VeriSign Sells Kontiki CDN Business For $1 Million And Stake In New Company

VeriSign just filed its 8-K detailing the sale of the Kontiki business to a new entity, Kontiki Inc., which is a majority-owned subsidiary of MK Capital. "VeriSign received compensation of $1 million and 3,980,000 shares of the Purchaser's Series A Preferred Stock".

MK Capital is already closed for the day so I'm not able to ask them if they will say how many outstanding shares are in the new company and what percentage VeriSign owns. While the rumored price being talked about last month was $40 million, it's really hard to know what the deal is valued at without knowing how many outstanding shares there are and what the new Kontiki is valued at.

As I predicted back in December, I always expected that VeriSign would exit the CDN business once they began to contemplate whether or not they wanted to stay in the market with the service. Come April, it was already clear that a deal would be done to take them private.

The kontiki.com domain now goes to a website with details on the Kontiki acquisition and includes a new Kontiki logo I have never seen before. Don't know for sure if that will be their new logo and brand but I'm sure we'll find out soon enough.

NewTeeVee.com has posted an interview from today with Eric Armstrong, Kontiki's new president.

Online Video Mergers and Acquisitions: Wall Street's View

At the Streaming Media East show on Tuesday May 20th, we have a special session entitled "Mergers and Acquisitions: Wall Street's View". Acquisitions, partnerships, funding, and failures are all making headlines at an increasing rate.

At times it is difficult to understand why these events occur, what drives them, who is involved, and how they affect the rest of the industry. This panel of venture capitalists, equity research analysts, and others will discuss their views on the state of the markets, what gets them excited, what concerns them, and how it could impact the way you do business.

Confirmed speakers include:

• Moderator: Brian Essex, Analyst (formerly at Morgan Stanley)
• Colby Synesael, SVP, Equity Research, Telecom, Merriman Curhan Ford & Co.
• Kevin Ryan, Co-founder, Chairman, Panther Express
• Neil Squeira, Partner, General Catlyst Partners
• Ray Conley, CFA, Palo Alto Investors

Have a topic or question for any of the speakers you want to see addressed? Submit it in the comments section and we'll add it to the Q&A portion of the session.

Registration is still open and you can see all the various pricing packages, including a one-day ticket on our website. Six years since we took over the StreamingMedia.com business and we've still managed to keep the conference very affordable for everyone to attend. A full two-day conference ticket is only $895.

CDNs Vendors Raised Nearly $300 Million In Past 18 Months

In the past year and a half, more than 15 video delivery vendors, including P2P based providers, have raised almost $300 million in capital. CDNetworks, EdgeCast, Panther Express, Grid Networks, Highwinds, Velocix, Itiva, Move Networks, Pando Networks, Rinera, BitTorrent, ChinaCache, Rawflow and Oversi combined raised $282.85 million in 07' and 08'. And that number does not take into account other CDNs who have already raised money but have not yet announced details. In addition, there are also at least four providers, some new, some not, who are out in the market raising a new round.

When all is said and done, at the end of this year, I expect we'll have over $400 million raised by CDN vendors for 2007 and 2008. And with the market size for video delivery services in the U.S. being around $450 million in 2007, that's a lot of money raised as compared to the size of the market. I'm afraid that many investors are going to need the CDN market to grow a lot faster than it can in order for them to see the kinds of returns they are probably expecting.

Three More CDNs Launch, Market Too Crowded

Amazingly, the number of new content delivery providers in the market continues to climb with three new CDNs launching in the past few weeks. The new entrants, which I will cover next week are Jittr Networks, SimpleCDN and EdgeStream. I think it's great that more companies are offering services in the market and that investors seem to have no qualms in pumping more cash into the industry. But we're now looking at over 40 content delivery networks and it's just too many. There is not enough business out there today to support so many providers, all offering different variations of the same service. On Monday I will be updating the list of CDNs that I track in the industry at www.cdnlist.com

I think choice is great and why not have as many choices as possible for any product or service? The problem being, in the long run, many of the CDNs are not going to be able to grow their revenue to meet their investors expectations. I keep hearing almost everyone say how they are going to give Akamai or Limelight a run for their money, but nearly all of the new CDNs, or those who have been around for a year or so, will do at most, 5-7% of Limelight's projected 2008 revenue. So far, only Level 3 is showing any signs of really growing their CDN revenue, based on the data they gave out last week during their earnings call.

That's not to say that all CDNs are trying to go after Limelight or Akamai or even want to become that big. A rare few of the CDNs make it clear that they don't want to be the size of Limelight and if they do $15 million this year they will be happy. Kudos to them for not giving into the market pressure of a new company thinking they have to launch to the market saying how they are going to take down the number two provider. What's wrong with being a smaller, profitable company not in the top three based on revenue? Nothing. Better you set expectations properly, your own and your investors, and survive for years to come in the market.

I hate to say it, but we're going to see a lot of cracks in the CDN sector starting 18 months from now. The market simply can't sustain so many vendors. If the market size was five or ten times what it is today, then all of these providers would have a shot, but it's not that big and won't be that big 18 months from now. For all the new CDNs, none of them seem to really have any idea what percentage of the market they think they can grab. While many of them say how they can take business from other providers, rarely do they say what percentage of the market they think they can get. I also don't hear from any of them what they think the market size is for CDN services in the U.S.

I'm all for new players in the market, giving everyone a fair chance, providing customers with more options and having the industry grow as a whole. But when you have so many providers in the space, all saying the same thing; we are cheaper than Akamai and/or our delivery is better quality, especially for high-bitrate video, then you can't expect to grow your business for the long run. And with more CDNs in stealth mode still waiting to launch, and telcos like AT&T and others taking more of an interest in getting into the CDN market, the number of providers for CDN services is going to take a real hit when the VC money starts to run out.

