CDN Industry Buzz Q1 – 2020

The CDN industry continues to move forward in 2020 despite the difficult climate. The initial shock of the first global pandemic has somewhat abated. Countries have taken drastic measures to contain the damage, closing down industries, requiring homeschooling, and demanding that employees work remotely. Despite the tragic situation the world may be in, the CDN industry has catapulted to the forefront of the new world order, providing a critical service that powers online institutions.            

Coronavirus Impact 

The impact has divided the business world into winners and losers. The airline industry, hotels, gyms, bars, restaurants, and clothing stores are hemorrhaging. On the other hand, Costco, Wholefood, Target, Amazon, UPS, FedEx, and toilet paper manufacturers are booming. Which camp is the CDN industry? The latter. As schools, companies, organizations, and governments work from home, traffic to websites, mobile applications, and online institutions has increased dramatically. 

Verizon has seen a substantial rise in network traffic. The CDNs have to, however, traffic spikes vary by provider, country, and region. In Italy, Fastly noticed a 100%+ increase in traffic. For Akamai, overall network traffic increased by 30%. Cloudflare recorded spikes of 20-40% in some regions. The estimates below are snapshots in time of network traffic during the crisis. To provide a better sense of traffic patterns, we examined last-mile traffic (Verizon) and middle-mile (CDNs).     

  • Verizon: Network saw a 75% spike online gaming, 12% spike in video streaming and 20% increase in overall traffic. 
  • Akamai: Overall traffic increased by 30% in March, the first time the CEO has witnessed this type of activity.     
  • Cloudflare: Traffic increase varies by country. Traffic from Italy was up 20-40%. At Internet Exchanges, they witnessed spikes in the range of 10-20%. 
  • Fastly: Traffic increase varies by country. In Japan, traffic is up 31.5% and in Italy 109.3%.

One area that has plummeted is live sports streaming traffic. The drop in live sports streaming traffic differs for every CDN. Akamai streams more live sports than any other CDN, so it’s going to affect them differently than say Cloudflare. However, in the case of Akamai, the rise of traffic in other areas offset the drop in live sports streaming traffic.     

In Other News

Aside from the pandemic, there’s been a lot of interesting activity in Q1-2020, including some juicy drama. StackPath recently raised $216M. That’s fantastic news, especially in the COVID-19 world. However, in a shock and awe move, the StackPath board reshuffled its executive ranks. Lance Crosby, the outgoing CEO who was once the face of StackPath is now Chief Innovation Officer. That move is questionable, and its starting to bring back memories of Instart Logic (Instart). In other news,  the industry has experienced a small-scale contraction. Here’s the latest.      

StackPath Raises $216M

StackPath has raised $216M in Series B, bringing its total to $396M. Investors include Cox and Juniper. The new round provides ample capital for StackPath to continue it’s growth, build new products, and continue with hiring in a difficult climate. However, the timing for an IPO just got cloudier. The earliest we can expect an IPO is next year, that’s if they don’t get acquired by Cox, Juniper, or whomever before the IPO. StackPath is a private company so annual revenue isn’t public, but there are rumors that revenue is below $100M. If that’s the case, they have a ways to go to reach ~$150M in annual revenue, the magic number and range that Fastly and Cloudflare announced when they IPO’d.   

StackPath Reshuffles the Executive Ranks

StackPath reshuffled its executive staff in a dramatic move. There is a new CEO, CRO, and COO in place. The long term implications are significant. Most importantly, the probability of an IPO has plummeted and the chances of them being acquired have skyrocketed. Although the new executive staff has extensive technology experience, they have no prior CDN industry experience. If Instart Logic has taught us anything, it takes more than money, degrees, and skillsets to succeed in this business. It takes fire in the belly that only a founder can provide, as demonstrated by Matthew Prince (Cloudflare) and Artur Bergman (Fastly). We predict that StackPath will get acquired this year for ~$500M to $600M, just a tad under Limelight’s valuation.                

  •  Christopher Turco: CEO
    • Last Position: Partner at Abry Partners
    • Work Experience: Sitelock, Masergy, Windstream, and Sungard
  • Justin Grindstaff: CRO
    • Last Position: VP of Sales at NTT
    • Work Experience: Level 3 and Qwest
  • Francisco Romero: COO
    • Last Position: SoftLayer COO
    • Work Experience: EDS and McKinsey & Company

Industry Contraction

Instart Logic is no more, having been acquired by Akamai recently. ChinaCache has gone caput, hanging on by a thread as its largest clients head for the doors. And in Q2-2019, Nuubit (previously Rev Software) shut down. That’s three different types of CDNs – a well funded one, a public one, and a small startup, gone. Previously, there were 32 CDNs in the industry, not including the cloud giants or Netlify. Today, there are 29 that includes everyone from the well-known Akamai to obscure startups like BunnyCDN. The sad part, there is only one startup today similar to the early days Fastly and Cloudflare, but we’ll keep the name private for now.      

