About two weeks ago, Akamai invited me to spend the day with them in Cambridge to allow me to get an better insight into their business and give me the opportunity to ask management and others more about the market, pricing, application delivery and a host of various other topics. They nicely gave me access to over a dozen individuals including senior management in sales, marketing, engineering, product development, investor relations and their CTO.
Added Tuesday April 8th: Since I am being asked so many of the same questions I should put it on record that Akamai did not pay for my trip to Cambridge, I paid for my own plane ticket. And no, Akamai did not see this blog post before it went live and have to "approve it" as some are asking. And as I have said before, I have never bought, sold or traded any stock in ANY public company, ever.
While some of what we discussed was off the record, there is a lot that I can talk about relating to some new product functionality, sales and marketing topics and a lot about the market dynamics, trends and my take on what the opportunity is for Akamai in the market. With so much to cover in detail, I won’t be able to cover it all in one post. I will give a run down of the highlights here and then over the next two weeks I will follow up with specific posts about their application delivery product, their StreamOS content management system, customer service, analytics, some details about the network and I will post their answers to some of the questions that readers sent in. Akamai is nicely working with me on the future posts to give me customer names, specific examples of how they are using the services and examples we can see in action. There will be more to come on that later this week.
After spending the day with Akamai, there were a couple of really key high-level feelings I walked away with. For starters, Akamai has a very_clear understanding of what customers want in the market across all of their product lines. When I was getting new product demos and talking about new functionality for their services, at no time was Akamai guessing on what they think customers wanted. It was very clear that they spend a lot of time talking with their customers, getting feedback, going through review sessions and finding out what they can do to help their customers grow. For every new product or feature they showed me, they also included examples of real customers using the service and talked about how it allowed the content owner to grow their business or gave them more control applying business rules around their content. Many companies I speak to in the CDN space talk about new products and services they are working on but many times I get the sense that they don’t know exactly what their current customers future needs are. While Akamai is clearly working on what customers need today, announcements they will make throughout the year will showcase that they are also deploying products and services customers will need two and three quarters from now. The biggest thing I saw from Akamai was that they have a very clear understanding of the market they are in.
Another key takeaway for me was that Akamai realizes that as the leader in the space, they need to do a better job of communication data to Wall Street and to investors and need to spend more time to educate customers. That being said, Akamai’s is not saying that they are now going to provide every piece of data a financial analyst wants, but I gave them some examples of how they could put out more specific data to the market while at the same time protecting their customers, and they are open to the idea. They know as the leader in the space they need to step forward and do a better job of showing the entire industry how this market is growing.
They understand that analysts are saying that they want to buy more stock in the company but need more data to be able to do that and they said they would provide more breakout on their business at their next analyst day. While I don’t deal with Akamai on a day to day basis as it pertains to their P&L, I do deal with many money managers daily and hear the kinds of questions they want answered. I think that over time you will see Akamai be more open to disclosing more data on their business.
Tied closely into the data discussions is the subject of Akamai’s pricing and the pricing trends in general which we covered in detail. I gave Akamai my feedback on their pricing, what I am seeing in the market and how they compare to other vendors specifically for video delivery. This was an interesting discussion as I learned that in many cases, Akamai may not be the right fit for customers who want commoditized services. When I gave Akamai examples of deals I have seen in the market and showed them that they were two or three times higher than competitors, they were not surprised. They made it clear that if a customer does not care about being able to use multiple services, doe not care about good analytics (not just reporting), does not require a good SLA, not concerned with geographic reach etc… then that customer is probably not a good fit for Akamai and they should go somewhere else at a lower price.
If there was one thing I walked away from after this meeting it is that Akamai is laser focused on customers who have business problems, need to apply their own business rules around their content, need very detailed analytics, need geographic reach, need multiple services and are trying to solve the entire ecosystem problem from creation to distribution. While they will gladly take customers who want the simple task of pushing bits, that’s not who they are going after. For the most part, that is why the whole "pricing war" people talked about last year was completely overrated. Yes, Akamai may have to compete harder on price for those specific deals where the customer just wants to just push a lot of bits. But for customers who are looking for much more than that and also need additional services like application delivery, pricing is not the problem.
While I have always covered content delivery for video very closely, application delivery is now something that I am going to also focus on. In my eyes the biggest market opportunity for Akamai going forward is their application delivery product. While it is a market that is just starting out, I think that in two or three quarters it will become a very big opportunity and I think it is the most under-estimated product in Akamai’s portfolio. I’ll have more on that later in the week along with details on Akamai’s StreamOS product, the content management system that was acquired in the Nine System acquisition. From the product I saw in action, which Akamai has been working on for the past year since the acquisition, and will have announcements about shortly, I have not seen another CDN that has a solution that can do even 25% of what StreamOS does. And as more content owners start to become more sophisticated in regards to the kind of transcoding, tracking, analyzing and monetizing they are going to need, StreamOS will quickly become a revenue center for Akamai.
Overall, I didn’t see or hear anything from Akamai that gives me any indication that they are currently losing market share. Yes, for video delivery they have some competition in the market, but most of those competitors are still very small and don’t have a wide product portfolio. And when it comes to doing more than just pushing video bits, Akamai clearly has a handle on the market today and more importantly the solutions that will be needed by these customers a few quarters from now.
I’ll have more posts about my visit with Akamai shortly, so please add my RSS feed to your reader to get the new posts as soon as they are updated.