Content Delivery Networks (CDNs) for everyone
I thought it was just me, but I was thinking that there seemed to have been an unusual number of announcements lately regarding Content Delivery Networks (CDNs). Luckily, Dan Rayburn of Frost & Sullivan (who has a good blog by the way http://blog.streamingmedia.com/the_business_of_online_vi/) confirmed those suspicions recently in some of his postings and reports. His number for new CDN investment over the last 18 months is near $400M, this is in addition to whatever investment has been made in current CDN providers’ infrastructure (e.g. big players like Akamai or Limelight Networks or telecoms like Level 3 or BT). If this seems eerily similar to the heady dot com days circa 2000, I feel you have guessed correctly. That last meltdown resulted in a fire sale of cheap fiber to beneficiaries such as Google and others who astutely picked up those assets. How will it turn out this time?
To answer that question we need to look at what is driving demand in this latest round. The need to distribute even more content to greater reaches of the network for sharing for sites like YouTube or social networking is part of the equation. The other side being for enterprises requiring data management or content owners (e.g. Viacom, Disney) needing reliable distribution. However, this just begs the question of at what point do we have enough bandwidth? You could look at Microsoft’s decision to spend $2B to further develop its own data center and network infrastructure to create competitive advantage and provide managed services to large enterprises as a proxy answer being “obviously not enough”. Well, closer inspection reveals that the new managed services or other value add on top of those large pipes is the real opportunity beyond bandwidth, basic management and reporting. For this reason, I really like what CDN providers such as BT have done with their BT Mosaic service which allows their customers to manage and distribute the content transported over BT’s network. It is those types of services which will create competitive advantage in the CDN marketplace. As for competitors that are simply “pipes” providers? I believe the next round of consolidation is on the way for those players in a commodity business. The revenues do not support “infrastructure only” models particularly when the experts of the network, the telecom providers, are quickly ramping up operations. What are your thoughts?