Industry Updates

  • Limelight has officially launched edge functions (serverless computing), bare metal edge, and VMs at the edge.  
  • Joshua Bixby has become the CEO of Fastly. Artur Bergman, the previous CEO has transitioned to Cheif Architect. Joshua is a savvy grandmaster in business and Artur a brilliant technical mind. With edge computing at the forefront of the CDN industry, having Artur focused on the future of edge computing is a must.
  • Cloudflare has acquired S2 Systems, a startup that provides browser isolation technology which mitigates browser-based attacks. The acquisition was a fantastic purchase of an industry-leading technology product.   
  • CenturyLink has partnered with Signal Sciences and Section. Signal Sciences offers next-gen WAF and RASP. Also, they have developed features to secure microservices (Istio) and containers (Pivotal). In regards to Section, CenturyLink is using Section’s advanced computing technology to power its own edge computing platform.

Industry Observations

  •  StackPath, what does the future hold for this startup. A few months ago, it was a well funded CDN with a lot of promise. The questionable reshuffle has endangered its full potential. After witnessing the spectacular failure of Instart Logic, we’re more attentive to disruptive actions that defy logic. StackPath was on the uppity up for the last two years, transforming itself into an industry product leader. It had a small chance to become a Cloudflare-like company in the public markets but all bets are off now. The sad part, there is only one CDN startup in the pipeline with billion-dollar potential and it’s not StackPath.
  • Edge Gravity, the once-promising division of Ericsson initially focused on the CDN industry, continues to experience employee turnover. The turnover has been going on since its founding. Along the way, its business model has changed for the umpteenth time. Without its sugar daddy Ericsson, Edge Gravity would have collapsed a while ago.  
  • Comcast CDN: Comcast was once the poster child for DIY CDN. In 2012, five engineers built an internal CDN in eleven months using Apache Traffic Server. Thereafter, they got into the CDN business, selling products and services to media companies. Fast forward to the present, the CDN division has been struggling, according to believable rumors. This business model was never going to work. Media delivery is a commodity and having a US only footprint is a liability.          
  • Cloudflare vs Akamai: Cloudflare has dethroned Akamai as the most innovative CDN in the world. Cloudflare’s technology stack and platform are superior. Although Cloudflare has mushroomed to 1400+ employees, their dev team operates like a startup, introducing new features at a constant rate. Besides that, it takes < 15 minutes to sign up for their service. Expect Cloudflare’s valuation to eclipse Akamai’s and Palo Alto Networks next year. Akamai is predictable, quarter after quarter, year after year. Cloudflare is mysterious, and their upside is immeasurable.         
  • Cloudflare vs Imperva: In this matchup, we have two different business models with some similarities. Both provide CDN services, WAF, DDoS protection, bot mitigation, and focus on security. Cloudflare is a public company and Imperva was at one point. However, their outcomes are vastly different. Cloudflare is a $7B company with a high upside of potential. Imperva was taken private because its stock was floundering for the longest time. Why the discrepancy? Imperva is a security company that consumed its CDN, drowning it in its security portfolio. And Cloudflare stayed true to its roots, in that CDN has always been front and center for them, even though it doesn’t see itself as a CDN, they continued to publicize and market the heck out of it.   
  • PerimeterX is the last man standing in the bot mitigation market. Distil Networks was acquired by Imperva, Shape Security by F5 Networks, Shieldsquare by Radware, Adjust (interesting name) acquired Unbotify, and so on. Is that a good thing or bad? Today, starting a bot mitigation company from scratch is crazy. It’s a point product offered by most CDNs. The price tag for this service is anywhere from free to thousands per month. PerimeterX started in 2014 and raised $91M. They have a sound product and experienced team in place. It’s a matter of time before they get scooped up. Our guess is an acquisition of $500M.  
  • Our Top SASE Picks: In first place are Cloudflare and Cato Networks. In second place are Akamai and Netskope. Why are Cloudflare and Cato in first? Their platforms are the best of the best, especially their access products. Also, their cloud-native products were built from the ground up to run on top of their high-performance global networks. 

That’s it for now. Stay safe in the new world.