Anyone who reads my blog knows that I have been saying for some time now that CDNs need to do a better job of delivering a clear, concise message to the market of who they are, what they offer and how they are different from other CDNs in the industry. With nearly 40 CDNs now in the space, it’s never been more crucial for CDNs to stand apart from one another. Yet, with more new entrants, and more vendors all vying for much of the same business, few CDNs are really delivering any clear message at all. And don’t take my word for it, ask customers. They still don’t know the differences between vendors and in many cases, I don’t think the vendors do either.

For starters, this whole sales/marketing pitch of "we’re cheaper than Akamai" is pointless. Can someone please show me who isn’t cheaper than Akamai? Enough already. If all it took was a CDN to say they are cheaper than Akamai to get business, then Akamai would be losing a lot of CDN business right now, which they aren’t. So when nearly every CDN in the space is all saying the same thing, "we’re cheaper than Akamai", how is that a marketing message? I hear so many CDNs lead with that and I get so many e-mails from CDNs highlighting that. Ok, great to mention to a customer, but when every other CDN is saying the same thing to that customer, how is that making you stand out? It’s not. At this point, it would be unique if a CDN said we are more expensive than Akamai.

Why aren’t CDNs leading with propositions that customers want to hear? I keep saying that customers are complaining that they want better reporting and better customer service, and while some CDNs do highlight that as part of their offering, they are still not leading with that as the message. I challenge every CDN, especially the new entrants over the past 12+ months to write down what their marketing message is. Then compare that to what you read on your competitors websites and in their press releases and don’t be surprised when it’s nearly identical or is extremely vague and uses all the same marketing buzz words. This is really easy, yet many companies are simply falling in with the crowd getting lost in buzz words and bad marketing speak.

For instance. Simply by operating a CDN you are NOT helping customers monetize content. CDNs keep saying they are helping customers monetize their content yet then when I ask them if they have any of the offerings that truly enable the monetization of content like transcoding, authentication, meta data management, syndication tools, custom APIs, analytics tied into advertising etc…. most of the CDNs don’t offer any of these services as of yet. Simply delivering bits is not enabling monetization. Anyone can deliver bits. It’s all of the other pieces of the content ecosystem that really drives the monetization of content. Some CDNs have a few of those pieces, but the majority of them don’t.

Also, the marketing message that some CDNs are leading with calling themselves the third largest, or top-three CDN etc… is pointless. Who cares. Customers don’t. You are not going to win business simply by saying that to a customer. And quite frankly, what is it based on? CDNetworks says they are a "top-three global CDN", with us all assuming that Akamai and Limelight are the number one and two. But Panther Express says they are the industry’s third largest CDN and if we are basing this on revenue, then isn’t Level 3 the third largest CDN considering they said they did $100 million in CDN revenue for Q1 of this year?  The bottom line, it does not matter who is number three or number four. None of that matters. Think about this. Do you want to be known as the number three CDN in the industry, or do you want to be known by customers as the number one CDN in the industry when it comes to customer service and reporting. It’s a no brainer. We all know that in any industry, simply calling yourself a large player does not guarantee you success, long term viability or customers. Enron anyone? Size does not equal longevity.

When I started this blog it was to write about all things online video related and it seems all I have been doing is writing about CDNs for the past six months. I don’t call out CDNs in any post to make them look bad and don’t let my harsh criticisms of the CDN market suggest anything other than my love for wanting the CDN market to grow stronger and learn from its mistakes. We read a lot of great things about the CDN players but it’s also important that as an industry, we don’t allow ourselves to get to caught up in them and stay focused on what can be improved upon. Right now, I would say that the majority of CDN players really need to improve upon the story they tell of who they are, what they offer and how they are different from others in the market.

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.

Taking it easy for the next few days. Be back with some posts hopefully later in the week.

On April 11th, Colorado based Two-Way Media filed suit against Akamai, Limelight Networks and AT&T over a series of patents entitled "multicasting method and apparatus". (patent description below) While this is just one of many patent suits taking place in the content delivery sector, there are a few unique details about this one to watch. For starters, Two-Way Media first filed suit against AOL and after a successful Markman ruling in their favor, AOL settled out of court for an undisclosed amount. That by itself does not mean anything as it may have been easier for AOL to settle rather than pay legal costs, but the fact they settled after a ruling is a bad sign.

Even more interesting in my eyes is that the main patent, number 5778187 was filed in 1996 and was licensed by Two-Way Media to Cable & Wireless in the early days of the content delivery market. For those that remember, Sandpiper and Digital Island were some of the original CDNs that were acquired by Cable & Wireless. There is no way to know if Cable & Wireless licensed the patents because they felt they were valid or not, but the fact another CDN even licensed it makes this suit even more interesting.

Some may wonder why other CDNs are not mentioned in the suit and my guess is that it’s the same reason most suits like this only name those showing a lot of revenue. Until a company is doing a certain level of revenue, there is no reason to really go after them. But you can expect that as more CDNs see revenue growth and the content delivery industry turns into a multi-billion dollar market over the years, CDNs are going to be inundated with patent suits. It’s also interesting to note that once again, Level 3 seems to have a very clear strategy with regards to CDN patents and has no exposure to this patent either. Level 3 is covered under the original Cable & Wireless licensing deal with Two-Way Media through Level 3’s acquisition of the SAVVIS content delivery business, which included their intellectual property.

