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CDN News Roundup: 2009 Content Delivery Year in Review

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Amazon Disrupts Market With Flash Streaming
In December, Amazon announced that its Cloud-Front content delivery service would support Flash streaming as long as the videos are stored on Amazon’s S3 service. Amazon has deployed version 3.5.2 of Adobe’s Flash Media Servers in 14 edge locations globally and now supports RTMP, RTMPT (HTTP tunneled), RTMPE (encrypted), and RTMPTE (tunneled and encrypted) flavors of RTMP. In addition, Amazon says it will support live Flash streaming sometime in 2010.

While Amazon’s CloudFront service for on-demand video never posed any real threat to the larger CDNs in the market, this announcement drastically changed things. While Amazon is not going to take any large customers such as MLB or Hulu away from the CDNs, Amazon does have the potential to take many of the mid-sized customers who spend between $3,000–$5,000 a month on video. That’s Amazon’s sweet spot, and there are a lot of those customers in the market with the major CDNs. In addition, while Amazon still needs to flush out the other ecosystem pieces for video, its offering already ties in with transcoding solutions from Encoding.com and Bits on the Run. Additional third-party developers are already working on other apps, including reporting, that will help enhance Amazon’s offering.

While some might say that the downside to CloudFront is that it does not have a service-level agreement (SLA), Amazon does have two levels of premium support that cost between $100 and $400 a month for customers who want 24/7 phone support. Right now, I don’t see the lack of an SLA for CloudFront as a negative for the customers Amazon is targeting. The trend I am seeing in the market is that content owners want more control over their content, want self-provision, and don’t want to have to call their CDN every time they need something done. Amazon requires no commitment or contract, does not charge overage fees, and has upfront pricing with no additional cost for Flash streaming. You can set up a CloudFront account right now and be streaming in about 5 minutes. What’s not to like? If some still want to argue that delivering video on the internet is not a commodity, Amazon’s announcement should make them think again.

Amazon CloudFont
Amazon CloudFont Amazon’s CloudFront hasn’t shaken things up much in the CDN space, but its addition of Flash streaming should be a real disruptor to the market.

By far, the biggest impact this will have is on the smaller CDNs and streaming media hosting providers. While the smaller providers will still offer better support and help with things such as building custom players, Amazon will add those options over time, working with third-party developers to build apps on top of CloudFront. As far as CloudFront’s effects on pricing in the market, I don’t see it having any impact at all. I know some will suggest that Amazon’s Flash streaming service will drive prices down. But Amazon’s pricing has always been published on its website, and a company rep told me it doesn’t plan to change its pricing for streaming delivery.

The only real question in my mind about Amazon’s new Flash streaming service is how it performs. Amazon says it doesn’t do any benchmarking testing against any competitors, but it felt confident that after running CloudFront for more than a year, customers would be very happy with its Flash streaming performance. In many cases, Amazon won’t need to be better than the leading CDNs. As long as it is on par with or close to its competitors’ performance, it will do very well with the solution. I’ll do some real testing myself on the performance of the service in the new year.

Amazon’s future road map for CloudFront is all based on requests from customers, and when I asked about the possibility of Amazon supporting Sliverlight soon, the company rep said customers simply weren’t asking for the format yet. I also asked why Amazon picked Flash Media Server over Wowza, which has a good relationship with Amazon, and I was told customers were specifically asking for support of Flash Media Server 3.5.

Eyewonder Limelight Networks’ acquisition of rich media ad platform Eyewonder will allow the CDN todiversify its revenue and compete on something other than price.

In the CDN space, vendors know who their competitors’ top 100 customers are and who is constantly knocking on their doors. While Amazon does not have the same strategy, the advantage it has is that every day, tons of customers sign up for CloudFront services through the Amazon.com website. Amazon has a very large built-in base of customers it can upsell, and the company rep did say that account managers do reach out to the largest content owners on its network.

While I don’t see Amazon changing the CDN landscape overnight, it is already starting to have an impact on the market. As it continues to add more functionality to CloudFront, its impact will only continue to grow. —Dec. 16, 2009

Limelight Acquires EyeWonder
Also in December, Limelight Networks announced an agreement to acquire privately held EyeWonder in a cash-and-stock deal valued at $110 million. The deal is expected to close sometime in the first half of 2010. After DoubleClick and maybe Pointroll, EyeWonder is one of the largest rich media ad platforms in the space, billing about $35 million–$40 million in revenue for this year. With Limelight’s 2009 projected revenue of $140 million–$150 million, this deal should easily make the combined companies into a $200 million-plus organization in 2010.

For Limelight, this is a smart move, and the immediate affect is twofold. It increases the company’s revenue by a third, and, more importantly, Limelight is acquiring a company that has 70%-plus margins on its business. EyeWonder’s overhead is low since it is not in the infrastructure business; this will allow Limelight to diversify its revenue with a product line that’s not competing solely on price, something we have seen in the CDN space for so long.I am already hearing some say that the combined EyeWonder and Limelight ad solution will compete with Akamai’s advertising solution, which is not the case. Akamai acquired acerno to get into the behavioral targeting business. EyeWonder is a platform that allows for rich media ads on the web and within video games. These are two very different ad solutions, solving two very different problems for content publishers.

Of the $110 million in purchase price for this deal, Limelight is paying for $62 million of it in cash. This leaves Limelight with about $100 million left in the bank. I would not be surprised if we saw the company make a few more smaller acquisitions in the near term. —Dec. 21, 2009

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