Latest Update On Akamai/Limelight Patent Suit and Potential Limelight Sale

I have been getting a lot of requests for an update on the Akamai and Limelight patent suit, so here are the latest details I have. Last week, April 17th, Akamai filed a motion for permanent injunction against Limelight Networks. It's expected that a ruling on the injunction will come in the next few weeks and there is a pretty good chance that the motion will be granted. If that happens, Limelight is expected to file for and be granted a stay of that motion. Once that happens, it basically means that this suit will go on for at least another year, if not more, unless both parties come to an agreement, which I don't see happening.

While none of this is really news as this outcome has been expected since the jury ruling, I think that once all of the motions relating to the injunction are done, the two companies most interested in purchasing Limelight, AT&T and BT, could once again resume negotiations. In my eyes, it is just a matter of when Limelight will be acquired by a telco and not if. Shortly after the jury ruling, Limelight was offered a buyout for about $8 a share by a telco, which is a pretty good offering in my eyes. (I don't own any shares in Limelight or any other public company) Even at that price, Goldman, which owns just over 35 million shares last I checked, would still walk away with well over $100 million.

Limelight needs the resources of a larger company to really take their business to the next level and to accelerate revenue growth. They can still grow and maintain business as a stand alone company, but the resources of a larger company would give them a better shot in the market for the long run. Limelight is facing at least three patent suits by Akamai, Level 3 and Two-Way Media (more on Two-way later in the week) and at this rate, the lawsuits will take their toll on the company in terms of resources and focus, in addition to cash.

I hope for their sake and for the industry that Goldman isn't going to be too greedy and a deal can be worked out sooner rather than later. There is a huge gap between Akamai, Limelight and the number three CDN in the market in terms of revenue, and I think it's best for the industry to have as many top players as possible.

Move Networks Rasies C Round Totaling $67.9, Not $91.3 Million

Move Networks announced today that it has raised $46 million in a Series C round led by Benchmark Capital which includes Cisco and Comcast and Televisa, as well as previous investors Steamboat Ventures and Hummer Winblad Venture Partners.

While many sites, including TechCrunch, are reporting that Move Networks has raised $91.3 million to date, some bloggers are doing the wrong math. Move raised $11.3 million in 06', $10.0 million in 07' and $46 million in 08'. While many announced that Move had raised $34 million back in Q4 of 2007, this was not the case. Move raised no money in Q4 of last year.

The $67.9 million is still a large number, but a lot less than over $90 million. Move is an interesting company to watch. Last month I had the opportunity to sit down with Move's CEO John Edwards and was able to get a really great insight into their current business and details on what Move is working on with Microsoft. There are some really interesting things that Move is thinking about in terms of where content delivery is going, how to scale it and what the broadcasters are going to require. We should see some very interesting announcements from Move later in the year.

Limelight Launches New Website, Includes New Focus On Enterprise and Government

Cruising some websites on Sunday I noticed that Limelight Networks launched a new website over the weekend. The new site contains a lot of video and has a lot more defined message around Limelight's core product offerings as well as their new slogan "deliver brilliance". The biggest piece of new content is the focus Limelight is placing on the ecosystem. A new section on their site talks to all of their partners for web development, transcoding, content management, ad insertion and various other solutions in the stack.

I've mentioned before that to me, Limelight was not previously doing a good job of really letting customers and the market know that they deliver more than just video. The new website address this by giving details on the types of content they deliver and how it applies to specific business problems for specific verticals. They also talk a lot more to object delivery, website acceleration, document distribution, online software fulfillment and online game distribution.

Additionally, Limelight has added new verticals on their site including corporate (enterprise) and government. Previously, Limelight had only focused on the media and entertainment market so the addition of enterprise and government is a new focus and potentially a new revenue stream for the company, if they can show some traction with customers in those new industries. It will be interesting to hear if Limelight has newly dedicated account managers to focus solely on government business, a segment of the market that Akamai has ruled to date, and whether or not Limelight is currently or will soon be a certified GSA vendor.

It's good to see Limelight begin to deliver a lot more messaging to the industry and I expect they will soon follow this up with specific messaging and new data for Wall Street. They know it is desperately needed and I expect they will address the need shortly. With most of the trial motions expected to be over within the next few weeks, I think we'll begin to hear a lot more from the company in regards to customers and product announcements. In addition, it makes the acquisition talks that are talking place more relevant since some of the questions around Limelight's appeal will be clearer. While I'd still like to see Level 3 make the acquisition, if Limelight gets acquired at all it's going to come from a telco like AT&T or BT. I'd be willing to bet anyone a steak dinner it won't be Akamai or Microsoft.

Disclaimer: Content delivery networks Limelight, Akamai, Internap, Level 3, EdgeCast, Ignite Technologies and NaviSite have all sponsored the blog or are current sponsors.

VeriSign To Sell Kontiki P2P Division: Rumored Price Around $40 Million

VeriSign is expected to sell its Kontiki P2P division this month to a group that has been previously involved in the company. Barring any last minute problems, the deal should be closed and announced in the next few weeks. Whether or not they will keep the Kontiki branding remains to be seen but they are expected to re-focus their offering to target the enterprise market. While VeriSign won't comment on the sale, the "rumored" buy back price people are circulating in the industry is around $40 million, which would be about 3x revenue.

P2P Company Pando Networks Raises $8 Million

New York based Pando Networks, a P2P content delivery network has raised $8 million dollars in new money from existing investors. Reports that Pando is looking to raise $20 million are incorrect. Combined with the previous funding, Pando has raised $20 million dollars to date but it not looking to raise $20 million in new funding.

Pando Networks plans to use the money to build out its sales and marketing force. Back in November I profiled Pando Networks win of the NBC Direct contract with should be going live in the next few weeks.

CDN Highwinds Raises $55 Million, Targeting Resellers

This morning, Highwinds announced it had raised $55 million from General Catalyst Partners and Alta Communications. Highwinds plans to use the capital to do additional build out of their network named "RollingThunder" which includes a CDN offering.

