Will Limelight's New XD Platform Threaten Akamai's High-Margin Business?

Yesterday, Limelight Networks made two related announcements; a new global content delivery platform, called the XD platform, and two new services based on that platform, called LimelightCONTROL XD and LimelightDELIVER XD. I’ve been getting a lot of questions from folks about these announcements, especially since one of the releases contained a quote from Overstock.com, a customer that as far as I had known, had only been using Akamai.

Many are asking me if this new platform is going to allow Limelight to really push into the value add services market that Akamai has dominated for so long. I’ll be posting a deeper look at Limelight's technology hopefully later in the week, but in the meantime, here’s an overview of the news, as well as an answer to the question I’ve heard the most: is this a threat to Akamai's high margin business?

Limelight's new XD platform features the same basic architecture as Limelight’s previous network, still utilizing their 15,000+ servers deployed around the globe, connected to 900+ last-mile networks. In addition, Limelight now has 8 million externally-deployed user agents, deployed around the Internet, feeding data back to Limelight about conditions on last-mile networks and Internet backbones (this is one of the areas that I hope to learn more details about during a scheduled briefing with Limelight later this week).

The new XD platform uses new edge server software that includes something Limelight calls “Adaptive Intelligence” that adjusts protocols in real-time for each connection or user request, which Limelight says significantly improves delivery performance. All existing services run on the new platform, so there is no migration for current customers as they are already running on the new XD platform. (Limelight’s delivery this past weekend of “The Wizard of Oz” for Netflix was all done on the new XD platform).

Limelight's XD platform also supports new services, the first of which Limelight also announced yesterday, called LimelightDELIVER XD and LimelightCONTROL XD. LimelightDELIVER XD uses the new Adaptive Intelligence feature of the XD platform to provide faster and more consistent object deliveries to users and LimelightCONTROL XD provides enhanced reporting and management features, including self-provisioning.

It is important to keep in mind that “CDN services” is not one single market, but a collection of sub-markets: streaming, large object delivery, small object delivery, whole site and dynamic content delivery, and overlay routing.  As I have written in the past, CDNs are starting to do a lot more than just deliver video on their networks. CDNs offer services in some or all of these areas, and also mix and match these, or parts of these, into services aimed at particular customer business problems. What Limelight announced yesterday is focused on object delivery, not whole site and not transactions. So just by themselves, today’s announcements probably don’t fundamentally rewrite the rules of the CDN industry.

But it seems pretty clear to me that today’s announcements are just the beginning and that there’s more to come. Limelight's XD platform announcement, in particular, seems like a “foundation” announcement on which Limelight will likely build other services. Globally deployed user agents that collect data on Internet and last-mile conditions – all the way to end user devices – and feed that data back to the CDN is potentially pretty important stuff.

And the Adaptive Intelligence approach seems pretty interesting too, as it extends the CDN “toolkit” beyond just resolving hostnames to edge servers that will handle the next few minutes’ worth of content requests. It’s an approach that extends down to the individual connection and out to the very end of the last mile. If it really does make Internet connections significantly faster (by using them more efficiently) on a case-by-case basis, and if Limelight applies this approach to other kinds of CDN services, like whole site delivery and transactions, then this could disrupt Akamai's value add services.

But Limelight hasn’t announced those kinds of services just yet. So today, I’d say this is a pretty important announcement for companies doing object delivery – small or large – and that it may just be the beginning of something fundamentally very significant – but we’ll have to wait and see for sure if it has any impact on Akamai's value add services.

Related Posts:

- Rumor Of AT&T Acquiring Akamai Appears To Be The Latest Of Many

- NBC and Microsoft Kick Off NFL Season Tonight, Akamai Doing The Delivery

- CDNs Need To Evolve To Offer Tiered Performance And Pricing Plans

- Featured Article: The Future Of The CDN Market

Comments

[developer]

Dear Dannny, All the time when Akamai comes with news, you try to do all to break the news and try to bring it as negative as possible. All the time when Limelight comes with news, you try to bring it as positive as possible. Its clear that Akamai is the leader in the CDN space. Akamai's revenue is 5 times bigger than Limelights....Akamai is a profitable company, Limelight isn't... Best regards

[Kevin]

I was impressed with the Wizard Of Oz streaming on Netlifix. The quality was great and I could jump to random parts of the movie and have it play almost instantly. It was just as good as jumping from point to point on a video saved on my hard drive. Just for comparison I logged into my Netflix account and watched the version in their instant watch section. (the SD version not the HD version as I am not an unlimited member) The video was being delivered by Level 3 and the quality was significantly lower. Not only did it look like a lower bitrate/codec video but the buffering was significantly worse. Jumping from point to point caused a 3-5 second delay before play resumed every time.

Hopefully Netflix adopts Silverlight for all of it's video, because that Wizard Of Oz showing sold me on Silverlight. Before that I didn't really take the time to look into Silverlight very much.

[Dan Rayburn]

@ Developer: You say, "Its clear that Akamai is the leader in the CDN space". I know, I've said that too, many times on the blog. Many Akamai investors seem to only talk about the negative things I say about Akamai, but never the positive ones.

