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Summary:

One industry that is seeing positive fallout of the Google-YouTube deal is the business of content delivery networks. Akamai, the perennial leader of the CDN business has been on fire lately, prompting venture capitalists and private equity investors to pump in millions of dollars into rivals […]

One industry that is seeing positive fallout of the Google-YouTube deal is the business of content delivery networks. Akamai, the perennial leader of the CDN business has been on fire lately, prompting venture capitalists and private equity investors to pump in millions of dollars into rivals at insane valuations. A little hint of the CDN froth is reflected in digital media deal of the day: Internap’s decision to buy Vitalstream for $217 million. That is pretty steep price – nearly eight times 2006 (projected) revenues for Vitalstream and a big gamble.

“The new Internap will offer turnkey digital media broadcasting solutions for web users of all sizes. By uniting our two organizations, customers will have a complete solution to realize the full on-line potential of their digital assets.” Jack Waterman, chairman and chief executive officer of VitalStream.

Bunch of takeaways from this deal: the content distribution network space is consolidating quite rapidly, and all comers are going after Akamai, which continues to stay on top. How long it can stay there? I am not even going to try and guess. Another thing which I must say is that Internap is trying to be network and CDN, a combo with mixed results in the past. Will it work this time?

  1. CDNs are a space and technology I’ve been tracking for a bit now. I agree…there is much froth coming.

    The key takeaway is that the barrier to entry for creating a CDN is very low. The quality of the network and the different ways one can interact with a CDN (imagine mounting a CDN as FUSE filesystem component…) are the differentiators.

    Just like S3-enabling your app, it should be that simple to CDN enable your app. You say consolidation, which may true as well, but I believe there will be more CDNs appearing as well.

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  2. It will definitely be interesting to see if InterNAP can find a way to sell the VitalStream CDN streaming products alongside their traditional bandwidth, data center and peering products. Past experience tells me that one sales force will find it difficult selling these vastly different services in the long-term as the buyers are typically different customers in an organization.

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  3. It took years for the promise of Video/Audio, YEARS, to become mainstream web content.

    Now we see Vital Stream, Kontiki, snacked up…

    PANs and mobile devices are the next wave with intelligent caching and personal publishing systems that bust bottle necks are next.

    China mobile porn is hot. Just you wait! Techno Tim.

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  4. Gigaom Reader Friday, October 13, 2006

    This makes a lot of sense for Internap. They have very successfully sold CDN services alongside b/w for years, including as a reseller of Akamai and Speedera.

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  5. CDN = Content Delivery Network (For those like me who didn’t know)

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  6. One of the reason’s why Akamai’s product is so successful is because they use InterNap’s route optimization service to handle thier CDN data. Without InterNap Akamai’s network would suffer quite a bit.

    If you think about it like this…InterNap is in a unique position, to start branching out to all the services that thrive due to thier unique service. This could translate into InterNap Networks being a goliath in the Internet Infrastructure space.

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  7. [...] burp has come with the increase in the number of competitors, each one trying to cash in on the boom in online video and other digital content. Limelight [...]

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  8. [...] burp has come with the increase in the number of competitors, each one trying to cash in on the boom in online video and other digital content. Limelight [...]

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  9. [...] for the low price of $135 million late last year. Another diversified provider is Internap, which bought Vitalstream last [...]

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  10. [...] While, I have been able to confirm that Kontiki business is on the block, I have come up empty on the identity of a likely buyer. Kontiki is based on Peer2Peer technology and could be a good fit for any number of CDN-operators out in the market. A source familiar with VeriSign told me that the reason this business is one block is because company realizes that CDNs are a highly competitive business and it would need a lot of money if the company wants to compete with powerhouses like Akamai. Others like Level 3 are taking even more aggressive scorched earth approach, which could become a problem for some of the smaller players. (Related: CDN Madness Cometh?) [...]

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