CDN Industry Buzz in January 2023
It’s been two months since our last industry snapshot. Recently, there have been no industry-impacting events. But, in the sign of the times, Netlify has laid off 16% of its staff and Edgio 10%. We understand Edgio’s decision since the merger between Limelight and Verizon is still playing out. However, the Netlify decision is surprising, given Vercel hasn’t done the same even though it’s twice the size in headcount.
It seems Netlify has gotten ahead of itself and hired too many people. And one possibility it had to let go of so many is that the business model, specifically their sales arm, isn’t performing as expected. So is it a sign that there is trouble brewing for Netlify? Hard to tell. Here is more industry news.
Rumor: Wall Street firms Cowen, Piper Sandler, and Truist Securities were highlighted in Seeking Alpha, hinting that if Akamai were to be acquired, they would be valued from $130-$150 per share. One source revealed in the StreetInsider that a private equity firm talked with banks about financing an Akamai acquisition and also held talks with Akamai. There have been Akamai takeover rumors for the last decade, and it’s never happened. We don’t see Akamai being acquired by private equity. Akamai is too proud to sell itself to a PE firm. A more likely scenario would be an acquisition by Google, Amazon, or Microsoft. That would be a Hollywood ending. But, once again, we don’t see this happening.
Security: In Q3 2022, Akamai’s security business increased to $1.3B, 26% YoY. Apart from WAF, DDoS, and Bot Protection, they have ventured deep into application access, malware and fraud protection via Account Protector, and micro-segmentation via Guardicore acquisition. That’s a billion shy from industry leader Crowdstrike. So the question is, when will they reach $2B in ARR?
CDN Revenue: Akamai announced that Q3 CDN revenue was $526M, contributing substantially to the overall $273M of free cash flow. This tells us that even though CDN is highly competitive, especially in large accounts where prices are at historical lows, Akamai is still making money off this business, enough to buy other companies. And this goes for many CDNs; although the competition is fierce and pricing low, those generating hundreds of millions in content delivery revenue are using this as a source to expand and invest in new products.
International: Revenue was substantial in Korea, Spain, Brazil, Mexico, Singapore, Hong Kong, and Taiwan, particularly in Latin America. This tells us that although inflation and the strong dollar are impacting other parts of the world, Akamai continues to do well there.
Supercloud: A new term has entered the Cloudflare lexicon, Supercloud; this is how they explain it, paraphrased, of course.
The adoption of cloud computing has changed the way we approach infrastructure, shifting from the traditional process of purchasing and installing servers to the modern practice of selecting regions and provisioning virtual machines, as well as keeping code “warm” in the cloud. While these new practices have become commonplace, there have been glimpses of a more innovative approach to cloud computing emerging, with concepts such as lambdas, edges, functions, and serverless. These technologies aim to increase developer productivity and make it easier to scale applications from a single instance to internet-level demand. This approach, which we refer to as the Supercloud, removes the need for developers to worry about details like scaling and location by simply allowing them to write code and let the cloud handle the rest.
Cornell University coined the word Supercloud and wrote a white paper that explains it in great detail. Here is an explanation in a condensed format.
The Supercloud is a revolutionary cloud architecture that allows users to easily migrate their applications to different availability zones or cloud providers. With its interfaces for allocating, migrating, and terminating resources like virtual machines and storage, the Supercloud presents a seamless network for connecting these resources. It can be used across all major public cloud providers, such as Amazon EC2, Microsoft Azure, Google Compute Engine, and Rackspace, as well as private clouds. This means that users can relocate their VMs to data centers around the globe, regardless of ownership, without the need for complex reconfiguration or state resynchronization in their applications. The Supercloud can also assist with offloading workloads from overloaded data centers to others with different infrastructures.