While most CDNs are all going after the same customers, Highwinds is taking a different approach by going after those who want to resell content delivery services to their own clients. To date, most CDNs either don't have a reseller program at all or their tool sets don't support resellers properly. Resellers need products that allow for sub accounts, reporting based on multiple directories, self provisioning and many times custom branding. To date, most CDNs don't deal with resellers well, don't have the proper customer support for resellers or don't have the tools to allow for a lot of the specifics resellers need.

For me, the real question is whether or not there are enough resellers out there to really scale a business past $30-$40 million a year in revenue. I know some are going to point to Akamai's 2007 revenue of $636.4 million and say that about 20% of it came from resellers and hence the market is there, but we don't know how much of that nearly 20% in reseller revenue came directly from Akamai's content delivery services.

With Panther Express and Velocix (CacheLogic) having announced their funding a few weeks ago and now Highwinds, that pretty much leaves only Pando Networks, BitGravity and Voxel.net as the remaining CDNs from the list of 30 who have not raised money in the past 12-18 months or are public companies.

Entriq Acquires Dayport, Rumored To Be Around $45 Million

Entriq, a provider of digital rights management based solutions announced today that it has acquired video workflow company DayPort. While terms of the deal were not disclosed, various sources say Entriq valued DayPort at around $45 million, which seems about right.

This is one of those deals where the synergy between the two companies seems dead on. Entriq provides content owners with the ability to add digital rights management and commerce solutions for video and DayPort provides much of the content workflow including transcoding, publishing and syndication. By combining both company's platforms, Entriq says they will enable customers to "publish, approve, control, syndicate, monetize and analyze their digital media business reaching mobile, broadband, streaming, podcasting and IPTV environments."

More deals like this should be coming in the industry. Right now, there are a lot of small players in the space, in many product verticals, who would benefit from combing products and services and operations to better compete in the market.

Why Level 3 Should Acquire Limelight Networks

While many seem to think I am crazy for thinking anyone would acquire Limelight, it would make sense for a company like Level 3. Yes, we all know Level 3 has had some problems with the integration of all the acquisitions it has made as of late. But putting that one hurdle aside, there are many reasons why this would make sense in particular for Level 3.

For starters, everyone seems to think that anyone acquiring Limelight would continue to operate their network. But for someone like Level 3 they don't need the Limelight network in operation. They need their sales reps, their customers, their revenue and their hardware. Transition as many customers as possible over to the Level 3 network and shut down the Limelight network. When Akamai acquired Speedera and Nine Systems they didn't keep those networks functioning. They took the customers and terminated the networks. Same thing happened when Internap bought VitalStream.

I don't think anyone would argue that you could do all of that overnight. It does take time and requires a great deal of work, but it's not difficult considering the product Limelight is selling to customers is very straight forward without a lot of customization. And any company that acquires Limelight would probably lose 20-25% of the customer base anyway so you'd be talking about having to migrate roughly 750 customers. That's not rocket science.

Would a company that buys Limelight have to pay some sort of royalty to Akamai while they transition the customers over and shut down the Limelight network? Maybe. But they might also use the appeal process to do all of that by the time the appeal goes to court and then show that they have terminated the product that was in question.  If that were to happen, I would expect Akamai would then file suit against Level 3 for the same 703 patent, which in my eyes they have not done to date as Level 3 has not been a serious threat to Akamai yet.

Some also say that Level 3 could not do this as they are not a real player in the CDN space and don't have the network to transition the customers to. That's incorrect. They have more customers for CDN than most realize, are continuing to add capacity each quarter and will become the number three CDN this year based on CDN revenue in the U.S. They are very quickly becoming a real option in the space and with the integration of the Vyvx products and the applications they acquired when they bought Servecast, they are laying the ground work for a true eco-system offering of more than just shipping bits.

Most would say that by Level 3 buying Limelight it would make them a target for a suit by Akamai. But they are missing the bigger picture. Level 3 is already lining itself us for a patent suit by Akamai. Based on the broad interpretation of the 703 patent, every CDN is already in violation. So why hasn't Akamai gone after Level 3 or any of the others? Simple. Even for Akamai a lawsuit is a lot of work and costs money. They are not going to go after any CDN until the CDN is a real threat to them in the market and doing enough revenue to make it worth their time. Cable and Wireless was around for years before Akamai went after them. Speedera was too. It wasn't until Speedera was getting traction in the market and revenue before the suit was filed.

And look at Limelight. Limelight was founded in 2001, yet Akamai didn't file the suit until five years later, when they were doing some real revenue and had become a real competitor to Akamai. Level 3 acquiring Limelight does not make them more of a target as they are already in the cross hairs and Level 3 knows it.

When Level 3 bought the SAVVIS/Cable & Wireless CDN assets they were buying a large patent portfolio to go along with the 800+ other patents in their portfolio. Clearly Level 3 knew what they were buying, knew the outcome of the Cable & Wireless and Akamai lawsuit and they would have spent a lot of time examining what their legal exposure may be with the patents before the acquisition. Based on Level 3 buying going through with buying the assets, they clearly feel they are prepared to defend whatever comes their way.

Is it an easy deal for Level 3? No. But it's not a crazy one and with the right pieces in place, Level 3 becomes the number two CDN overnight in terms of revenue and customers. And for all the people who still want to say how successful Akamai was in the Cable & Wireless suit, remember that Akamai sued Digital Island who was then bought by Cable & Wireless even though Digital Island was being sued. And we don't know how "successful" Akamai was in that suit as Cable & Wireless went bankrupt in the U.S. before any of the rulings were appealed. The one time cash payment by Cable & Wireless to Akamai was made in the final days of them closing down operations in the U.S. and was a small enough amount that Akamai didn't even need to mention it in any of their filings. (At least not that I could find)

And even with the ruling two years after the suit started, C&W said, "The injunction is a legal technicality about a legacy part of the CDN that was abandoned some time ago". So the idea that someone like Level 3 could take what they need and shut down the Limelight network is completely possible.

