(Nasdaq: AKAM) was founded in August of 1998 as an outgrowth of an MIT research
initiative lead by Dr. Tom Leighton, Professor of Applied Mathematics and Head
of the Algorithms Group at MIT's Laboratory for Computer Science. After recognizing
that a solution to Web congestion could be found in applied mathematics and
algorithms, with the help of graduate student Danny Lewin, Leighton developed
a set of breakthrough algorithms to intelligently route and replicate content
over a wide-area network. "Akamai," a catchy-name that melds well with Asian
technology empire rhetoric like Hitachi, Sony, Samsung, and Matsushita, means
"cool" in Hawaiian.
the help of MBA candidate Jonathon Seelig, and Professors David Karger of MIT
and Bruce Maggs of Carnegie Mellon, the content delivery mavens entered the
project into MIT's $50K Entrepreneur Competition. The original team joined forces
with internet veterans Paul Sagan (former President of Time Inc. New Media)
as COO, and George Conrades (former President of GTE Internetworking) as CEO,
and formally launched Akamai's website in April of '99.
relying on centralized servers, Akamai's FreeFlow service delivers content from
strategic Internet locations, allowing Websites to access objects at speeds
2 to 10 times faster than they would otherwise. Wall Street drooled as the Cambridge-based
internet startup ended at 145 3/16 on its first day of trading on the Nasdaq.
Akamai's IPO was recorded as the fourth-largest ever percentage gain on the
first day of trading.
Strategy and Trajectory
to increased Internet traffic, the Content Delivery market has evolved into
an all new revenue producing market. Defined as the market dedicated to improving
web site speed and reliability as its core competency, the nascent Content Delivery
market will experience substantial growth as the Internet surpasses 500 million
users by 2002. With a growth rate exceeding 400 %, we believe this young $10
million market could reach $500 million by 2002.
Akamai is Internet veteran George Conrades, who previously took a floundering
BBN and turned it into GTE's entre to the Internet. Conrades, formerly President
of IBM Americas, has attracted big name customers like Apple, CNN Interactive,
Nasdaq, and Yahoo. Well respected in technology and venture capital circles,
Conrades has forged strong business relationships and enticed $120 million in
funding for Akamai.
has also entered in strategic relationships with both Cisco and Microsoft, which
has brought in $49 million and $15 million in investment capital respectively.
In collaboration with Cisco, Akamai is positioning itself to enhance and jointly
develop more intelligent content routing and caching technologies for the Web.
By integrating Microsoft Windows Media into its service offering, Akamai has
been able to attract Microsoft's Streaming Media Division as a customer.
Akamai's direct sales force is actively targeting Fortune 100 companies, domestic
companies, and the 300 most heavily trafficked websites. A 30 day free-trial
evaluation enables prospective clients to try the service with no obligation.
As the exclusive network provider for Apple's QuickTime TV (QTV), Akamai has
enabled Apple to provide in excess of 23 million downloads of the "Star
Wars: Episode I - The Phantom Menace'' movie trailer. By delivering QTV streams
through Akamai's network, no longer does streaming media have to look like a
1960s choppy Apollo moon-landing outtake.
Delivery Focus: One of the reasons that Akamai is off to a running start
is the fact that it is positioning itself to do one thing well -- Content Delivery.
Often young organizations try to diversify too quickly, adding product and service
lines that they are not yet ready to support. Typically, ASPs and webhosting
companies try to figure out how to do speedy content-delivery as an after thought,
in response to complaints about web site slowness. Instead of falling into the
"now that we're doing it, how do we do it well?" trap, Akamai is focusing on
quality first by making speed part of its mission statement.
Capacity: In strategic relationships with webhosting vendors and ISPs, Akamai
places its Linux servers in webhosting datacenters and ISP points of presence
(POPs) globally to achieve greater distributive capacity on the internet. With
a network optimized for fast web delivery, Akamai will have application vendors
and webhosting providers both wanting to partner with them, to help them out
of central artery congestion traps.
