CDN Industry Buzz for Q3 – 2019

There’s been a lot of activity in the CDN industry over the last few weeks. We’re going to summarize the most interesting developments in our ecosystem. The two most shocking pieces: 1) the SEC charges Gladius Networks for not registering its ICO under federal securities law and 2) Oracle is shutting down Dyn.

SEC Charges Gladius Networks with Unregistered ICO

Gladius Network, one of the very first blockchain CDNs in the industry, which raised $12.5M via an ICO in late 2017 has been charged by the SEC for not filing its ICO under federal security laws. The SEC did not impose any fines because Gladius self-reported itself to the SEC. And that’s a good thing because if they did not self-report themselves and then got charged, it would have likely ended with a different outcome. The way their business model works – Gladius issues tokens to end users that lend it bandwidth and compute resources, which can be redeemed for dollars, then uses those resources to improve content delivery performance for its customers and protect them from DDoS attacks. Now, Gladius is returning investor funds according to this SEC snippet:

Pursuant to the order, Gladius undertakes to return funds to those investors who purchased tokens in the ICO and request a return of funds and register its tokens as securities pursuant to the Securities Exchange Act of 1934.

Today, we are fully convinced that the blockchain CDN business model that provides basic CDN services, WAF, and DDoS protection is not a viable business model. There are dozens and dozens of reasons why but that’s another discussion. However, that doesn’t mean all decentralized CDN business models won’t work. In fact, decentralized video streaming, known as P2P (peer-to-peer) has carved out a nice niche for itself in the industry.

Oracle Shuts Down Dyn

This story is about great success and great tragedy involving two companies. Having started in 2001 as a student community project, Dyn went on to raise $88M and hire hundreds of employees. Then in November 2016, Oracle acquired them for $600M – $700M. The acquisition was a successful exit for the Dyn founders, executives, and early employees. However, just recently Oracle has decided to shut down Dyn in May 2020, laying off ~400 employees in the process, the majority of them being in sales and marketing.

It hasn’t even been three years since the acquisition and there goes ~$600M down the drain. That amount of capital could have funded 30 next-gen CDNs and employed thousands. Leave it to Oracle to turn an American success story into a soap opera. To make matters worse, supposedly IBM was also in the running for acquiring Dyn but lost out to Oracle. Looking back, Dyn would have been better off in the arms of IBM than Oracle. This is a learning experience for many. Can Oracle ever be trusted again in the CDN industry after what they did to Dyn? No. The only reason to sell to Oracle is if its a fires sale and funds are badly needed to keep the company afloat.

Imperva Acquires Distil Networks

Distill Networks, one of the founders of the bot mitigation niche has been acquired by Imperva. Co-founder Rami Essaid stated that it was proving difficult to compete as a point solution in a market dominated by platforms. Bot mitigation, WAF, and DDoS protection are best sold as a bundle, which is how many vendors offer it. What does that mean for other similar companies offering point solutions? If you want to continue running as a solo point solution company, then expand or add more security features to the portfolio.  

Post Fastly IPO Commentary

Its been a month since the successful Fastly IPO and the stock price is holding steady, currently at $21/share, giving them a $1.9B market valuation. Many of us in the industry are still trying to get our head around this nice valuation. Yes, it’s a good time to be a CDN startup or start a CDN. However, it can’t just be a regular CDN providing the basic services but one focused on innovation-driven product development.

What would we like to see more of from Fastly? Become like Akamai in the acquisition department. With a $1.9B market valuation, Fastly can’t rest on its laurels. It must go on the hunt and acquire startups in the areas of security, AI, big data, microservices, containers, and cloud computing. Time is of the essence. Investors are only going to wait for so long before they start demanding things.

Can Cloudflare IPO Market Cap Surpass Akamai’s Current Cap?

The Fastly IPO is the best gift Cloudflare could have received from anyone. Cloudflare, along with Fastly, is an innovation leader in the CDN industry, one of the very few. In due time, Cloudflare will IPO. Cloud security is one of the core competencies of Cloudflare and they do it extremely well, perhaps better than CrowdStrike and Zscaler? Some say these two companies provide a different type of product. We say the security industry is converging and platforms like Cloudflare are likely to provide similar services in the future. Cloudflare is very unique in its business model, they deliver and protect 16M properties, have tens of thousands of companies signing up daily, and they are a leader in CDN edge computing. If Cloudflare doesn’t IPO at $10B minimum, that will be a disappointment.