Google Needs To Buy Akamai
Sep 6, 2008 – 11:26 by Ryan  |
If you examine the pressure on the content distribution industry by top tier ISPs, it’s clear this industry is changing. ISPs are now competing against their transit and hosting customers for content distribution business. This is a fairly bold move for ISPs, but it’s clear that they’re starting to question where their next spurt of growth lies.
Internet Service Providers
In 2006, Savvis (in what may have been a fatal mistake) sold their CDN business to Level 3 for $125 million. Apparently, AT&T also got the memo and rapidly deployed a CDN.
Globally, the majority of ISPs don’t have a CDN offering and they will continue to lose business to those that offer a “more complete stack.” All of this inevitable consolidation is necessary as the content distribution business becomes more efficient. Panther, one of the commodity CDN players offers a CDN solution for ISPs, and it’s possible that this model will become more prevalent because the majority of ISPs are ill-equipped to provide sophisticated (and cost-effective) CDN services.
Why?
Now, why does Google need to purchase Akamai? If the obvious continues to play out then the ISPs will have a renewed sense of “hand” when dealing with their customers. If Google is serious about becoming the dominant cloud provider then they will need all the leverage they can get when dealing with their peering partners. It’s widely believed that Google owns some of its fiber infrastructure and they have been busy building data centers around the globe.
Legal
The good part about Google acquiring Akamai is that there is solid competition in the CDN space. Akamai is the dominant player, but based on their recent stock performance, it’s clear that the ISPs and commodity players are gaining ground.
We don’t believe a legal protest of this acquisition would have much credibility. Akamai also employs a fair number of PHDs so we imagine it would be an adequate culture fit.
Viacom
Additionally, if Google acquired Akamai then Viacom would be in a precarious position. The company that Viacom is suing over distribution on YouTube would suddenly be distributing their content (Viacom is a large customer of Akamai – get off my CDN, Sumner Redstone :-)).
Rumors
There have been some recent rumors about Akamai selling so we’re interested so see what unfolds. The real question as Google discontinues its free dinner offering is: can they spend the $5 billion to acquire Akamai?
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