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  1. #1
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010
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    15,000

    [EN] Akamai reduz preços após perder 6 grandes clientes

    The lowest price I have seen Akamai quoting is $0.002 per GB delivered. To date, that is the lowest pricing I have ever seen on any CDN deal ever. That price is for very large customers, but even for small deals where Level 3 is at $.005 and Limelight will be at $0.0045, Akamai has come in at $0.003.


    Akamai Slashing Media Pricing In Effort To Fill Network

    Dan Rayburn
    September 14, 2016

    With Akamai’s top six media customers have moved a large percentage of their traffic to their own in-house CDNs over the past 18 months, Akamai has been scrambling to try to fill the excess capacity left on their network. Over the past few weeks I have been tracking media pricing very closely and now have enough data points directly from customers and RFPs to see just how much Akamai is undercutting Level 3, Amazon, Verizon and Limelight on CDN deals.

    On average, Akamai is coming in about 15% cheaper trying to win new CDN business or keep the traffic they have. The lowest price I have seen Akamai quoting is $0.002 per GB delivered. To date, that is the lowest pricing I have ever seen on any CDN deal ever. That price is for very large customers, but even for small deals where Level 3 is at $.005 and Limelight will be at $0.0045, Akamai has come in at $0.003. Akamai is making it clear with renewals and with new deals that they want to keep/win the traffic. And while lower pricing might help them with some RFPs, I see deals where they don’t win it, even with the lower price. And many times if they do, it’s harder for them to keep all the business they have, even with lower pricing, because many content owners are now using a multi-CDN strategy, sharing traffic amongst multiple CDNs. So in many cases, even when Akamai keeps a customer, they are keeping less traffic, at a lower price point.

    While selling on price alone has the potential to give Akamai a little bump in revenue if they can grab some more market share, it’s not a long-term strategy. When you can no longer sell media delivery based on metrics like performance and have to win business based solely on the lowest price, that’s a recipe for lower margins. In the first six months of this year, Akamai’s margins were down 150 basis points. Value add services, which have healthy margins can make up for a lower margin service like CDN, but Akamai’s year-over-year growth in their performance and security business has also slowed.

    Akamai, and all CDNs for this matter, can also get burned if they offer too low of a price and then realize a large percentage of the customers traffic is coming from regions like India, China or Australia. In those regions, it costs them substantially more to deliver the traffic and when they give a customer CDN pricing, it’s a number they are picking based off of blended traffic coming from a global audience. Get that wrong and your costs are higher, for business you already quoted at such a low price. While we don’t know Akamai’s true cost to deliver content since they don’t break out CapEx dollars, I guarantee that Akamai is not making money on a CDN contract priced at $0.002. That’s not a deal that is profitable to the company, standing on its own. Maybe it has a bigger overall impact based on who the customer is, or it gets them other business, but many of the deals I am seeing are for straight CDN, nothing else. Akamai is sacrificing margins on their media business, just to add traffic to their network. That’s not healthy for any business.

    Akamai is also facing a massive CapEx problem, where they have to spend a lot of money to constantly refresh their network and the number of servers they have. Akamai has said they have 200,000 edge servers and Limelight has said they have 10,000 edge servers. Limelight has 1/3 the capacity of Akamai, but spends far less in CapEx. In the first six months of this year, Akamai spent $160M in CapEx, Limelight spent $5M. Even if half of Akamai’s CapEx is directed at their media business, it’s $80M or 20 times Limelight’s CapEx spend. Based on those numbers and other data I have, by my estimate, it costs Akamai about $5M in CapEx to add 1Tbps of capacity to their network. Compare that to Limelight and Level 3 where I estimate it costs them about $1M in CapEx per Tbps of capacity, in the U.S. or Europe.

    Highlighting this point even further is that on Limelight’s last earnings call, the company talked about their CapEx costs and capacity, when compared to Akamai. Limelight has less than 1/20th the infrastructure to deliver 1/5th the revenue, when compared to Akamai. We don’t know the exact capacity of Akamai’s network, but Limelight’s current egress capability is just shy of 15Tbps. And I think Akamai has said they hit a record 40Tbps. Also, Limelight added almost as much capacity in the first half of 2016 than they did in the full year of 2015, while spending $7.6M less in CapEx year-to-date. Meanwhile, Akamai’s CapEx costs are accelerating, while traffic growth has slowed, with declining growth in revenue.

    Akamai’s got a short and long-term problem with their media business and really needs to decide if they want to be in a business that is so volatile, with little to no margins. You have a commoditized service offering, customers that now compete against you, cloud providers that have more scale and ways to make money and competitors that own and operate the network, and others with distinct CapEx advantages. Akamai would be better off getting out of the media business over time and putting all of their efforts into their web performance and security product lines.

    On a side note, Twitter’s NFL stream, taking place Thursday Sept 15th, will be delivered by Akamai and Level 3 and I do not expect it to have a large simultaneous audience. My estimate is under 2M simultaneous streams. Also, Apple’s iOS 10 update that came out on Tuesday, the vast majority of that is being delivered by Apple’s in-house CDN, with only a small percentage of the overall traffic going to third-party CDN providers.
    http://blog.streamingmedia.com/2016/...a-pricing.html

  2. #2
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010
    Posts
    15,000
    "Detalhe" ...

    Ray Lucchesi ‏@RayLucchesi

    4k 2hr movie is 100GB, 8K 2hr is 400GB

  3. #3
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010
    Posts
    15,000

    Diy

    Apple and Facebook, which represented 12% of total revenue in Q2-2015 decreased to 5% of total revenue.

    Q2 2016 Earnings Call

    July 26, 2016

    ...

    As we discussed on past calls, our overall revenue growth rate is unusually low this year, because of the do-it-yourself, or DIY, efforts of two of our largest customers. As these customers deliver more of their content themselves, it has meant less revenue for Akamai. In Q2, these two customers accounted for a little over 5% of our total revenue, down from 12% in Q2 of last year.

    I know that some of you have expressed concern about the broader impact of DIY on our business. And so I'd like to take a few minutes now to address the subject. While any company could, in theory, try to build their own CDN, doing so is a very expensive endeavor that I believe is simply not practical for the vast majority of our customers. In addition to the cost, it's also very difficult to build a CDN that has anywhere near the scalability, quality and security provided by Akamai. And so large-scale DIY is generally only attempted by the Internet's largest media and infrastructure companies. For the most part, we've been successful in competing with DIY efforts by offering much better performance, scale, and security at a favorable price point.
    http://seekingalpha.com/article/3991...all-transcript

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