The biggest hurdle I see to this is the debt that Level 3 has and the problems they have had with all the integrations in the past. Those could potentially be deal breakers that keep this from happening. But if all the right pieces fall into place, Level 3 could make out nicely acquiring Limelight and propelling itself to the number two spot in the market.

CDN Panther Express Raises $15.75 Million In Series B Round

As expected, this morning Panther Express announced it had closed $15.75 million in series B funding lead by Index Ventures. Gold Hill Capital and existing investor Greylock Partners also participated. 

In the press release,Panther does not gives any real details on what they will use the money towards other than to say for "international expansion" and "further infrastructure investment". Currently Panther has 250 customers, 50 of which are based in Europe.

The big question I have is whether or not Panther Express will use any of this money to build out their network to support streaming, since right now they only support video delivery via progressive downloads.

Note: I have a briefing call with Panther Express later in the day and will update this post should I get any additional details.

JumpTV Selling Their CDN: Shows It's Too Expensive To Operate Your Own Network

Last week, JumpTV announced that it was looking to sell its content delivery network and would be "refining its strategic focus toward high-value sports and Hispanic broadcast content." This is a great example of where trying to own and operate your own network specifically for the delivery of video does not makes sense. In the release, JumpTV said "The content delivery network is currently a significant cost center for the company, and the Company believes its sale will enable it to lower its ongoing operating costs."

When asked by investors who their biggest competitors are in the market, some CDNs choose to say "companies who do it themselves". That may be the case when it comes to the static caching of images and HTML, but for video, nearly no content owner builds out their own CDN. Yes, Google and MySpace deliver the majority of their video content themselves, and AOL does a lot, but how many companies are truly like those three? Certainly not JumpTV.

Delivering video to a mass scale, like JumpTV was doing for over 5,500 live events in the last quarter alone, takes a lot of money, a lot of effort and more resources than most realize. Yes, it is not rocket science anymore, but it is very capital and man-power intensive. For all the investors that think any company with some money can enter the market and easily give the top CDN players a run for their money, it's not that easy. And when any content delivery network says that "customers doing it themselves" is the bigger competition they face, ask them for what service they are talking about. It's not for video.

Think about some of the biggest users of video on the web today; MLB, NBA, CNN, MSNBC, FOX, ABC, CBS etc... none of them are building out their own CDNs for video delivery. The CDNs have no major threat from content owners building out their own distribution networks for video delivery.

Akamai, Limelight and The Writers Strike: What It Really Means

Limelight put out earnings this week and once again, many analysts are unfairly comparing Limelight and Akamai numbers and data. Why is it that so many analysts and reporters are willing to make very specific statements about CDN providers, but do so using general terms? Sounds confusing just saying it but I'll prove my point in a second.

Yes, there is no question that Limelight did not show revenue growth from quarter to quarter and its yearly revenue guidance of ($136M) is a lot less than the pre IPO revenue guidance they gave ($179.2) for 2008. Investors want to see revenue growth quarter to quarter, but to me, who has no vested interest in either Limelight or Akamai's stock, the number of net new customers by Limelight each quarter continues to grow very well. Continued, long term, steady growth of customers is a good benchmark. Yes, being profitable is important, I get that, but this is not a dash to the finish line. This market is only just getting started and for Limelight, they are in this for the long term. And even without revenue growth quarter to quarter, the next closest competitor to Limelight in terms of CDN revenue for the U.S. has less than 25% of Limelight's revenue, so its not like anyone is bumping them from the number two spot.

I find it interesting that no one is saying Akamai only had 19 net new customer for the quarter and Limelight had 170? Why is no one comparing that and saying look how good Limelight is doing over Akamai? Because it is not a fair comparison. But that does not stop analysts and others from comparing Limelight's 15% decrease in the monthly average customer revenue, versus 20% increase by Akamai. That's suppose to be a fair comparison? What percentage of Akamai's revenue came from CDN services last quarter? How many new CDN customers did Akamai sign up? We don't know as Akamai won't break out those numbers. But did anyone stop to think that Akamai's CDN business could of been flat for the quarter as well but all of the other higher grossing products they have made up for it?

Limelight lives or dies by two things. It's CDN product, specifically for video delivery and the media and entertainment customers, which is its core vertical. Akamai offers multiple products not related to video and targets other verticals like enterprise and government. So when reporting numbers, we know exactly what product or service customers are buying. With Akamai, we don't.

Now some will say that Akamai stated on their call that a) the writers strike did not affect their business and b) they saw significant seasonal strength in media and entertainment. I agree with both of those statements, BUT, they are general statements. Did the writers strike affect Akamai. Absolutely. Doesn't Akamai have just as many if not more major broadcasters on their network than Limelight? While it did affect them, Akamai answered the question correctly when they said that it did not affect their business. Since Akamai is diversified in their product line, the writers strike had little impact on their revenue overall. But is that then fair to compare that to Limelight since they don't offer those other products? No.

And as for Akamai's statement that they, "saw significant seasonal strength in media and entertainment..." I don't doubt that. But for what product? Why does everyone assume that just because it is a media and entertainment customer that means they are doing video? Media and entertainment customers need other services Akamai offers as well. Why doesn't anyone question the general statements many companies put out and ask for the data behind it?

And before anyone writes in and says I am taking sides or am defending Limelight, I'm not. Yes, Limelight is a sponsor of the blog but Akamai has also nicely been a sponsor of the blog on multiple occasions. If the roles were reversed, I would still be making the point. It does not matter who the company is to me, it's the principle of how data is reported and conveyed to the industry and the market.

