Why Doesn’t Akamai Acquire Encoding.com

When encoding.com first started in the business, they got some good traction early on by signing up companies like Netflix, Redbull and Viacom. Their platform has always been ahead of its time. In the early days, encoding.com was the default encoding service for many, and most CDNs including Limelight, Akamai and EdgeCast referred encoding jobs to encoding.com. Jeff Malkin, co-founder of encoding.com did an excellent job of working the CDN Ecosystem to his advantage; with so many CDNs on his side, it was only a matter of time before the encoding.com service exploded.

A big challenge during the early days of cloud encoding was the mindset toward cloud encoding. For many, especially those in the broadcast industry, cloud encoding was a no-go, not only because it was new and unproven technology, but some felt their onsite appliances were good enough. Slowly over time the cloud encoding business model matured, and attitudes changed for the better; and the rest is history. Today, encoding in the cloud is the equivalent of compute in the cloud, and if a media company involved in the production / distribution of video isn’t using it in one form or another, something is definitely wrong. Encoding.com is a pillar in cloud encoding, a market they help create. But sooner or later, even pillars need a larger company to take it further. I asked Jeff Malkin if an acquisition by Akamai is in the cards, and this is how he responded.

“I can say that cloud-based media processing and content delivery are complimentary services.  It makes logical workflow sense to combine best-in-breed video transcoding along with video hosting (storage and streaming) provided by CDNs such as Akamai, Highwinds, Limelight and others.  Media processing is a natural accretive service for CDNs to offer.”

According to published sources, “Encoding.com is the world’s largest video encoding service” that powers “video transcoding for the 3k leading companies across media and entertainment”. On top of that, encoding.com just introduced the HybridCloud encoding service, which enables companies to deploy encoding.com infrastructure in a Private Cloud setting. This makes sense for many large companies such as Disney and Viacom. To date, encoding.com has been very smart in raising money, having only raised only $8.3M over the last seven years, with a good chunk coming from Harmonic. Harmonic is the $525M publicly traded video infrastructure company that generated $433M in 2014 revenue.

The most puzzling question about encoding.com is “how are they still a stand-alone company”? If we were to consider all the companies involved in the video space, including Google, Viacom, Netflix, Harmonic, Limelight, Verizon, Facebook, Apple, Microsoft, and so on, Akamai is clearly the #1 partner for encoding.com, and a great fit. Both are leaders in their respective markets, and a coming together would create an even more powerful company. Why should Akamai go for it?

  • Acquire 3,000 customers in media and entertainment
  • encoding.com is very affordable for Akamai
  • encoding.com is the premier cloud encoding service, surpassing Amazon
  • HybridCloud enables Akamai to supplement its CDN License offering to  Carriers in private cloud configuration
  • Akamai can start down the road to eventually challenge Amazon in some of its bread and butter services

Why would Encoding.com want to do? First is the money. Second is the growth; encoding.com will have the financial resources of a $12B company to do all kinds of wonderful things. Disclosure: I’m not a CFA or Financial Analyst, so don’t use this information for investment purposes”.

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