To enable live application-level VM migration, the Supercloud team overcame several challenges related to heterogeneity, networking, and storage. They implemented nested virtualization to eliminate the need for VM management support from underlying providers. They also designed and implemented a new distributed storage system optimized for wide-area cross-provider VM migration. It improved latency and reduced overhead by decoupling strong consistency from update propagation. In addition, they deployed a high-performance Software-Defined Network (SDN) utilizing Open-vSwitch and VXLAN tunnels that can cross cloud boundaries, along with a Frenetic controller. They also developed various solutions for addressing the migration of services that use public IP addresses. The Supercloud runs on the OpenStack platform and appears to users as a private OpenStack cloud. A new scheduler continually monitors the workload and automatically determines the optimal location for running services.
Netlify published the Jamestack Community Survey in Q4 2022, with 16,000 responses over three years, some interesting highlights.
- If given a choice, 55% of developers would instead leave their job than return to working in a physical office.
- In the past year, the use of serverless technology has seen significant growth. Last year, 46% of people reported having tried serverless technology. In 2022, adoption grew, and 70% of developers tested serverless functions, with 35% reporting regular use.
- In the past 12 months, the adoption of React has reached an all-time high, with 71% of developers surveyed stating that they use it on many or most of their projects. Alongside React, the most popular framework for React, Next.js, has also seen widespread use, with 47% of developers reporting regular usage in the past year.
- WordPress continues to be the leader in the CMS market, while another group plays second fiddle, including Contentful, Sanity, and others.
- Single Page Apps remained popular, but so have static websites.
- Netlify created a new category called edge dynamic sites, fully dynamic sites with their content at the edge. 47% of the respondents stated they built one website like this.
Edge Functions are a cost-effective and resource-efficient solution that delivers dynamic content at low latency. They are powered by V8 engine and run in isolated execution environments that do not require containers or virtual machines, which keeps them lightweight and eliminates cold boot times. One of the key benefits of Edge Functions is the Edge Runtime, which is deployed across a global network of data centers on Vercel’s Edge Network. This means that Edge Functions can be invoked in the data center closest to the user or a region near your databases, allowing for the fast delivery of personalized content based on the user’s location. Overall, Edge Functions provide a reliable and efficient way to deliver dynamic content at low latency.
This is big news. AWS now encrypts all new objects stored in Amazon Simple Storage Service (Amazon S3). S3 will automatically apply server-side encryption (SSE-S3) to all new objects unless a different encryption option is specified. SSE-S3 was first introduced in 2011 and handled all encryption, decryption, and key management processes transparently. When an object is PUT into S3, a unique key is generated and used to encrypt the data, with the key encrypted using a root key.
This update ensures that a security best practice is automatically implemented with no impact on performance and no action required from the user. For example, existing S3 buckets that do not use default encryption will now have SSE-S3 applied as the default setting, while those already using S3 default encryption will not be affected.
Fastly has introduced two new products, Origin Inspector and Domain Inspector, as part of the Edge Observability product line. The aim is to enhance the delivery of advanced edge and origin visibility and analytics. This product line allows customers to build their observability systems by providing real-time and historical data in a single view and enabling them to quickly interpret data and take meaningful action using near-instant deployment times.
It’s nice to see Fastly developing new products again. They were in a dry spell for quite some time. However, the Fastly team needs to start building a suite of database products if they haven’t started yet. An object store and relational database are a must. It will complement their edge functions and help them compete against Akamai and Cloudflare. Their competitors offer multiple database products.
Our team just came across an open-source product called Caddy Server. Caddy is a web server developed in Go that is a reverse proxy and load balancer with many features. Supposedly it is easy to use, performant, and secure. It has several features that make it an attractive choice for web developers, including automatic HTTPS with Let’s Encrypt, a simple configuration syntax, and support for standard web protocols such as HTTP/2, WebSockets, and FastCGI. It is commonly used for hosting static websites, reverse proxying, and as a load balancer. This product joins Nginx, Apache Traffic Server, Pelikan, Squid, and others.
The burning question we have is, what’s the next industry-impacting event? We believe there will be consolidation, where one public CDNs acquires another. So that’s it for now.