I probably saw over two dozen articles yesterday alone about Limelight's earnings. One said, "...it’s at least as likely that customers are pulling away from Limelight because of the costly patent lawsuits brought by Akamai and Level 3..." Really? That's a very specific statement, yet made in a general term with no details. Likely based on what? Customers you spoke to? Something Limelight said? Something you can point to? None of the above. If anything, Limelight's continued growth of net new customers each quarter says the opposite.

No, I don't own any shares of Akamai or Limelight. I have never bought, sold or traded their stock ever. And I know some investors are going to say that I am not a financial analyst so what do I know. That may be. But don't you think that is exactly what is needed in today's market? People who don't have any vested interest in public companies questioning what they say and asking for details on the products that make up the numbers? Anyone can look at a spreadsheet and P&L and all of that. But all of those numbers come from the products and every time I listen to a earnings call, nearly all of the questions are about ARPU and lots of financial data. That data comes from the products and services being sold. Why not ask more about them so you can see how the numbers evolved into what they are?

I'm sure some will say, why the hell do I care about this so much? Why am I always ranting about apples to apples comparison when I have no vested interest in the stock of any of these companies? The answer is simple. I want this industry to grow. I have been in this market for almost 15 years and I want to see it grow for another 15. In order to do this education, data, metrics and examples are the_best way that is going to happen. Maybe I am a fool for wanting companies and Wall Street to be more straight forward with info, ask the right questions and provide real data. I know when it comes down to it it's all about politics and the companies decide what data they put out in the market and what "perception" they want the industry to have.

My relative Sam Rayburn, former Speaker of the House said it best with the quote of "you can never remove politics from politics". That's what this industry feels like to me sometimes, politics.

More VC Money Coming To CDNs and P2P Networks

With over 30 CDN and P2P providers in the market today (www.cdnlist.com), you'd think the VC money would stop flowing to content distribution networks, but it's not. Over the first half of this I expect we'll see at least three more companies who are expected to announce funding. Looking at my list of 30+ providers, there is almost no company left on the list that hasn't raised money. I can't remember a time in the CDN market, even dating back to 1999, when nearly every company in the CDN industry all raised capital within nearly 12 months of each other.

We've seen Limelight Networks go public and EdgeCast, CacheLogic, CDNetworks, Grid Networks, BitTorrent, ChinaCache, Move Networks, Itivia, Rawflow and Rinera Networks all raise money within about the past 12 months. I expect the next round of funding announcements this year to come from Panther Express, Pando Networks and BitGravity and if that happens, nearly every company on the list will have raised money or is a publicly traded company.

This worries me. While it is great for the industry right now, over time, the market can't sustain 30+ providers. I fear that 18-24 months from now we're going to see quite a consolidation in the CDN market and only about half the providers will be left standing. The CDN market keeps going in the same cycle every couple of years. In 1998 there were about half a dozen CDNs. In 2001 that number surged to a few dozen. Then in 2004 we were back down to about six providers, and three years later, back up to a few dozen. It's a roller coaster ride for the CDN market and I really hope that the CDN and P2P providers are taking note of why companies failed in the past, where they went wrong and are aware of how not to repeat the same mistakes made in the market in years past.

Yahoo! Buys Maven Networks: Revenue Multiple Too High

As I'm sure you've read by now, Yahoo! announced earlier in the week it had acquired Maven Networks for approximately $160 million. While I see some of the synergy of the deal, I think Yahoo! paid too much. Based on the price tag, Yahoo! paid about 11x the sales revenue that Maven had in 2007. It's a good deal for Maven shareholders, but for Yahoo!, that's a high evaluation in my eyes in today's market.

Clearly, Yahoo! bought Maven for their technology platform and IP, but at some point, you have to also look at the buy vs. build numbers. Acquiring Maven gives Yahoo! a platform today, as opposed to them having to build one themselves, but at what cost? Considering the state of the rest of Yahoo! business, selling a software video platform is very different than the way Yahoo! has sold everything else for years. And not really knowing what Yahoo! strategy is as a whole moving forward casts doubt on what will truly become of a Maven/Yahoo! integration.

While it sounds like the product will still be branded under the Maven name, Yahoo! should re-brand this immediately and bring it under the Yahoo! brand. With the sate of flux that Yahoo! is in as a company, I think it needs to do everything it can to put forth one clear brand, strategy and core set of products. I think over time the Maven platform could be a good core product for Yahoo!, but only time will tell how successful the integration will be and whether or not Yahoo! sticks to the set of current products offerings they have in the market today. In my eyes, it's hard to for Yahoo! to say to the market that it is dedicated to any product platform, while at the same time laying off 1,000 employees. How much will Yahoo! truly support the Maven platform with additional dev work and new products features and functionality?

CacheLogic Raises $25 Million, Starts New Project With The BBC

As expected, CacheLogic has officially closed a fourth round of funding totaling $25 million and has now raised just over $50 million to date. The company will be making some announcements shortly about some new large customer wins and will be focusing on a new marketing effort designed to showcase their P2P offering in a new light. They have also recently won a contract to work with the BBC to help with the expected traffic surge when the BBC's iPlayer comes out of beta.

It looks like P2P technology still has the most traction outside of the U.S. for now.

CDN Funding Continues: CDNetworks Raises $96.5 Million

Hot on the heels of EdgeCast announcing it had raised $6 million dollars, content delivery provider CDNetworks announced late yesterday that it had raised $96.5 million in private placement. For CDNetworks, this funding now gives them the ability to make a serious push in the U.S. market for content delivery of video and static content. The funding announcement also coincides with the launch of a new company website.

To date, CDNetworks primary business has solely been in Asia but over the past few months they have been out in the U.S. market selling services and ramping up their sales team. From the pricing I have seen in RFPs, they are not the low cost leader in the space and they are not, I repeat, not undercutting Limelight and others on price just to win market share. I think all CDN providers understand by now that they can't give this stuff away just to win market share and expect to stay in business. The pricing "war" that so many analysts are "speculating" on is completely overblown in the market. Just because a new provider enters the market does not mean they are selling on price.

