Yahoo  Aug 1  Comment 
Akamai (AKAM) second-quarter results benefit from robust cloud security solutions growth driven by solid demand for Kona Site Defender and Prolexic Solutions.
Yahoo  Jul 31  Comment 
It forecast current-quarter revenue of $656 million to $668 million, while analysts on average were expecting $668 million, according to Thomson Reuters I/B/E/S. Akamai provides services to companies to speed up their web pages, but has been...
MarketWatch  Jul 31  Comment 
Shares of Akamai Technologies Inc. fell more than 3% late Tuesday despite an earnings beat for the technology company. Akamai said it earned $43 million, or 25 cents a share, in the quarter, compared with $57 million, or 33 cents a share, in the...
Yahoo  Jul 31  Comment 
Akamai Technologies Inc topped Wall Street's estimates for second-quarter profit on Tuesday, helped by an aggressive push into cloud security and a stabilizing media content delivery business. Revenue ...
Motley Fool  Jul 10  Comment 
The content delivery expert brought in an activist investor firm to boost operating margins and start exploring strategic options. Investors were quick to embrace these ideas.
Yahoo  Jun 27  Comment 
Akamai Technologies (AKAM) updated guidance for the second quarter and fiscal year 2018.


Akamai Technologies (NASDAQ:AKAM) helps companies speed up their websites by using Akamais own high-speed network to copy clients' websites to servers that are physically close to the company's users, and therefore increase download speed. This process, known as caching, is especially important for Online Video websites, which are particularly bandwidth-hungry.[1] The company earned $860 million in revenue and $145.9 in net income in 2009.[2]

The key to Akamai’s success is its de-centralized computer nework, which improves the speed of its clients websites. BestBuy's offices are in Southern California, but their users are around the world. Akamai's network means BestBuy's users can always connect to a BestBuy server that's close by, and therefore faster.

From a technical standpoint, AKAM’s internet traffic footprint is large. The company operates the world’s largest distributed computing network with more than 20,000 servers in 1,000 networks across 71 countries. According to its own estimates, Akamai delivers 20% of the world’s non-email web traffic.[3] The company sells its services to many of the internet’s top players, including over half of the top 50 web retailers such as Best Buy (BBY) and Sony (SNE). In media, the company counts 29 of the top 30 websites as clients including media-heavy sites such as MTV and Comedy Central.

Akamai's customer base is in e-commerce and online video, so Akamai benefits from the expansion of these services. However, AKAM is exposed to risk as its service becomes commoditized - servers and bandwidth are cheaper than they once were, and other companies such as Limelight and Internap Network Services (INAP) have now compete in the market which Akami used to dominate. As the fixed costs to setting up infrastructure drop, so do the barriers to enter this industry, leading to more competition.

Company Overview

Akamai earns revenues from the hosting and delivery of internet content and media from its clients websites to end-users. The company is able to charge a premium for its services for two reasons. First, the company provides data delivery to end users, handling actual internet traffic. Secondly, the company helps to manage the technical demands and consult its customers as to how to effectively deliver their content. Moreover, the process of website caching means that Akamai backs-up many of its customers websites.


  • Application Performance Solutions - products are designed to improve the performance of highly dynamic applications used by enterprises to connect with their employees, suppliers and customers. Traditionally, this market has been addressed primarily by hardware and software products. Akamai uses a managed service approach which consists of:
  1. Web Application Accelerator: designed to improve the performance of Web-based applications through a combination of dynamic caching, routing and connection optimization, and compression of content.
  2. IP Application Accelerator: designed to address core Internet weaknesses to optimize the performance, availability and real-time sensitivity associated with IP-enabled applications delivered over Internet-related protocols such as SSL, IPSec, UDP and FTP.
  • Digital Asset Solutions - esigned to enable enterprises to execute their large file management and distribution strategies by improving the end-user experience, boosting reliability and scalability and reducing the cost of Internet-related infrastructure. These products consist of:
  1. Akamai Media Delivery: As the demand for Internet access to music, movies, games, streaming news, sports events and social networking communities grows, there are many challenges to profitably offering media assets online, particularly with respect to user-generated content and HD video. In particular, media companies need cost-effective means to deliver large files to millions of users in different formats compatible with multiple end-user devices and platforms. Akamai Media Delivery addresses these challenges by delivering media content on behalf of our customers. The company supports all major streaming formats and has an HD Network which allows its customers to offer live and on-demand HD video online.
  2. Electronic Software Delivery: Due to the expanding prevalence of broadband access, distribution of computer software is increasingly occurring over the Internet. These products handle the distribution of software for customers.
  • Advertising Decision Solutions (ADS) - designed to enable more effective online advertising by helping advertisers reach their target audiences.
  • Dynamic Site Solutions - designed for accelerating business-to-consumer websites that integrate rich, collaborative content and applications into their online architecture.

