Vadzi Technologies 2014 CDN Ranking Report
Author: Ernest Regalado
Company Profile Vadzi Technologies is a new research company focused on the Content Delivery Industry. We are a new generation of thought leaders, challenging the status quo and executive thought. The principal of Vadzi, Ernest Regalado, has worked in the technology industry for 17 years, for several CDNs, Tier 1 Carriers, and System Integrators. During this time, he has gained valuable insight into CDN ecosystem, having talked to thousands of CDN prospects about their requirements; and developing relationships with hundreds of companies of all sizes, in all verticals, against dozens of competitors, in many different countries.
Executive Summary
Vadzi is presenting the 2014 CDN Report Card ranking US-based Content Delivery Networks (CDN). The CDN industry is dynamic, changing constantly as CDNs get acquired, go out of business, or grow extremely rapidly. This analysis is based our actual work experience and extensive market research. We have evaluated CDN players based on certain metrics, which have been described below. The strength of a CDN is the result of CDN experience of executive leadership, the number and type of features offers, the value proposition, pricing, cost structure, and the type of customers using its services.
Mission Statement
Our company mission is to challenge executive thought, and offer new ideas that spur growth. A Content Delivery Network that is on an upward trajectory will face insurmountable growing pains, and that defines the character of a CDN. In the CDN industry, executive leadership must be open to new ideas, new business models, new products and features that other CDNs haven't developed yet. In other words, it must be able to embrace innovation on the fly, and be able to develop features rapidly, usually within three months, whether it is front-end optimization, web application firewall, a browser applet that extends the function of a CDN. To do otherwise, is to invite disaster, and to endanger the viability of the company, because CDNs are feature driven. We have seen up-and-coming CDNs that did well for a while, employed the smartest, savviest, and hardest working staff, only to fall by the wayside. Our advice for CDN executives is to be humble, open, creative, and embrace change when growth stalls.
Growth Pains CDN executives must continuously challenge themselves. When sales are stalling, and new customer acquisition has come to a halt, some form of change is necessary. New business is won one account at a time. Finding the right opportunity can be challenging; and closing that opportunity even more. High profile websites are on the target list of all CDNs. CDNs must work hard to earn their business. Being smart, proactive, creative, and understanding the competition is a given. To overcome sales growth challenges, startup pure-play CDNs must employ experienced sales teams that understand customer requirements. Other critical items are flexible contracts, developing extensive feature sets, and right pricing that is not too low as to devalue the service, nor too high, so it's above the customers' budget.
CDN Rankings The ranking is a visual metric that demonstrates where CDNs stand in relation to one another in the industry. In the CDN industry, size does not equal better service. In fact, many smaller CDNs provide better service than their larger counterparts. They not only respond to support questions faster, but also are in a position to implement custom changes quicker, sometimes in hours as opposed to days. Given their smaller size, this type of flexibility is a requirement for success. They understand that an extra level of touch is needed to win the hearts and minds of the customer. Our belief is that one CDN cannot meet all the needs of all the companies in the US or globally. The market is big enough to handle many players. CDNs must understand their core offering, focus on it, and deliver it better than anyone else.
For the CDNs that are in the lower spheres of the ranking scheme, this is a challenge to them to work harder, smarter, and more creatively than the competition. We'll keep tabs on them, and work with their executive team. Once we feel that they have progressed to a higher rank, we'll publish it on our blog. Many CDNs started at the bottom, worked their way up, and made great things happen. Cotendo, Edgecast, VitalStream, Verivue, and Limelight are a few examples of such CDNs.
Profitability vs. Revenue For the CDNs that rank #2, or down, we don't consider revenue as the main driver of our rankings. Annual revenue is an important metric, but when CDN revenue from many CDNs is in the same ballpark, profitability proves to be the more important metric. Small file http delivery, like ecommerce and news sites, is more profitable than large file video delivery, from sites such as Hulu or Netflix. Even though video delivery is broken into smaller chunks when being delivered, we don't consider it small file object delivery. Small file object delivery is the delivery of small objects such as images, CSS, and JavaScript. Large file delivery is the delivery of games, software, and videos.
In my experience working for several CDNs, and competing against dozens more, large file video delivery generates the lowest contribution margin (bandwidth cost-customer price). For example purposes only, a video content site pushing 5Gbps of sustained average bandwidth, to viewers in the US, might pay $5/Mpbs, generating $25K/month for the CDN in overall revenue (not profit). On the other hand, customers delivering small files pay a significantly higher per GB price than the $5/Mbps. In some cases, it can be as high as $35/Mbps or more. Small file object delivery, along with all the add-on features, is more profitable. CDN pricing correlates to carrier pricing, as bandwidth increase with a carrier like AT&T, pricing per Mbps drops. In this report I won't disclose the cost structure of the CDNs.
