Innovation vs Commoditization: Limelight Networks

Limelight Networks (LLNW) is reporting earnings on Nov 10, 2014. Over the last four quarters, LLNW has reported the following figures, starting June 30, 2014 and ending Sept 30, 2013: $41M, $41M, $42M and $42M. Thus, quarterly revenues have remained flat, and that amount is likely to stay in the same range. Akamai is the complete opposite, where they are likely to grow total revenues from $1.57B in 2013 to $2B in 2014. That’s a CDN growth rate of $400M+ in one year. What does that kind of growth say about the startup CDN ecosystem? The CDN market is healthy, and its a good thing to be in the CDN business. For arguments sake, we count 100% of Akamai’s revenue as CDN revenue, since it is their CDN that makes all other services possible.

Limelight Networks vs the CDN Ecosystem

When LLNW reports its earnings tomorrow and gives investors the state of the union on where the CDN industry is headed, it will neither represent the CDN industry as a whole, or the startup CDN ecosystem. LLNW is its own world, struggling with its own unique set of challenges. Akamai is the bell weather of the industry, representing the health of the industry as a whole, and when they’re killing it, the industry is in great shape. In the startup CDN world, companies like Sitelock, Fastly and Instart Logic represent the true health of the startup ecosystem. Although these startups are relatively young compared to LLNW, they are orders of magnitude ahead in the feature set, and in the psychology of the business.

Conclusion: When LLNW reports their story tomorrow on the CDN industry, it applies only to them. If the CDN industry is brutally competitive and commoditized in their eyes, maybe its because of the lack of innovation coming from their side. When a CDN fails to innovate, of course their world is going to be brutally competitive. As far as the CDN startups are concerned in the ecosystem, its business as usual for them.

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