VeriSign Expected To Sell Their CDN Business

A few weeks ago, VeriSign held they annual analyst day where they unveiled new details about the company's strategic direction for 2008. Their newly announced strategy is to sell a number of businesses in the company's portfolio, such as communications, billing and commerce and focus instead on their core business and a smaller group of products and services.

While VeriSign stated that it would review its content delivery offering over the next six months and decide whether or not to keep it, the CDN business is already being shopped around to other CDNs and content companies who many want to own their own network. While all the major CDN players are looking at the assets, it's unlikely any of them will be a good match for the business. VeriSign's CDN business really only consists of the P2P offering they acquired from Kontiki and has very little in the way of any traditional CDN products, so it's really a P2P infrastructure sale. Most CDNs already have a P2P offering they have been working for some time or don't have an interest in P2P until there is more traction in the market.

There is also the possibility the CDN business could be sold along with other products and services in a larger deal or all together if VeriSign as a company is sold. A few of the telcos not yet in the CDN business are currently investigating whether or not to offer a CDN product and this could be a cheap way for them to potentially enter the market with a P2P offering to start. The real question is how much revenue the CDN business is doing and what it's assets are worth. My guess is that VerSign will probably do about $8-10M for 2007, but I don't know for sure. One thing I would be willing to bet on is that VeriSign would unload it for a lot less than the $62 million in cash they paid for it.

It will also be interesting to see how this affects a few of the major broadcasters in Europe including the BBC, Sky and Channel 4 who all currently use VeriSign's P2P solution for video delivery. Although based on a story yesterday by PaidContent.org, it sounds like Sky is abandon its P2P player and moving to a browser based system.

The biggest speculation I keep hearing is that Limelight Networks will buy the business so they can acquire a P2P offering and add some additional revenue. But the more that comes up, the more I think it's not a fit for Limelight Networks as a company and if they were to do any acquisitions, they would have to be all stock based and one would think VeriSign does not want stock. My feeling is that VeriSign will make the decision very soon and part with the business very shortly. The real question is to who.

CDN and P2P Funding Continues: Grid Networks Raises $9.5M

Yesterday, Grid Networks announced they had raised $9.5M led by Panorama Capital and two strategic partners who's names would be disclosed in the future. Not surprisingly, Grid says they will use the money to expend the development of their "network-friendly P2P service" and grow their distribution business.

Grid is the first of multiple companies who will announce investments before the end of the year. EdgeCast, CacheLogic and Panther Express are all expected to make funding announcements in this quarter.

Best Buy Launches Online Video Sharing Service, Takes Equity Stake In Mydeo

Today, Best buy announced the launch of their new fee based solution for consumers to store and share videos on the web. The solution is powered by Mydeo, a UK based company that has been offering online tools for the sharing of user-generated content for a few years. Best Buy has also taken a minority, equity stake in Mydeo, the terms of which were not disclosed.

Plans for the new Best Buy service start at about $7 a month and include 100 minutes of video hosting and video lengths up to 30 minutes each. The service will be merchandised online and in Best Buy’s retail stores and is already live on the web at: bestbuy.mydeo.com

The Outlook For Investment In The Online Video Sector

I'll be moderating a panel at the Streaming Media West show in two weeks asking analysts how Wall Street looks at the online video sector, how it values companies in our space, where they think the industry is heading and what they are most excited about. The list of panelists includes:

• Dan Rayburn, Executive Vice President, StreamingMedia.com (Moderator)
• Colby Synesael, SVP, Equity Research, Telecom Services, Merriman Curhan Ford & Co.
• Katherine Egbert, Software Research Analyst, Jefferies and Company
• David Eller, Principal, Primary Research, Reuters
• Aaron Kessler, Senior Research Analyst, PiperJaffray & Co.

It's not too late to register. While the early registration discount period has now passed, if you have not yet registered and want a discount code, let me know.

CDN Funding Continues: Panther Express, EdgeCast and CacheLogic Raising Money

Hot on the heels of Move Networks raising $34 million at the beginning of this month, more venture capital money will be flowing to other content delivery networks very shortly. Panther Express, EdgeCast and CacheLogic, amongst others, should all announce some pretty large funding deals in this quarter.

The bar between what CDNs have enough revenue to last 2-3 years is quickly dwindling as many of them are now raising enough capital to keep them in the game for at least the next two years while the market shakes out. Next year, we're going to have a lot of providers in the market with deep pockets, as is evident by the salaries companies in the CDN space are now paying to attract senior sales people.

Add that to all of the P2P and hybrid solutions in the market, the confusion around what all of these CDNs really support and the speculation on what impact Level 3 may or may not have on the market, and next year is shaping up to be the perfect storm in the content delivery industry.

What do people think about us organizing a one day summit focused only on the CDN market? I am thinking of calling it www.ContentDeliverySummit.com and making it a small focused show and really marketing it to the analyst community. What do you think of the idea?

Google-YouTube: Twelve Months Later, Advertising Just Getting Started

It's been a year since Google acquired YouTube and in that time, the promise of YouTube developing and rolling out a successful video advertising product is only just starting to get off the ground. It's going to be a long time until there is enough data in the market to suggest if the model will be successful, and YouTube has a long way to go before we find out of it can really generate any serious ad revenue from their content.

Paul LaMonica over at CNNMoney.com has a good in-depth article about the hurdles that YouTube faces one year later with more niche competitors, the Viacom lawsuit, the big media companies entering the space (Hulu) and the problem with getting advertisers to spend money around UGC content.