Thus, a CDN that generates $50M in annual revenue from small file http delivery is likely to be more profitable than a CDN that generates $150M in annual revenue from large file video delivery. Therefore, the CDN that delivers a larger percentage of content that is "non-video” tends to be more profitable.
The price per GB for small file http delivery should be 3-6 times higher than video delivery. Companies such as Netflix, Hulu, and MetaCafe pay rock bottom prices that are sometimes even lower than the cost structure for smaller CDNs. B2C video-based companies like Netflix, are extremely price sensitive, due to the large amount of volume they deliver to consumers. On the contrary, ecommerce companies like Overstock, Blue Nile, and Gap, Inc., value performance, scalability, security, and feature add-ons above price. They are willing to pay a much higher price per GB, in order to get a few extra milliseconds of performance out of their delivery. In their world, seconds usually amount to hundreds of thousands; or in some cases, millions of dollars annually.
Metrics Used for Ranking Vadzi uses 10 metrics for ranking CDNs. These demonstrate metrics such as employee count and number of sales, listed below:
Annual Revenues Total Number of CDN Employees Total Number of Dedicated CDN Sales Rep Total Sustained Average Bandwidth of all POPs in Gbps Total Number of Customers Diversity of the Customer Base Alexa Ranked Websites Using the CDN Total number of features in CDN service portfolio Dedication to Innovation—Continuously Rolling out New Features Experience of Sales Team and Executive Team Focus on CDN industry
Feature Set The CDN feature set is an important indicator that demonstrates the maturity of a CDN and their dedication to innovation. The rule of thumb is the longer the CDN has been in business, the more features it should have. Akamai has the most extensive feature set of all CDNs. It continues to roll out new features on its own, and acquire companies to build its feature set. Other CDNs like EdgeCast, Limelight, and MaxCDN continue to build features from the ground up, rolling out features one at a time.
The key to success is to develop a robust product roadmap, one that calls for the development and delivery of features every three months. The product management team of a CDN must work in conjunction with the sales teams on a plan of attack. Sales teams are the ears to product management. They listen to customer requirements daily; whether it is web application firewall, network level DDOS protection, mobile device detection that serves particular content for each device, etc. Leaving sales out of the product development process is a huge mistake. No one has better visibility into customer requirements than sales. The last thing a CDN needs is for their product management team to develop a feature that sits on the shelf. That is an incredible waste of time and money that could have been invested in a feature that could have generated millions.
CDN Features and Add-ons
Dedicated PCI Network Rules Engine DNS Services
Dedicated Small File Dynamic Content Support SSL, EV Certificate, Delivery Platform Acceleration/ Application Wildcard Delivery Network Dedicated Large File Front-end Optimization Mobile Content Acceleration Delivery Platform
Real Time Reporting Token Authentication Licensed CDN
Advanced Analytics HLS and HDS Streaming Instant Purging
Origin Storage Live and VOD Streaming Easy to Use Control Panel
Transcoding Automated CNAME 24x7x365 Support Process APAC POP Presence Web Services API Download Manager
The features mentioned above are extensive and "CDN centric." Obviously, there are features that CDNs may incorporate into their service portfolio, but if they digress too much from a CDN centric approach, it is likely they will do more harm than good. A feature that is not CDN centric requires extensive training of the sales staff. The learning curve for a whole new product offering is a minimum of one year. Let's not forget, there will be a whole new legion of competitors that understand the ins-and-out and intricacies of that product offering.
To further illustrate this point, let's evaluate OVP. Should a CDN develop its own Online Video Platform (OVP) and offer it as a feature to its customers? An OVP ingests video, transcodes it, stores it, encrypts it, tags it, and delivers it to a plethora of devices.
We believe that an OVP is not a CDN centric feature. Therefore, it should not be incorporated it into the CDN offering. It is also an incredible waste of resources. To top it off, Brightcove, Ooyala, and Kaltura are incredible sales machines; and it will be impossible to win against them, at least for the first year or two or three. Therefore, we do not include OVP in our matrix above.