Time Delivery Capability: Akamai's content delivery routes in real-time,
in comparison to West Coast Based Sandpiper, who updates their routing tables
several times a day. This means that Akamai is better able to protect against
performance strikes that occur from new ad campaigns, website launches, and
current events. Akamai's content delivery principles are based on the ability
to match millions of worldwide Internet users with millions of content delivery
options, under dynamic Internet conditions.
and Scope: Wide-area distributed content delivery capacity is a factor of
a number of variables: cpu power, RAM/cache, routing algorithms, and number
of distribution points. Having deployed over 1,700 servers globally, Akamai
has a 25% lead on distribution points over Sandpiper Networks. The more distribution
points a content delivery vendor has, the more accurately it can determine the
most efficient connection for a website query. When comparing performance monitoring
capabilities, Akamai has monitoring agents on all of its servers and networks
worldwide, while Sandpiper uses the more traditional ISP approach of using rmon
probes on routers, and currently has only 150 deployed. Akamai has plans to
expand its global presence from 55 to 100 networks in comparison to Sandpiper's
25 to 30 network growth plan.
ISP and ASP Market Challengers: With Exodus' Ready-Cache Content Distribution
Service up and running, ASPs and webhosting companies are already trying to
get in on the game. Akamai has the advantage that its multi-carrier network
and service was designed for speed since day one. However, there are numerous
ISPs and ASPs with a tremendous amount of cash to invest that Akamai is currently
not partnering with. Each may prove to be an imminent threat to Akamai, who
will not have the same global reach or installed base as the larger players
in this market . Akamai will have to maintain its leadership position by expanding
Client Base: Currently, Akamai has a significant revenue dependency on a
very limited set of clients. This represents a huge exposure for Akamai, which
needs to quickly expand its number of clients and dollars generated from them.
Akamai must also prove that it can retain clients for extended periods, rather
than support only those organizations that need a short term bandwith expansion
for a specific launch or campaign. Recent announcements show that Akamai has
begun to address this issue, but it remains a concern.
Exposure: From an innovation perspective, Akamai holds no U.S. patents,
although it does has multiple patents pending with respect to its content delivery
service. Today, Sandpiper is the company that has a service delivery model most
similar to Akamai' with it's Sandpiper Networks' "Snap-On Tools marketing approach".
Mirror-Image and Adero are also jockeying position in the Content Delivery market,
although they have smaller network topologies and delivery capabilities.
its focused strategy, seasoned management team, and innovative architecture
concept, Akamai will maintain the lead in the content delivery arena. Handling
over 12Gbytes per second, Akamai can help Web content providers scale at a faster
pace than they could otherwise.
expect Akamai to partner with as many ASPs and ISPs as possible. This will quell
the need for ISPs and ASPs to develop their own Content Delivery services the
way Exodus has.
on the success of its Hollywood debut, expect Akamai to sign-up new broadcasting
customers. Akamai's strong relationship with Apple is enough to lead one to
think that Pixar and Disney will be next on the customer list.
75% of Akamai's revenues come from one customer -- Apple. To mitigate the
risk of revenue loss, Akamai needs to rapidly expand its customer base;
acquiring smaller content delivery shops is one way that Akamai can do this.
Akamai is focusing its sales team on highly trafficked web sites. This is
a good strategy, however, parallel attention to vertical markets like multimedia,
broadcasting, and advertising will secure Akamai's niche with early adopters.
licensing its caching agents to network hardware suppliers, Akamai can spread
its points of distribution and customer base at a rapid pace. Potential
partners could include Verio, MCIWorldcom, AT&T, or Sprint.
will want to decrease its accumulated deficit by applying some of its future
revenues to offset its long-term debt of $10.8 million.
Organizations in multi-media delivery and heavy transaction processing that
have high traffic volume and streaming media requirements should examine Akamai
for assisting them in gaining a competitive advantage among their challengers.
services can be cost justified if revenue loss is higher than the price an organization
would be paying for FreeFlow. If Akamaizing your content provides your organization
with more revenue than the cost of the monthly FreeFlow service, signing up
with Akamai is a sure competitive advantage.
that are currently not experiencing website delays, and are not dependent on
website current event peaks or high-volume transaction processing, should wait
to use to Akamai's services.
Akamai's has 1,475 servers across 100 telecommunication networks, with a capacity
of 12 gigabits per second.