Does Akamai Plan to Kill Off The Competition and Make Matthew Prince A Genius

It’s kind of crazy but one move from Akamai can 1) increase Akamai’s CDN global market share by a hefty margin 2) kill AWS’s dreams of being a CDN juggernaut and 3) make Matthew Prince (CEO CloudFlare) a genius – although I doubt that Matthew could have known this would happen. We can all agree that CDN data transfer pricing continues to drop with no end in sight. Rumors are that for medium-volume delivery (1PB+), the price is half a penny per GB, which is equal to $5/TB/month. If Akamai really wanted to kill off CloudFront, Google CDN, Level 3 and DIY CDN in one fell swoop, it definitely could. How?

Akamai can offer $1/TB for 100TB/month with $1,000/month minimum commitment (for new clients). That would be $100 for 100TB/mo of transfer plus $900 for features. An offer like that would destroy AWS’s dreams of becoming an unstoppable force in CDN, especially since their CDN is extremely expensive. The $1,000/mo minimum commitment would siphon off the mom and pop businesses to the CloudFronts of the world. This in turn would make Matthew Prince a genius because the CloudFlare business model is immune to $1/TB.

CloudFlare has received a lot of flack from the competition because a big percentage of their customer base pays nothing. That’s right – they’re giving away CDN for free. Thus, if CloudFlare can generate $65M – $100M per year by giving away CDN services for millions of websites, then logically, they can continue to do so at $1/GB. This leaves everyone else in a scary situation.

The big question is – can Akamai do it? Two years ago, or even one year ago, I don’t think they could. Today, I believe they can. The Akamai feature set is ridiculously extensive, especially with all those acquisitions under their belt. They can give away transfer for free, and make up for it by selling high-profit margin features. And while they haven’t tried to do this yet, you can believe it’s crossed their mind a few times.

Digiprove sealCopyright secured by Digiprove © 2017

2 thoughts on “Does Akamai Plan to Kill Off The Competition and Make Matthew Prince A Genius”

  1. If they do so, they end up killing their own company. I guess more than 80% of their revenue comes from much higher prices, and if they lower the price, they will have to do it for all their customer base, reducing drastically their margin and company. No CDN can survive with such a low price as you say. CloudFlare does survive because they build a model where paying customers pays also for non paying customers so they end up with a healthy company in the end. Also, understand that Akamai’s product is too complex comparing to CloudFlare and CloudFront too (e.g most of their customer base have “advanced” configurations as reported on their annual investors meeting). With Akamai, to have a new Digital Certificate issued you need to die first. So, again, even if they do lower the price, they end up killing themselves. AWS pricing is not half a penny, correct, and their price is what customers are willing to pay (otherwise they would not be growing like they are), which means they have the correct price for the market. Not high, not low.

Leave a Comment