Vadzi Technologies 2014 CDN Ranking Report Vadzi CDN Report Card
Akamai EdgeCast o $1.37 Billion in Annual Revenue o Around $100M in Annual Revenue o 600 to 1,200 Customers o 6,000+ Customers o Most Extensive Feature Set o 2nd Most Extensive Feature Set o Largest Sales Force o Large Sales Force o 3,000+ Employees o 300+ Employees
#1 Akamai Leaders #2 EdgeCast
#3 Limelight
Up-and -comers #4 Level 3
#5 Highwinds
Generalist s #6 CloudFront
MaxCDN / Fastly CloudFlare / Yottaa Incapsula Specialist s CacheFly / MirrorImage Internap
The CDN ranking scheme is divided into 4 Tiers. The Leaders Tier is the top tier of CDN players. They offer the most extensive feature set, have a large number of customers (including high Alexa ranked sites), a well-diversified customer base, push 1Tbps of sustained bandwidth, and generate $100M annually. The Leaders Akamai Akamai, the dominant leader in the CDN industry, generated $1.370B in 2012, far greater than all the other CDNs combined. Their market share, based on the share price as of January 1, 2014, is 44 times greater than that of Limelight Networks, the only other top tier pure-play CDN that is publicly traded. Akamai is the most established brand in the CDN industry by a long shot.
Over the years, Akamai has acquired numerous companies, of all sizes, in order to maintain their market share, and to add functionality to their service portfolio. Since they are in the CDN industry, every major decision they make impacts all of the other CDN players. They are not afraid to use their pocketbook to have their way. Their latest decision to acquire Prolexic, will impact the entire CDN ecosystem. Prolexic, a heavyweight in cloud security, only deepens Akamai's security portfolio.
The CDNs that compete against Akamai in some accounts, especially ecommerce and finance based websites, must accelerate the development of their security offering or be left behind. Smaller CDNs cannot afford to make any mistakes, or else they will be severely impacted.
EdgeCast EdgeCast, the #2 CDN in our rankings, is a highly successful CDN. Only five years ago, they were a niche player, catering to small and medium size websites. Through hard work, dedication, great decision-making, and excellent leadership, they have surpassed all other CDNs, including Limelight Networks and Level 3. EdgeCast has 6,000+ customers including License CDN Customers that include large telecommunication companies from many countries including Canada, Australia, South Korea, and many more.
It serves as a reminder to all the other CDNs, that any CDN, no matter how small, has a chance to make it to the upper echelons of the CDN ecosystem. In our opinion, EdgeCast is the only CDN right now that can go head-to-head with Akamai on any account (Fortune 1000 and ecommerce) and win. EdgeCast has the service portfolio and feature set to do so. Limelight comes very close though. The one feature that eliminates other CDNs from making a dent in the ecommerce sector is the lack of a PCI compliant platform.
Feature Set Matrix FEATURE SST AKAMAI EDGECAST Dedicated PCI Network Y Y Dedicated Small File Platform N/A Y Large File Http Platform N/A Y Mixed Platform—Small and Y N/A Large Dynamic Content Acceleration Y Y Front-end Optimization Y Y DNS Services Y Y RTMP Streaming Y Y Mobile Content Acceleration Y Y Real Time Reporting Y Y Advanced Analytics Y Y Licensed CDN Y Y HLS and HDS Streaming Y Y Origin Storage Y Y Rules Engine Y Y SSL, EV Certificate, Wildcard Y Y Instant Purging Y Y The Up-and-comers
Limelight Networks Limelight Networks (LLNW) is the #3 CDN in our report. In 2012, LLNW generated $180M in annual revenue. This figure is likely to have fallen in 2013. Even though LLNW has been losing around $10M per quarter for the last several quarters, it has a solid balance sheet, with about $120M in working capital (current assets-current liabilities). LLNW has a new executive team in place, which is trying to halt revenue loss. The previous executive team made a disastrous decision to buy EyeWonder for $110M, only to sell it a while later for $66M. For a company the size of LLNW, the $44M loss was material. EdgeCast grew to $100M on only $20M of VC funding.
LLNW is still a top tier CDN, with an extensive service portfolio, and many large customers. It employs 500+ professionals, many of whom are well versed in the CDN business. Limelight must go back to its roots as a CDN, and change its entire marketing strategy from Digital Presence, to a high performance CDN. If it is able sustained growth, we will consider elevating LLNW to a higher tier.
