Apple Has Plans To Bring CDN In-House, But To What Extent Is Unknown

With Apple having already announced their plans to build its new $1 billion data center in Maiden, North Carolina, folks I have spoken to inside Apple told me that once the new data center is completed, Apple plans to have a more active role in doing their own content delivery.

While this won't be happening anytime soon, since the data center won't even be completed this year, it does indicate that over time, third party CDNs like Akamai and Limelight could very well lose a large portion of Apple's business. While it's way to early to speculate what kind of content Apple will deliver and in what volume, this strategy is nearly identical to what we've seen Microsoft do over the years.

In 2007, third party CDNs delivered more than 95% of Microsoft's traffic. But only three short years later, Microsoft projected that third party CDNs will only account for about 40% of their traffic. While this might scare some investors into thinking that a new trend is taking place, whereby content owners start building their own CDNs for delivery, that's not the case. There are very few companies the size of Apple, Microsoft and Google who can spend hundreds of millions of dollars to build out a CDN with the scale and performance that they need, especially when it comes to video.

It is however something to keep a close eye on as we know that Apple has been a long time customer of Akamai and recently, started using Limelight as well. What we don't know is how much business is potentially at stake with these companies since neither of them will comment on their business with Apple or the size of their deals. But it's also something to keep an eye on for another reason. We keep hearing the CDNs talk about Blu-ray quality streaming and more HD quality video coming online and how it will help fuel the growth of their business. While I agree with them that it will help fuel the growth of the CDN industry, I disagree with them that it will be a catalyst anytime soon.

But what happens if Apple and Microsoft start producing higher quality content, like they will, yet start doing a lot of that delivery of it themselves? What impact will that have on the CDNs? While Microsoft and Apple clearly aren't the only two content creators who can help fuel the growth of the industry with higher quality content, they are two of the largest. It's something to keep an eye on and I expect we'll know a lot more details around this come next year.

Related Posts:

- CDN's Delivered 95% Of Microsoft's Traffic In 07', But Only 40% By Next Year

- What's The Barrier To Entry In The CDN Business? A Few Hundred Million

- Apple Moves To Dual CDN Vendor Strategy: Now Using Limelight With Akamai

  • Maurice Pelletier

    Hosting others content like they do with iTunes U should not be overlooked as part of Apple’s reasoning behind this kind of massive data center. When folks commit to an amazing educational CDN like iTunes U they and their users are exposed to other Apple technologies and products. Another form of “Halo Effect”
    There is real value here. Think of the reach educators have by using this service…the devices they reach! Desktops Mac/PC, laptops, iPhone, iPod, Apple TV.

  • John

    Not my field, but from the location of Apple’s new facility I guess Apple is looking to host a lot of content as opposed to bringing content closer to the end user. Apple may still need Akamai and others to deliver this content more efficiently.

  • http://www.google.com/reader/shared/vincent.rais Vincent Rais

    I can see how Microsoft’s data center deployments (and own CDN rollout) affects Akamai/Limelight revenues, but with Apple I only see the build of one, huge data center which, for content delivery on a global scale, should have little impact. It’s when they’ll start building network/POPs around the world is when we should start taking notice, at least from a CDN perspective.