Apple’s CDN Impact on Akamai

Apple has reached a major milestone in building and deploying its CDN. They are currently using Akamai and Level 3 as their CDN providers. How much is Apple spending with Akamai annually? Let’s say it’s between $100M/yr to $150M/yr, as it would be difficult to ascertain how much exactly, since both parties most likely have an NDA in place, which prohibits them from sharing any financial details. If Apple is spending $150M/year with Akamai today, Akamai might lose $25M to $50M of CDN business over the next year or two. I don’t see Apple moving more traffic than that, since their platform has just launched. It took Netflix a while to deliver content on its own CDN platform, and their platform is much simpler, than the CDN platform that will be needed to deliver Apple’s content.

By year end, Akamai’s annual revenue will be close to $2B, and next year they might reach $2.5B to $3B in annual revenue. Thus, a $50M+ loss of CDN revenue isn’t really that much, especially since Apple’s CDN business is probably a low profit margin business for Akamai anyways. Apple’s CDN is a basic CDN lacking all the typical CDN feature and functionality – that’s why I say it will take years before Apple is able to deliver all of its own traffic, if that’s their goal. That’s my opinion, and the truth is no one knows how much traffic Apple will shift to their own platform. Apple doesn’t even know right now, since they are new to the CDN business, and the CDN business is a long term business that takes five years to figure everything out.

It’s not like you build a CDN, and shift all your traffic at once to your own CDN. Apple will find out in due time if its CDN is robust enough to withstand the heavy workloads required to deliver its content to a billion consumers around the world. Then again, there’s always the chance the CDN breaks down mid-way through, and the caching platform needs to be completely re-written, especially since they are using Apache Traffic Server, instead of Varnish. Apple using Apache Traffic Server – that’s baffling, especially when the Varnish folks are continuously making improvements to its caching platform, and adding features on a regular basis. No one is doing that for the Apache Traffic Server, as there is no company standing behind it.

Apple’s CDN Impact on Akamai

We can’t use Netflix and Comcast as a case study for Apple, since Netflix and Comcast deliver content to a limited region, which consist mostly of video to 50M subscribers, with a big chunk of them using their high speed wireless home network. Apple has to deliver small files, games, software updates, applications, video, and pretty much every type out there, to a global audience, with  millions of folks downloading content on low bandwidth mobile devices. Conclusion: Apple CDN will not impact Akamai financially.

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