Akamai’s reported Q3 earnings and “Media Delivery Solutions” revenue is down 14%, coming in at $188M. “Cloud Security Solutions” revenue is up 46% coming it at $95M. First Takeaway: today the video streaming/media delivery business is a mere afterthought in the grand scheme of things. It’s no secret that video streaming is a commodity low-margin business that requires heavy investment in infrastructure. Fortunately for Akamai, video streaming and DDoS Mitigation have one thing in common – both require Tbps of transit and tens of thousands of servers.
And let’s be honest here – the biggest winner of the recent DDoS attacks is Akamai. Since they’re the largest DDoS Mitigation company around, they are also the biggest winner by default. The biggest losers are the content companies such as Netflix, Spotify, Twitter, and so on. It will be interesting to see if Netflix and Apple are brave enough to try DIY DDoS Mitigation.
DDoS Mitigation is no longer a luxury, but a requirement, especially for the high profile companies. In the next 12 months, the DDoS Mitigation business is going to splinter into two different market segments. The first segment will deal with large scale DDoS attacks and the second with intelligent DDoS attacks targeting the application layer. As of today, there is only one company that can handle a multi-Tbps DDoS attacks – “Akamai”. In 6-12 months, Akamai will have company from the likes of Level 3, Verizon, Google, Azure and AWS – all of which bring economies of scale to the DDoS Mitigation business.
Right now, Akamai has the biggest market opportunity ever – they can dominate the segment that deals with large scale attacks. AWS is years behind Akamai in DDoS Mitigation. Level 3 and Verizon are Telcos, and that in itself is the problem. That leaves Google, and if they decide to enter the market, they are at a minimum six months behind.
Two things need to happen for Akamai to dominate early and prevent others from being successful in that segment. First, they must dramatically increase transit capacity to 10-15Tbps, and buy whatever hardware is needed. Thereafter, they must get everyone on board as a customer, dropping price points to go after a much larger market. Whether they do this or not, remains the question.