Akamai published its second quarter earnings today, with revenues of $194M at the low end of its guidance and earnings per share of $0.19. More importantly, they reduced revenue and earnings guidance for the third quarter and full year. They blamed a 'challenging operating environment' and macro economic trends.
Could it be that the economy is hurting the CDN business, but not even touching the booming colocation and hosting sectors, nor damaging the telecom operators? Is content really that different a market? I don't actually think so, and I don't take Akamai's explanation at face value. Just yesterday we heard from Dan Rayburn that both pricing trends and traffic growth in the CDN space are healthy, you can't have good pricing and traffic growth yet claim a challenging overall economic environment - you can only claim a challenging sales environment.
Akamai's growth for many years has been just awesome, but it had to slow down eventually. It was able to grow like a rocket because it really had no viable competition for a long time, and that has changed with Limelight, Level 3, AT&T, and a plethora of smaller CDNs out there fighting for each deal. Akamai remains a powerful company with a great product and continues to lead the space, but the arrival of competition means they have to compete and to maintain their former growth rate they would need to win everything. Nobody can do that forever. So Akamai's growth rate must moderate, at least relative to what it would have been, and we enter a new, more interesting phase in the CDN space.
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