Thomson Acquires SyncCast Delivery Network

This morning, The Wall Street Journal is reporting that Thomson has acquired SyncCast Corporation for an undisclosed amount. California based SyncCast is best known for providing tailored digital rights management solutions to customers in the media and entertainment industry since early 2001. While SyncCast really focused on building products for the protection of digital media content and the entire ecosystem around protected media, they also distributed content via their regional content delivery network.

While terms of the deal were not disclosed, my guess is that it was less than $30 million.

Discussing The CDN Industry With Money Managers

I've been getting a lot of requests from industry analysts and institutional money managers to do presentations on the state of the CDN industry. Lately I have been doing a lot of these in small private groups directly for firms clients and customers. These tend to work well over lunch where firms can't invite a small group of their clients and we spend an hour or two covering the different CDN vendors and the business opportunities in the industry.

Typically, the discussion covers a breakdown on each vendor in the space, their strengths and weaknesses, product feature sets, competitive differences, industry pricing and trends, market growth potential and details on exactly what customers are looking for in the way of services. I've done many of these over the past few months for multiple investment houses and enjoy discussing the market.

If you are interested in organizing a lunch like this, please contact me to set one up.

Level 3 Making It's Move: Acquires European Based Servecast To Accelerate Online Video Offering

Level 3 announced this afternoon that it had acquired Dublin based Servecast, a provider of live and on-demand video management and streaming services for broadband and mobile platforms. Level 3 paid approximately $45 million in cash for the company which did about $5 million in revenue for 2006. Servecast his a nice suite of content management tools for the enterprise and the media and entertainment verticals and has a good reputation in the European market.

No surprise here. As I wrote about a few months ago, Level 3 is looking to be a serious player in the content delivery market for audio and video. While some doubt whether or not a networking and carrier company can really thrive against the larger CDNs, I think they can and will. They have all the pieces to be able to provide a value service offering based on the entire eco-system for content as opposed to just pushing bits.

When Level 3 launches with their streaming media based service in Q4 of this year, I expect they will become a serious competitor right out of the gate. There is no sign of the CDN market slowing down and with the arrival of new companies in the U.S. like CDNetworks and the P2P and next generation delivery networks gaining some traction, the fight for the content delivery market is really about to get serious.

Beet.tv has an interview with Level 3's Lisa Guillaume from the Streaming Media East show in May.

Note: I will be profiling CDNetworks, Internap and Move Networks in the coming weeks.

Mobile Video Delivery Heats Up: Ortiva Wireless Raises $15 Million

Ortivia Wireless, a network specializing in mobile video and multimedia content delivery announced that they have raised $15 million in its Series B funding led by Comcast Interactive Capital. I first met Ortiva at the Streaming Media West show last year and profiled them on my blog back in February.

The size of this funding should be a clear indication to the industry that mobile video delivery is starting to gain traction and will soon become a real business. Using a content delivery network that has been built to deliver content just for mobile devices is going to become a requirement for content creators, especially since the traditional CDNs are setup to do very limited mobile video delivery. Of the nearly ten content delivery networks in the U.S. today, seven out of ten of them don't have any mobile video delivery offering at all. And the few that do offer a very basic service in some cases charge up to 10x what they charge for regular CDN delivery as they are not properly setup to truly deliver video to mobile.

InternetNews.com just profiled the CEO of Ortiva Wireless, DeWayne Nelon this past Friday and did a Q&A interview that discusses some details of Ortiva's offering. Ortiva is one to watch.

The FeedRoom Receives $5 Million In New Debt Financing

On Friday, BlueCrest Capital Finance announced that it had provided The FeedRoom with $5 million in new debt financing. To date, The FeedRoom has previously raised nearly $50 million in venture equity funding and recently opened new offices in Toronto and California.

Back in February I posted about The FeedRoom and other companies who had just recently gotten received a third round of funding and was questioning how many more rounds of funding can all of these companies get before they have to show investors some real revenue numbers. Before too long, there is going to have to be a tipping point in our industry where the VC money is not going to be as easy to get as it is now.

User Generated Video Sites Veoh and Kyte.tv Both Receive Funding

In more funding news this week, Veoh and Kyte.tv both announced investment deals.

Veoh raised $26 million in a series C funding led by Goldman Sachs and existing shareholders Spark Capital and Shelter Capital Partners. For Veoh, this gives them a combined total of just over $41 million raised to date, by far the largest of any of the user generated video sharing sites. That's a lot of money for a site that shares videos and I know I speak for many in the industry when I say that I can't wait to see how they will monetize this type of content and show investors a return on their money.

Kyte.tv, a new company on my radar which launched its website in May, said on Tuesday it had received funding from the investment arm of Nokia. Kyte.tv which aims to take the video sharing model on the Internet over to the handset, did not disclose the size of the investment. Kyte also lists as investors Swisscom and Niklas Zannstrom, who started Web phone service Skype.

Internet TV Platform Provider PermissionTV Gets $9 Million Investment

PermissionTV, the self described "Internet TV technology platform provider" announced today that it had received $9 million in funding from Castile Ventures and Point Judith Capital. Both are new investors in the company joining the other six investments firms who have already invested in PermissionTV. The  press release also says the company has signed over 30 new customers in the past year.

PermissionTV falls in the category of other companies like Narrowstep and Maven Networks that allow companies a platform by which they can create branded Internet TV channels and monetize the traffic via ad supported content, subscription based and various other means. There are a lot of players in the Internet TV platform space, whatever that means, but quite frankly, I can't really tell the differences between most of them. They all seem to focus on professional content, nothing user generated related, and sell the platform as more of an ASP model. The suite of features and functionality they have is all pretty similar but does vary from one provider to another.

For me, it all boils down to what exactly is defined by the term "Internet TV"?

P2P Content Delivery Company Oversi Receives $8 Million In Funding, Including From Cisco

Yesterday, Oversi, a P2P caching and content delivery company headquartered in Israel announced it had received $8 million in funding led by Cisco. The release says the funding will enable them to expand Oversi's sales and distribution channels and will help fund the development of new products in the P2P streaming and delivery space.