Business Growth

FY 2009 (ended December 31, 2009)[2]

  • Net revenue increased 9% to $860 million. The company attributes the increase to the number of customers under recurring revenue contracts as well as increases in traffic and additional services sold to new and existing customers.
  • 28% of the company's revenue was generated overseas.
  • Net income increased by less than 1% to $145.9 million.


Proliferation of Broadband Internet Will Grow Akamai's Customer Base

The availability of broadband in people's homes is increasing in double digit percentage points in many developed countries, and has doubled in developing countries in the mid 2000s.[5]. With it, media consumption habits have dramatically shifted, as can be seen in the growth of companies such as YouTube , and many traditional TV networks offering their programming online, such as ABC and NBC. More bandwidth presents both an opportunity as well as a challenge to Akamai. The increased expectations of consumers puts a strain on content providers, who then turn to AKAM to bear the content delivery burden. However, it also puts pressure on AKAM's own bandwidth, which is often purchased from internet backbone providers, which operate the massive routers and server farms that send and receive internet traffic across major fiber-optic networks between continents and countries.

  • Growth of E-Commerce - In addition to content delivery, AKAM sells other data delivery options to its customers, such as the caching of entire websites for redundancy or better performance, as mentioned above. For example, Akamai was hired by BMW to host and stream movies from BMWFilms, as well as the Car-customization portion of their website.
  • Growth of Online Video and Other Media - Flash games, YouTube videos and other "rich content" are demanded by consumers, yet place tremendous load on provider's servers. The consumption of media online as opposed to over the air will only increase in the next decade, and AKAM is in a position to profit from this shift.

Increased distribution of Software as a Service Creates further Opportunities for Revenue Expansion

SaaS is a new e-commerce business model. SaaS changes the mode of distribution of software from a one time purchase of CD-roms and discs, to a service sold on a per-period basis, typically over the Internet. This model places larger server demands on the provider, although it also gives them more stable revenue streams and increased control over the application. AKAM's server network and monitoring tools lets its clients forgo the "in-house" model to build out SaaS capability, helping them deliver their software over the cheaper and more controllable internet, rather than discs. The strength of this model is demonstrated by Akamai's own performance, as their data-monitoring and caching services employ this same "Software as a Service" model.

Decreasing costs of storage media and bandwidth means more competition for Akamai

Akamai houses information in its servers, and ships out the content over the internet. Respectively the costs to each of these components of its business are broadly determined by storage prices (or hard drive prices) and bandwidth prices. The wholesale prices of bandwidth are difficult to chart, but are decreasing similarly over time. As these prices fall, it is easier for new players to step into the space, and for operations to return to in-house groups. This is a risk to Akamai's business as its success has rested on the fact that smaller companies cannot afford the infrastructure investments that content delivery networks demand, and Akamai charges higher prices than its competition due to its wide reach and technological supremacy. MOre competition may threaten Akamai's ability to charge this premium for its services, eroding both its profits and its market share.


Direct Competitors

  • Level 3 Communications (LVLT) - Level 3 also competes against Akamai, largely on price, moving video and VOIP, as well as other more complex services.
  • RealNetworks (RNWK) - RealNetworks operated in the Online Video segment beginning in the 1990's, and has a number of technologies that make it a viable content delivery service alternative. For example, Rhapsody, a jointly-operated venture between Real and Viacom was signed on to replace Yahoo's "in-house" Yahoo! Music Unlimited service.


  • AT&T (T) - AT&T's scale and wealth of bandwidth makes them a clear competitor in this industry. The company's control of $100BN in internet backbone servers makes it less reliant on third parties for bandwidth than Akamai.


Internet monoliths like Google (GOOG) and Yahoo! (YHOO) have invested time and effort into managing content delivery already. While not typically serving outside clients, their reach is extensive, much like Akamai's.

Amazon, through its Amazon Web Services unit, offers a CDN solution called CloudFront that dovetails with the rest of the AWS stack -- though nominally a separate offering, the primary use case for CloudFront is content delivery for AWS customers. If AWS continues to capture market share in the hosting and cloud-computing businesses, CloudFront will emerge as competition to Akamai.


  1. AKAM 2009 10-K "Overview" pg. 2
  2. 2.0 2.1 AKAM 2009 10-K "pg. 25
  3. Akamai Technologies, "Visualizing Akamai"
  4. AKAM 2009 10-K "Our Core Solutions" pg. 4-7
  5. The Economist. "Broadband Penetration"
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