Other CDNs aside from Level 3 could be in the cross hairs of companies like Two-Way Media, but at this time it’s too early to know exactly who Two-Way Media and other patent holders may go after. And for those who say that some CDNs have no concern as they have made public statements saying they are not worried, what do you think they are going to say? No CDN is going to come out and tell Wall Street or investors, yes, this patent worries us. So unless a company comes out and address a specific patent and provides details as to why they feel they are not infringing, you really can’t believe the corporate line of "we’re not worried", unless of course you are Level 3.

Patent Abstract
A scalable architecture is disclosed for delivery of real-time information over a communications network. Embedded into the architecture is a control mechanism that provides for the management and administration of users who are to receive the real-time information. In the preferred embodiment, the information being delivered is high-quality audio. However, it could also be video, graphics, text or any other type of information that can be transmitted over a digital network. Preferably, there are multiple channels of information available simultaneously to be delivered to users, each channel consisting of an independent stream of information. A user chooses to tune in or tune out a particular channel, but does not choose the time at which the channel distributes its information. Advantageously, interactive (two-way) information can be incorporated into the system, multiple streams of information can be integrated for delivery to a user, and certain portions of the information being delivered can be tailored to the individual user.

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.

About a year ago, I wrote a post about how content owners who wanted to deliver Flash streaming could use Amazon’s Elastic Compute Cloud (EC2) and Simple Storage Service (S3) along with a CDN to deliver streaming media based content. In the past few months, Amazon has made some new product announcements that over time, lead me to believe that more content owners are going to look to Amazon for video delivery needs, particularly those who are only delivering video via progressive download.

Last month, Amazon announced some new features with their cloud computing product including new functionality for Elastic IP Addresses and EC2 Availability Zones. Simply put, Elastic IP allows you to associate static IP addresses with a unique EC2 and Availability Zones lets you deploy your apps into different regions. Amazon is effectively allowing content owners to replicate apps in different data centers and in different regions, thereby also protecting them from outages. While only a limited number of U.S. based locations are available today, more locations, including those outside the U.S. will be added in the months ahead.

When the new locations are added, then this offering is something to really watch. Amazon is offering faster performance between servers in the same EC2 zones and one would expect they would then offer some level of performace guarantee across all zones. When this happens, they essentially become a content delivery network. We’re already starting to see some companies like Digital Fountain build an entirely new CDN offering around Amazon Web Services, and there are more to come.

It’s also interesting to see how much of the internal workings of Amazon’s cloud computing service they are willing to share with developers and everyone else. Most delivery networks are so closed and Amazon has wisely taken a different approach, primarily due to the size of the customer using their service. Wired has a great article from yesterday that talks about Amazon’s cloud computing service and the best line in it is the response from Amazon’s CEO when asked about cloud computing becoming a commitized service. "Commodity businesses don’t scare us," he says. "We’re experts at them. We’ve never had 35 or 40 percent margins like most tech companies."

While Amazon’s cloud computing service will have more of an impact over time, especially as it evolves into more of a traditional CDN offering, it still won’t be a big disruptor to the major CDNs like Akamai and others. For some customers Amazon could be a viable option with reliable and cheap services. But for many content owners, and in particularly those who have video, their needs are getting more complex each year as they struggle not to deliver bits, but rather solve the entire workflow problems associated with ingestion, transcoding, authentication, meta data, content management, syndication, tracking and reporting and traffic analysis.

That being said, anyone as smart and as big as Amazon is one to watch.

The program for the Streaming Media East conference in May closes today and is being shipped off to the printers. I have three speaking spots that have opened up last minute and are accepting all speaking requests. The first two sessions are panel spots, the third session is a moderator position. Please don’t submit for the moderator position unless you are willing to do the work that is required of being a moderator. Originally I was going to moderate that session myself but am now looking for someone to take it over. If you are interested in any of these three spots, contact me ASAP as they will be filled today.

All submissions for any of the three spots MUST include full details of the speaker including name, title, company, full mailing address, phone number and e-mail. In addition I also need to know how the subject of the panel is relevant to the speaker as there has to be a fit subject wise. Please don’t send me an e-mail simply saying, "I want the spot". That will not suffice.

Tuesday May 20, 2008 (panelist)
Effective Advertising Models For Short-form Video Marketing
Some advertisers see user-generated video sites as a free way to distribute their message, but this has rapidly evolved into a significant paid business, where sites charge based on video placement and search keywords. Learn the relative ROI of going to a major site (i.e. YouTube) vs. a smaller site (i.e. Metacafe) vs. a plethora of tiny sites. Learn what methods are successful for getting viewers and the importance of content vs. placement. This panel will discuss and show video examples of effective business models for both advertisers and publishers.

Wednesday, May 21, 2008 (panelist(
Independent Content: Creating New Revenue Streams
In the wake of the Writer’s Guild strike, what does the landscape look like for writers, content producers, and video creators who want to use the Internet as the next broadcast medium? What are the non-studio/traditional revenue streams on the Internet, and who’s in the best position to profit from them? Hear from some traditional broadcast producers who have created new content companies focusing on unique web-based video and hear what types, genres, and lengths of videos are getting the most traction. Attendees will also learn what kinds of content are going to generate the most dollars online and hear where those dollars are expected to come from.

Wednesday, May 21, 2008 (moderator)
Evaluating and Choosing The Right Methods Of Video Delivery
With all the various means of distribution and protocols available for video today-CDN, P2P, streaming, progressive download-there is still no single solution that will meet all customers’ needs perfectly across all platforms and devices. Learn the various methodologies for content distribution, as well as the pros and cons of each type. Speakers will also discuss which methodologies apply best to which platforms and geographic locations based on type of content, length and format of video, and target audiences. Panelists will also provide you with guidelines and formulas for determining the best single and/or hybrid solution for your online video distribution needs.