I know there are at least two other P2P based delivery networks that are currently closing funding which would give vendors in the P2P delivery market a lot of dollars combined. I would expect/hope to see many of them really push hard into the market shortly with their value propositions.

Blip.tv and EyeWonder Both Receive Funding

And the funding deals just keep on coming. Yesterday, Blip.tv and EyeWonder both announced they had received a round of financing.

Blip.tv, best known for sharing advertising revenue 50/50 with content creators, announced yesterday that they have closed a second round, amount not disclosed, led by Ambient Sound Investments (ASI), the venture capital fund established by the four founding engineers of Skype. Blip.tv plans to use the money to develop and offer new advertising options and extend their content distribution network to reach users on multiple devices.

Also yesterday, EyeWonder announced they had received a round of funding from BIA Digital Partners, a private investment firm focusing on mid-to-later stage companies. The amount was not disclosed. EyeWonder plans to use the money to expand in the U.S and abroad.

ChinaCache Closes Series B Round Of $31.5 Million

Last month, the largest content delivery network in the China region, ChinaCache, announced it had raised a Series B round of $31.5 million. I'm surprised not to have seen this talked about on a lot of websites considering ChinaCache is considered to be the premier company in their region with little, if no competition.

I don't know much about ChinaCache as a company but they say they have nodes in 50 major cities across China and did $10 million in revenue for 2006. They also have Yahoo! and Nokia as partners for their CDN service. This is a company to watch. It's only a matter of time before they see some serious revenue growth in a region that is growing as fast, it not faster, then the U.S. market. I'm surprised that no U.S. based CDN has done any type of integration with them, or if they have, aren't promoting it heavily. Anyone else have more info on ChinaCache?

On2 Acquires Video Technology Provider For Mobile In An Effort To Extend Reach To Devices

On2 announced yesterday that it had acquired Finland based Hantro Products Oy in a cash and stock deal valued at around $58.4 million. Hanto provides video compression technology for mobile, consumer electronics and IPTV devices. The press release says that Hanto's technology has been implemented on more than 200 million devices and in mobile phones produced by 5 of the top 6 handset manufacturers.

On2 said the Hanto business is expected to generate between $8.1 and $12.2 million in revenue this year which should really help On2's bottom line. For a company that has excellent traction in the market, a set of really robust products and many happy customers for its Flix product line, I always found it odd that On2's revenue has always been so low. For Q1 of this year their revenue was only $2.8 million.

On2's move of focusing on the chipset comes as no surprise considering how mobile devices are finally starting to become adopted in the States and already have better traction overseas. If On2 can give increased video quality with lower power consumption demand and lower silicon costs for manufactures like they say, then this will be an interesting product offering to watch.

Limelight Networks Starts Roadshow, Prices Shares For IPO

Limelight Networks has started its roadshow this week and investors have started calling asking for details on the content delivery market as a whole and what the competitive landscape looks like. Limelight has also set its proposed IPO terms and will be offering 14.4 million shares between $10-$12 a share. It plans to trade on the Nasdaq under the symbol LLNW.

The real question is what Limelight plans to do with the money once raised. Speculation is that they need to do some small acquisitions and increase their service offering by providing more in the way of content management and they clearly need to improve their media reporting options. Acquiring a company who has a content management solution is possible as there are a few small players on the market who could easily be taken out. But on the reporting side, there is not much on the market when it comes to reporting, so expect them to spend some of the newly raised capital to improving their own reporting product.

Everyone keeps asking, but I don't know the date when they are going public. I don't think an exact date is really decided till after the roadshow. But I'll make a guess and say July 9th.

Mogulus, Vator.tv, ScanScout and Black 20 All Get Funding

Another busy week for investments, this time from small content startups.

• Vator.tv has announced some funding, details of which can be read about at VentureBeat.com, a great site for those of you who don't know about it. Bambi Francisco, the founder and CEO of the company is speaking at the Streaming Media East show this week on a panel about "consumer-generated video sites".

• Jeff Jarvis announced on his blog that he has invested in Black 20, a company he is calling a creative small-TV content company. Jeff and Black 20 are speaking on a panel at Streaming Media East this week about "creating the new television".

• Mogulus, a service currently in beta that allows for personal webcasting online, announced that it has raised just over a million dollars. I've been looking into the service and last week chatted with the CEO Max Hoat and I expect to have a demo account to play with over the next week or so. Max will also be at the Streaming Media East show this week.

• ScanScout, a company that monitors video content announced it had received $7 million in funding.

• It's been reported that WallStrip.com is going to be acquired by CBS for around $5 million. While it has not yet been confirmed by anyone at CBS or WallStrip.com, other sites are reporting it as a done deal. Adam Elend from WallStrip.com is speaking at the Streaming Media East show on Wednesday so I'll see if there is anything he can talk to by then.

I know of a few more investments announcements that will come out this month as well so expect this to be a really busy month for funding.

Joost, ROO and Itiva All Close Funding

We're not even halfway  through the month and already there have been a bunch of funding deals.

• Today, Joost announced that five selected parties have collectively invested approximately $45 million in the company including Sequoia Capital, Viacom and CBS amongst others. They don't say exactly what they plan to do with the money but I think it's a safe bet to say that a good chunk of it will go to expanding their delivery capacity

• This morning, ROO announced that it had completed a private equity financing with gross proceeds of $25 million in a stock transaction involving mostly existing investors. ROO will use the money for ongoing operations, expansion of their video platform and "to pursue previously announced acquisitions."

• Last week, Itiva Networks announced it has secured $7 million in private funding. The company said it plans to use the money for working capital and to expand it's sales and marketing efforts.

In addition, I know of a few more deals that should also be announced this month. Will be a successful month for companies in this space raising money.