When I posted that Akamai did not lose the BBC business, like some had reported, no one said anything:
http://blog.streamingmedia.com/the_business_of_online_vi/2008/08/news-repoting-o.html

When I confirmed that Akamai's network did not have an outage, even when a analyst reported it did, Akamai investors said nothing:
http://blog.streamingmedia.com/the_business_of_online_vi/2008/04/akamai-confirms.html

When I spent a whole day with Akamai and outlined my thoughts on where I felt they were strong, none of you Akamai investors were complaining:
http://blog.streamingmedia.com/the_business_of_online_vi/2008/04/recap-of-my-day.html

The bottom line, I have written positive and negative things about all companies, including Akamai. But many investors have blinders on and only want to hear positive things about companies they have invested money in, when they should be more concerned about the negative things.

If you were running a business, would you want to hear more of your customers positive comments, or negative ones? Negative. That way you can fix them and make things better. That's the attitude more investors should have, but don't seem to. Having money invested in a company, many times, clouds their judgement.

[Investigator]

Dan, how could Akamai shareholders say anything about your BBC article? No one on Yahoo's AKAM message board was aware of any BBC issue. The usual poster of your blog articles, newsaboutstocks, didn't notify the AKAM board of your article. No one on the LLNW board said anything about it, either. The Limelighters do like to crow about Akamai weaknesses.

No one mentioned your refuting the Akamai outage story? You will learn otherwise if you search the AKAM board for the three words: akamai outage dan

What the AKAM board has been waiting and waiting for are at least half the number of negative comments from you about Limelight as you've trumpeted about Akamai. I cannot remember more than one negative comment by you about Limelight, but plenty about Akamai. Why are Akamai's high margins an outrage to you? Why don't Limelight's low margins merit just a tad of your criticism? Where is your balance?

Also, since you (privately) note the IP addressess of those who comment here, how many people do you think are willing to post here at your blog? It's certain you've been reading the comments at the AKAM board, so why imply that no Akamai follower comments on your articles?

Finally, why did you downplay the significance of Akamai's HD feat while making Limelight's "XD" announcement sound like a significant accomplishment? Who even knows what "XD" stands for? Most commonly, "XD" means "ex dividend." Or is Limelight's "XD" something from Star Wars? At least "HD" abbreviates a word pair that begins, respectively, with 'H' and 'D'. But in your realm an indistinct "XD" outranks high-definition video?

[Dan Rayburn]

Ok let me ask you this. As an Akamai shareholder, did you notice the day Akamai's stock dropped almost $2 because AT&T said they were going to spend almost $70M to enter the CDN market and compete with Akamai?

The next day, I posted an article entitled:
AT&T's CDN Offering Not Displacing Akamai or Limelight Anytime Soon
http://blog.streamingmedia.com/the_business_of_online_vi/2008/06/atts-cdn-offeri.html

or how about when Barron's said Internap was going to "become the next Akamai" and compete with them. I wrote a post entitled:
Internap Is Not The Next Akamai
http://blog.streamingmedia.com/the_business_of_online_vi/2007/07/barrons-is-clue.html

I was the one to break the story on my blog that Akamai had won the contract for the 2010 Winter Olympics. I don't see Akamai investors having any problem with that post.

If you look at the articles on my blog over the past 2 years, I have said many positive things about Akamai. Maybe you haven't seem them all, but to imply that I only write bad about Akamai and good about Limelight is wrong. Maybe investors aren't reading many of my posts, but they seem to have no problems finding the posts they don't like.

I don't deny that I have had more negative posts about Akamai than Limelight, but I'm simply reporting what's really taking place in the market. You can't argue that Akamai is having a lot of problem with their CDN business when their revenue is declining, they are losing some big customers and management is saying they feel the pressure. The have done layoffs, lost patent suits and are not the dominating force they once were with CDN. Those are all facts. You may not like me writing about them, but those aren't my opinions.

Akamai sued Limelight and in the end, lost. During the suit I got tons and tons of email from angry Akamai investors saying Limelight is stealing from them and I should be saying how bad Limelight is on my blog. Well, what happened. Akamai lost the suit. So when I report on that, it's news, again, not my opinion. But to this day, I still get angry emails about it. If Akamai investors want to be angry, fine, but being angry at me for reporting the news is stupid. I don't have anything to do with the patents.

At the same time, I have said many times on the blog in reference to Limelight that they have to show revenue growth and are not profitable. Two things that they need to overcome in order to survive in the market. I have made that very clear. I also mentioned how they took quite a stumble right out of the gate after they went public and blogged about that.

You don't need to agree with me that I try to be fair to all companies, but if you read all of the CDN posts on my blog, you'll see that's the case. I've written more negative posts about Internap in the past than Akamai, so why aren't you complaining about that? It's because you own shares in Akamai and you have a vested interest, I get that. But then instead of making the discussion about me, why not make the discussion about the companies I am talking about?

As for the Akamai HD and the Limleight XD announcements, I wrote plenty on the Akamai announcement and my take on it. I don't need to go into that again, you can read the post. But you should also know, many companies like Limelight are smart and work with members of the media to answer their questions, pre-brief them on news and don't dodge their questions. Akamai on the other hand has taken the tactic of refusing to answer nearly every question myself or other members of the media ask. If they choose not to inform us, give us details or provide us with answers to our questions, then there is less for us to write about. Many times I want to write more about a certain Akamai subject, but the company won't answer questions about it.

I'd love to highlight in a post how many CDN customers Akamai has. How much their video traffic has grown over the past few years, how many total streams they have delivered, how much of the traffic on their network comes from video etc.. so we can see just how big of a leader they are. But Akamai won't answer any of those questions, so I can't write the post.