Akamai reported earnings yesterday and Cloud Security Solutions revenue was $110M, up 36% from Q1-2016, and Media Delivery Solutions revenue was down 9%, coming in at $187M. As the bellwether of the industry, Akamai’s performance is an indicator of what’s happening in the world of edge delivery and edge security.
Our first prediction – by the end of 2018, Akamai’s security revenue will hit $1B run-rate, comprised of internal growth plus acquisitions, and the edge security industry in total will reach $2B run-rate. Thus, Akamai will control 50% of the edge security market.
What data is there to support this prediction? There is none, its just a hunch. Akamai’s media delivery business is a different story. Exactly 1 week ago, we posted news that Google and AWS were selling media delivery services for $2/TB to a select group of accounts. And by the way things are going, its hard to tell when pricing will bottom out. We define media delivery as video streaming, software downloads and gaming.
The Cloud Trio’s (Google, AWS, Azure) hunger for capturing market share for all things “cloud” isn’t good news for the media delivery industry. The Trio has a two-prong approach to competing in media delivery: 1) dramatically drop data transfer prices and 2) go up the technology stack into premium video processing services and offer those to customers at low price points. By year end, Google and AWS will compete with Akamai in video processing services including ingest, transcoding, and so on. No surprises there, that’s why Google acquired Anvato and AWS purchased Elemental Technologies.
And lets be realistic, disruptive innovation in the video processing market has been stagnant when compared to edge security services. It was only a matter of time before Google and AWS starting impacting this segment. The good news – everything we know about video processing is going to change by year end, as real disruption impacts the video processing market – the culprit, machine learning. The non-intelligent video processing services like ingest, transcoding, mobile delivery, and so on, will soon be controlled by machine learning technology.
Some of that was on display at NAB, but more importantly, we’re actually working with some companies in this space. And the intelligence is going to happen at the application layer, not the ingest, transcoding, and processing layer. Supervised machine learning algorithms are making it possible to deliver assets to viewers based on their behavior.