Level 3 Level 3, the #4 CDN, was the only Telco CDN of 2013 in the US. That changes in 2014, with the Verizon acquisition of EdgeCast. In 2012, their annual revenue was $6.3 billion. Their CDN revenue, although not published, might be somewhere between 2%-4% of overall revenue. Although many analysts rank Level 3 as the #2 CDN, we rank them as the #4 CDN for the following reasons: o Level 3 is not a pure-play CDN. The focus and dedication found in startups is usually not present at billion dollar companies o New feature roll-outs are slow o Level 3 does not have DSA, FEO, or an automated Rules Engine in their product offering o CDN revenue is in the same ballpark of Limelight and EdgeCast o Level 3 generates a large part of their CDN revenue from a handful of customers o Level 3 customer base not as diverse as EdgeCast and Limelight o Level 3’s network is built specifically for video delivery, not small file delivery. Video delivery is the most commoditized type of delivery
In regards to video delivery, Level 3 is a powerhouse. The benefit of being a carrier is they have the largest egress capacity of any CDN. Level 3 can stream the Super Bowl, Olympics, and World Cup all by itself. No other CDN, with the exception of Akamai, can handle that kind of load. Also, Level 3 has a firm hold on the broadcast delivery sector in the US. We don't include their broadcast business in the ranking because broadcast is a totally different market compared to CDN.
Feature Set Matrix
FEATURES AKAMAI EDGECAST LIMELIGHT LEVEL 3 Dedicated PCI Network Y Y ? ? Dedicated Small File Platform Y Y Y N Large File Http Platform Y Y Y N Mixed Platform—Small and Y N Y Y Large Dynamic Content Acceleration Y Y Y N Front-end Optimization Y Y Y N DNS Services Y Y Y Y RTMP Streaming Y Y Y Y Mobile Content Acceleration Y Y Y N Real Time Reporting Y Y Y Y Advanced Analytics Y Y Y Y License CDN Y Y Y N HLS and HDS Streaming Y Y Y Y Origin Storage Y Y Y Y Rules Engine Y Y Y N SSL, EV Certificate, Wildcard Y Y Y Y Instant Purging Y Y Y N
*Small File Http—Dedicated platform for serving small objects (CSS, JS, Images) *Large File Http—Dedicated platform for service large objects (software, games, etc.) *Dynamic Content Acceleration—Middle Mile TCP/IP optimization such as packet parallelization, window scaling, TCP fast start, and connection pooling *HLS & HDS—Supports streaming for Apple HLS and Adobe HDS including re-packaging *Mobile Content Acceleration—supports dynamic nature mobile delivery including mobile device identification
Vadzi Technologies 2014 CDN Ranking Report The Generalists Highwinds Highwinds, a leading CDN, has been around for many years. It is focused on the gaming market and employs an excellent sales team. A few years back, they decided to exit the RTMP (live and on demand) video streaming business. The video streaming business is resource intensive. Not only does it require its own platform that's completely separate from the http delivery platform; but it also requires a hard-to-find skill set of flash streaming developers. Now, it is focused on http delivery, a good decision for them.
CloudFront Amazon CloudFront is an emerging player in the CDN market. Its main goal is to sign up as many customers as possible including those spending a few dollars per month. CloudFront is not a pure- play CDN. There’s nothing wrong with that, that's their business model, and they are making a lot of money from it. They want quantity, and don't want to offer premium support to small and medium size websites. QoS. On the bright side, they have the best cloud computing and cloud storage platform globally.
The Specialists
There are a number of exciting CDNs in this sphere like Fastly, MaxCDN, Yottaa & CloudFlare. This is the place where the next-generation CDNs are born. The specialist must not only stay afloat, but must develop features that are different and innovative. This group of CDNs consists of highly focused entrepreneurs that risk everything to make it big, putting everything on the table. Their focus is to graduate into the next tier of the CDN ecosystem. One characteristic that binds all the CDNs in the sphere is that they are specialist in a subset of services. And usually, they do a better job of it than the competition.
For example, MaxCDN offers a 1-click SSL, that takes seconds to deploy, and is just as easy to order as Godaddy. Their other features include robust API web services and plug-in support for third party applications like Wordpress and Magento. For some Fortune 1000 companies, a MaxCDN is a perfect fit. Another exciting CDN in this group is Fastly. With a fresh round of VC funding, they are going to do some great things in the coming months.
Vadzi Technologies 2014 CDN Ranking Report Conclusion
In summary, the 2014 CDN Report Card is a visual representation that demonstrates where CDNs stand in relation to each other. Many CDNs have climbed from the bottom, jumping ahead of more established CDNs and others getting acquired at decent valuations. Ranking CDNs is difficult with so many constants. Any of these rankings can change in a matter of months. If you have any questions, please reach out to me at the email address below.
Author: Ernest Regalado Editor: Aarya Chevaillier
Vadzi Technologies, LLC. 5405 Wilshire Blvd., Suite 353 Los Angeles, CA 90036 [email protected]
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