN, DSA, DDoS Mitigation Services, Wireless Last Mile Acceleration, etc
  • Limelight can never recover, it’s too late because they dropped the ball – it’s never too late for anything, especially in the CDN industry. LLNW can still recover if it really wants to, it just has to acquire a hot cyber security start-up, tweak a few things, and it will be in good shape
  • Amazon is the Wal-Mart of the CDN industry, beating the competition through price cuts, and a fast, reliable CDN at the same time – Amazon is for the SMB market, so it must keep prices low. However, in the enterprise space, the last thing any big company wants to do is award their CDN business to the lowest bidder. And who is Amazon beating? Akamai, EdgeCast, Instart Logic, Fastly, etc. I really doubt it.