Is Amazon really gunning for Akamai? According to an Oppenheimer analyst, possibly. Akamai’s stock price has been trending upward for the last week, and its stock price closed at $71/share on Friday, valuing them at $12.7B. At the other end, Amazon’s stock closed at $378/share, valuing them at $178B. Although Amazon earned $29B ending Dec 31, 2014, net income was a paltry $214M. When looking at Amazon’s balance sheet ending Dec 31, 2014, they have $3.2B left over when current assets are subtracted from current liabilities, which means they lack a Google like cash position. Disclosure: “I’m not a financial analyst and I’m not qualified to give any financial advice, so please don’t use this rant for any investment purposes”.
Who would have ever thought of Amazon going after Akamai. With that being said, let’s do a quick study on the possibility. AWS is an amazing story, and CloudFront is a CDN story like many others. Amazon has millions of cloud customers, with a certain percentage being trial accounts and low monthly billers. Amazon has single handily disrupted the old guard enterprise market of IBM, Dell, EMC, Oracle, Rackspace, and so on. They are a pioneer in cloud computing, cloud storage and open source, and have made it possible for small companies to enjoy the same resources as the Fortune 500. AWS operates like its in the Super Market business, on razor thin profit margins that makes it up in volume. Their customers spend anywhere from $10 per month to a million, appealing to all budgets. Amazon is known for self-service, the integration of thousands of third party vendors into its ecosystem, furious roll out of features, and so-so security.
Akamai is the complete opposite of Amazon. Akamai is not a good fit for all budgets. In fact, businesses need to spend four figures per month to get started. The service gets better at five figures per month, enabling customers to enjoy more features, and for six and seven figures per month, they roll out the red carpet. In terms of service, Akamai takes a different approach than Amazon, in that they offer white glove service to all customers, just like Nordstrom. On top of that, they have a Professional Services arm that can help customers with a multitude of services, just like Accenture. Next is attitude, Akamai has attitude like Oracle and Cisco, which they have earned over the last decade beating up on hundreds of competitors. Finally, Akamai dominates the large enterprise, including the Fortune 500, banking, government agencies, and so on. Finally, Akamai has been working the enterprise market for twice as long as Amazon.
Can Amazon and Akamai Tangle
Akamai has no lost love for Amazon, and vica versa. Although Amazon has millions of customers all over the world, Akamai has a better pulse on the Internet, and the things running over it. In fact, Akamai and Google are two companies that understand Internet traffic flows better than any other company. There’s really no argument there since Akamai has 160k+ servers in all parts of the world, thousands of PoPs, and a presence in all 200 countries in one way or another. The raw log files that those 160k servers generate on a daily basis is massive, likely to be in hundreds of TBs or even a few PBs.
If Akamai were a kid, they would be the smart preppy boy wearing penny loafers, Lacoste Polo shirt, bifocals, with hair slicked to one side, and the kid who enjoys reading Tolstoy on a winter evening. Amazon would be a geeky skater wearing cut up shorts, Vans, with long hair and a goatee, and the kid who has a disdain for the rules of the game. Can the preppy kid and skater become BFF in the cloud world? Is Juniper and Brocade a good fit, or Oracle and Microsoft, or Dell and Lenovo, or Google and Yahoo, or Symantec and Checkpoint, or oil and water? In our humble opinion, Amazon hitching with Akamai would be as successful as Internap and Vital Stream. The two cultures are polar opposites, the business models don’t jive together, and the way each company approaches customers is as different as night and day. It would never work in a millions years, but then again, crazier things have happened in this life.